“Money is coming home”: what 2023 was like for private investors | December 31, 2023

Source: Reuters

The devaluation of the ruble, the tightening of the monetary policy of the Central Bank and sanctions against the St. Petersburg Exchange in 2023 brought new difficulties to investors. However, there were many positive events in the past year. The Russian stock market has rebounded after a disastrous 2022, with the Moscow Exchange index rising for eight months in a row—the longest streak of growth for a key stock market indicator in its history. By the end of December, the indicator added 43.87%, reaching 3099.11 points; at its peak in September it was 3287.34 points. The year was marked by an IPO boom, and the number of individuals with brokerage accounts on the Moscow Exchange reached a record 29.2 million people at the end of November 2023.

RBC Investments asked private investors what events, in their opinion, had the greatest impact on the stock market, what problems they faced in 2023 and how they solved them, as well as what new threats and positive changes they expect from the new year 2024.

Investor opinions: chaotic behavior of players, lack of financial reporting and the opportunity to make good money

Murad Agayev, private investor, co-author of the telegram channel “Harmful Investor”

According to Murad Agayev, in 2023 the behavior of investors on the stock exchange was unpredictable. This was reflected in the chaotic growth in trading volumes of shares in the second and third tiers. “A striking example is when paper “Mechela” became top 1 in terms of trading volume and overtook Sberbank. With all due respect to this company, it is not so large and well-known that it could somehow miraculously grow in volume,” he says. Agayev notes that this suggests that the concentration of unqualified investors on the exchange with a small amount of money has become higher and private traders can “interestingly influence” the prices of various assets.

“The biggest challenge I encountered was the lack of “Surgutneftegaz” reporting under RAS for nine months. This is mandatory information that was scheduled for publication by November 31st. I personally have a large concentration in the securities of this company and without reporting I cannot make a decision on them,” said Murad Agayev. The investor said that he contacted the Central Bank on this issue.

Murad Agayev calls the continuation of the case regarding the seizure of shares of the Solikamsk Magnesium Plant (SMZ) from minority shareholders as an important event. It began in the spring of 2022, when the Arbitration Court of the Perm Territory declared the privatization of the enterprise carried out in 1992 illegal. In January, SMZ shares were transferred to the state corporation “Rosatom”, and in December the Moscow Exchange spoke out in defense of minority shareholders, of whom there are about 2 thousand. “Investors are suing the state so that their ownership rights are confirmed and they are not left with nothing. If desired, the privatization of any enterprise carried out in the 1990s can be declared illegal. This matter is important because it speaks about the protection of private investors. What kind of exchange can we talk about if the company can be taken away from you when government agencies don’t like some owner,” he says.

Among the positive trends in 2024, the investor names a large number of IPOs. This, he notes, increases the amount of money in the stock market and allows its participants to “trade more than just Gazprom.”

Timofey Martynov, investor, founder of and analytical service Mozgovik Research

“The most important thing about the market is that it is alive and even in very good shape. Because a year ago the mood was extremely pessimistic and cautious,” says Timofey Martynov. For him, the most difficult thing in the past year was to patiently hold good stocks and not sell them, while the geopolitical situation “constantly threatened to worsen.” In general, he notes, the market grew almost every month, there were no major corrections, so in fact the year turned out to be quite simple for investors.

“Last year we had a lot of cheap stocks, the problem was to overcome our fear and force ourselves to buy them. This year we saw a lot of expensive stocks, the problem was to avoid making some stupid investments at unreasonable prices,” the investor notes.

Next year, Timofey Martynov expects the signing of a peace treaty between Russia and Ukraine and a reduction in geopolitical tensions, the relocation of some quasi-Russian companies to the Moscow Exchange and a reduction in interest rates by the Central Bank at the end of the year. “I expect our market to grow by the end of the year, but half as much as in 2023. If we’re lucky, we’ll see a bubble in the market; some of these processes have already begun to appear in the past year,” he believes.

Oleg Kuzmichev, investor, author of the telegram channel “Oleg Kuzmichev”

In the past year, Russian oil and gas overcame the embargo EU for Russian oil and petroleum products. This had a positive impact on the stock market, noted Oleg Kuzmichev.

The investor calls the main difficulty of 2023 the lack of comprehensive reporting by Russian companies. “The main problem in the industry is the dialogue between investors (now mostly physicists) and companies who are used to dealing with large investment funds,” he says. In his opinion, more public companies should hold Investor Day, presentations on quarterly results, and in-person general meetings of shareholders. He notes that Russian companies had more such events until 2022.

Next year, Oleg Kuzmichev expects the peak of inflation to pass successfully, the rate to be reduced and the RTS index to grow by 15-20%. “Threats to our market are lower prices for raw materials or geopolitical instability, but for now we are holding out. We need to remain optimistic; pessimists in the Russian market have already become disillusioned and have earned nothing,” he says.

Stepan Toropov, investor, author of the Granite Trade telegram channel

According to Stepan Toropov, the stock market in 2023 was most affected by the IPO and SPO boom. In his opinion, at the end of the year, ideal conditions developed for companies to go public on the stock exchange and for additional placements – after the rate increase, share capital is more expensive. “This is important because there are more issuers on the market, and investors have more choice. “Including companies from segments that were not previously represented on the market, for example CarMoney, Henderson,” he says. According to Toropov, opportunities for the future are opening up for private investors. He himself invested in Sovcombank, because he considers this business promising. “I also purchased Henderson shares, but not at the IPO price, but after a correction of about 30% down, and shares of Astra, UGC,” he shares.

