Foreign investors actively acquiring shares of Russian companies
Amid rumors about the possible lifting of some restrictions, foreign investors began actively acquiring shares in Russian companies and organizations that operate with Russia in one way or another. The excitement is fueled by hopes for restoring access to Russian financial markets, which have been closed to foreigners for the past 3 years.
Various securities trading companies are receiving more and more requests from foreign investors trying to figure out how to return to the Russian market. At the same time, direct investments in Russian assets are still prohibited for American investors. However, this does not stop anyone – now investors are buying securities through Hong Kong, Vienna and Budapest.
What is the interest expressed in?
- Growing interest in Russian assets:
- Rusal shares rose by more than 75% on the Hong Kong Stock Exchange.
- Shares of the Austrian bank with a subsidiary in Russia rose by almost 40% on the Vienna Stock Exchange.
- Investors are ready to invest in assets indirectly linked to Russia, expecting benefits after the market returns to international trade.
- Dynamics in the foreign exchange markets:
- The Russian ruble has grown by 15% since the beginning of the year, but it is mainly available to investors from the EAEU countries.
- Currencies of countries friendly to Russia are strengthening, for example, the Kazakh tenge.
The purchase of assets indicates a clearly rapid increase in expectations of a return to Russia. However, even if the US restrictions are lifted, the European side probably will not be able to return to active trade within Russia for a long time. Despite the fact that some of the US restrictions have been extended, rumors about the imminent opening of Russian markets continue to influence investors. Many of them are already preparing for the fact that access to Russian assets may be opened in the coming months.
The interest in Russian assets also highlights that many see potential in restoring economic ties and are willing to bet on future growth. The situation may change in the coming months, but the return process will continue, even if the lifting of restrictions is delayed a little. In the meantime, investors are trying to look for loopholes and investment opportunities, despite existing restrictions.
Stock market before and now
At the same time, at the beginning of 2022, when brands decided to leave the Russian market, many of them reserved the opportunity to return. Some have provided legal mechanisms in advance for the repurchase of their assets. For example, automakers have retained certain opportunities to return – a large German automaker can buy out its plant within six years after leaving, and another Austrian dealer continues to operate in Russia through a representative office engaged in warranty service and the sale of spare parts.
The Russian market has changed, and many niches previously occupied by European and American companies have now been occupied by Chinese brands and domestic manufacturers.
- Difficulties for companies without return mechanisms:
- Companies that have not provided for return mechanisms and whose business in Russia has not been highly profitable face difficulties.
- The Russian market has changed: the niches previously occupied by European and American companies are now occupied by Chinese brands and domestic manufacturers.
- Organizational-level issues:
- A return may involve the need to rebuild production facilities or relocate offices to new regions.
- The development of import substitution:
- Against the background of the departure of foreign companies in Russia, the process of import substitution has actively developed.
- Government support and awareness of the need to establish our own production played a key role.
Against the background of the departure of foreign companies in Russia, the process of import substitution has been actively developing. Government support and awareness of the need to establish their own production played a key role. Industry and energy, despite the use of foreign equipment, continue to function without major disruptions. However, the rapid restoration of economic ties with the West may cause a mixed reaction. Historical experience shows that even in difficult periods, Russia cooperated with Western countries. For example, one of the largest car factories was built with the participation of a foreign company, despite difficult political relations in the past. Economic interests often prevail over political differences, and it is important to take this into account.
The return of foreign brands may also lead to lower prices for imported goods, which will have a positive impact on consumers. Experts emphasize that Russia should not prevent the return of companies, as this may bring additional benefits.
It is still unclear exactly what conditions will be put forward for companies that decide to return to the market. Preferences are likely to be provided for Russian businesses that have occupied vacant niches. This is logical, given the significant investments they have made. In addition, the authorities are unlikely to allow returning companies to displace domestic brands.