The investor cites the volatility of the ruble as the greatest difficulty. To protect against this risk, he holds part of his capital in shares of exporters and oil companies. “By next year, I will begin to collect replacement bonds, which, in my opinion, also protect against ruble devaluation,” he believes.

2024 will be an interesting year for the stock market, says Stepan Toropov. The quotes will be influenced by the presidential elections in Russia, Taiwan and the United States. This, in his opinion, creates uncertainty for the commodity market. “The possible devaluation of the ruble is also scary. Our budget expenses will increase by a third. Where to get money? Either raise taxes or devalue the ruble, as was the case this year,” he says. In addition, Stepan Toropov sees a risk in new sanctions and believes that the Moscow Exchange is targeting them. If it falls under sanctions, this will limit currency trading. “Even despite the risks of sanctions, the stock market in 2024 will provide an opportunity to make good money. By the end of next year, the Moscow Exchange index may grow by 30-35%, taking into account dividends,” he says.

Editorial opinion: greed, emotions and hope for “elegant ways” to sell frozen assets

Elina Tikhonova, presenter of the RBC TV channel

Elina Tikhonova calls the key rate increase more than doubling as the most important event in the stock market. “And it was difficult for me to react to this in time, but it would have been worth it. For example, sell some bonds and buy new issues with a new rate. Actually, my greed has become the main difficulty in my investments this year. Looking back, I would strongly advise myself to already record a loss on VTB or Segezha shares and not sit in these minuses, hoping for a financial miracle. In the second half of the year, I increased the volume of bonds in my portfolio; in December, I transferred part of the funds (dividends and coupons) to money market funds,” the TV presenter shares.

She calls the main problem of 2023 in the industry the increased volatility of all instruments except OFZ. The market, according to Tikhonova, is ruled by the emotions of private traders and infrequent large transactions of big players, who, due to a thin market, move quotes too sharply. “However, since I declared myself a long-term investor and try not to break my promise, I don’t get nervous about such movements,” she says.

In 2024, Elina Tikhonova is preparing for high stakes for at least the entire first half of the year. He does not plan to change the strategy; he will continue to focus on bonds, the money market, deposits, and shares of mainly Sberbank and oil companies. Among the opportunities for next year, the TV presenter highlights redomiciliation and the expected growth in the securities of these companies. Risks include a more significant economic slowdown and problems with debt servicing in the most heavily leveraged and cyclical industries. “Well, I always remember about the risks of new sanctions, so I don’t hold currency positions, just the good old cash,” says Elina Tikhonova.

Olga Kopytina, deputy head of the RBC Investments project

A whole pool of regulations that came into effect in 2023 will return blocked assets to investors, says Olga Kopytina. “Even if it’s slow and a little so far, it’s better than zero. The money comes back home, works in the market and for investors,” she says.

Olga Kopytina calls the main difficulty of 2023 the incomplete disclosure of information by companies. Without this data, it is difficult for an investor to calculate risks. In her opinion, the problem, at best, will be leveled out in three years, when a new transparent financial history of each company is built, but the “hole in the heart” for the undisclosed years will remain, it seems, forever. “The solution to this problem was simple: no disclosure – no place in my portfolio. As a result, he became quite stingy in diversifying across issuers,” says Olga Kopytina. Therefore, for now it has distributed most of the funds among conditional savings instruments – money market funds, public bonds, floaters, and deposits.

2023, compared to 2022, “seemed to be completely problem-free,” Kopytina believes. “That’s the problem. Because the risks are still high. The current situation, it seems to me, is perfectly described by a very old joke. Two people are sitting: an optimist and a pessimist. The pessimist says: “Everything is so terrible, it can’t get any worse…”. And the optimist joyfully replies: “It will be, it will be!” — says Olga Kopytina.

In the new year, she believes in the growth of the Russian market. As for the positive changes, it is expected that all the laws on unlocking will work in full force – according to 844, the portfolios of small investors will be returned, and at the next stages for everyone else, all Eurobonds will be replaced. “Managers will find elegant ways to sell frozen assets from ZPIF-A, FinEx is implementing an unblocking plan, Russian management companies will finally be released from the shackles of Decree 520, and Ministry of Finance and the Duma will finalize and adopt amendments to the Tax Code so that all these changes do not increase the tax burden,” she listed the expected events.

Marina Anufrieva, editor-writer, RBC Investments

Marina Anufrieva calls the most important event of the past year the increase in the key rate more than doubled over the year. This made it possible to invest in less risky assets – bonds and money market funds, while receiving fairly good returns. “It was difficult to know whether to buy shares of companies that do not publish reports. Most often, I avoided such issuers. The problem resolved itself when companies returned to regularly disclosing their results,” she says.

In the first half of the new year, Marina Anufrieva does not expect significant growth in the stock market, but she is optimistic about the second half of the year and expects a reduction in the key rate. “I’m a little wary of the redomiciliation of some companies and am preparing for a temporary drawdown in their securities in my portfolio,” she says.

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