A Shot in the Arm for Capital Markets in Russia
Investments are becoming popular globally rather than in individual countries
The situation in Brazil is similar to that in the US and Russia. A huge number of new investors are coming to the market. These are mostly young men; their number has increased several times over the recent years. At the same time, the number of women who are engaged in investment operations has grown by four or even five times. 3.5 million investors are now working on the Brazilian market. In contrast, in the previous period there were just half million. This is a substantial growth. The main reasons for it are low interest rates, as private investors began to look for more profitable operations, and, of course, new information and educational channels that allowed people to learn about these opportunities, — Marcelo Maisonnave, Founder, XP Inc.
Low rates on deposits and the pandemic have had an impact on attractiveness of investments
There were another two drivers [for promoting investment among retail clients, Ed.]. The first driver is <...> lower interest rates, which pushed <...> to participate in this process from the point of view of the economy, when interest rates on deposits became very low. At the same time, we can earn money on other platforms with a higher interest rate and outpace inflation. <...> The second driver is the pandemic that has probably exacerbated this trend. Turns out that a large number of individuals who came to this market, those are people who had time and who were able to use [investment tools, Ed.] remotely, staying at home, feeling secure and learning new things, — Yuriy Denisov, Chairman of the Management Board, Moscow Exchange.
User-friendly services boosted the popularity of investment
Russia is no different [from other countries, Ed.]. The retail investment boom is coming here. <...> Why? There are macrofactors that Yuriy [Chairman of the Management Board of Moscow Exchange Yuriy Denisov, Ed.] was talking about. As for the product, the technologies were in place, it was the creation of a very intuitive and simple interface. <...> It was the first step. <...> But [there are, Ed.] many things around it that also contributed to these changes. It was the possibility to add a Tinkoff card, and then a card of any other bank to the account. This means that you could buy shares directly from the debit card. Now it seems pretty normal, but back then it was a revolution. Those who had brokerage accounts in Russia remember how it used to be. Such a headache, — Oliver Hughes, Chief Executive Officer, Tinkoff Group.
Newcomers to the stock market do not always have enough knowledge
We have seen an amazing trend in the US and European markets where we [work, Ed.]. <...> This trend related to the involvement of individuals is totally unprecedented. This is something that we wanted to see, this is the democratization of the market, and it is very important. Along with this comes responsibility. We are observing this [behavior of retail investors, Ed.] in various aspects. First, this is the participation [of retail investors, Ed.] in IPOs, active trading in financial markets. We have been observing the development of this trend, and we are increasingly focusing on fulfilling our role more responsibly in terms of educating new players who are joining the market, — Adam Kostyál, Senior Vice President of Listing Services, Europe, Nasdaq.
Retail investor requires a special approach
To be fair, we must admit that we made a large deal [IPO, Ed.], and we made an offering for almost 2 billion dollars – such amount currently cannot be attracted from retail investors. Therefore, in our case, the bulk of investors were foreign institutional international funds. But at the same time, we paid attention and devoted time to working with Russian investors. We also need to understand that since the investor boom has been happening globally in recent years, we, like the previous companies from Russia with IPOs, were still looking for a way to work with Russian retail investors. What have we come up with? We understood that retail investors were very different. They are no less advanced than international investors, institutional ones, but the decision-making model that they use is fundamentally different. That is why the materials that we prepared for institutional investors, they simply do not work for Russian retail investors, — Anton Makhnev, Chief Financial Officer, Fix Price.
State promotes investments and increases their attractiveness with benefits
We have indeed seen a soaring number of private investors coming to the Russian market. This is a huge amount of work that has been carried out [over, Ed.] many years. We can say that over the last five years we have been building this structure, the market. A lot of work has been done by the regulator in terms of corporate governance and information disclosure. A lot of work has been done by the Ministry of Finance and the Government, they provided tax incentives and launched individual investment accounts. These are accounts with certain benefits, which also promoted the market in a certain way. A lot of work has been done by the entire industry, banks and brokers, who over the years have set up their electronic digital channels that made it possible to quickly register participants [in tenders, Ed.], — Yuriy Denisov, Chairman of the Management Board, Moscow Exchange.
Regulator also provides information to investors
This new generation of investors <...> is more confident, they are willing to take risks. Moreover, they can find necessary information on the Internet. In fact, the regulator plays an important role on a number of investment platforms from the point of view of providing <...> information and directing new investors, — Marcelo Maisonnave, Founder, XP Inc.
Banks and brokers create user-friendly platforms for comfortable investing
It was 2016 or so, I guess, when [the founder of Tinkoff Bank, Ed.] Oleg Tinkov was wandering the office, there was a spontaneous meeting. And Oleg literally said: ‘Why can’t I just click in the app and buy shares?’ It was just a typical conversation with Oleg. At that time, our yellow banking app was already pretty good. There was no super app, but we had an advanced financial app. ‘Why can’t I also buy shares [in the app, Ed.]?’ Very few people asked such questions back then. The team dug into this solution. First, it was our front on a partner’s backend, and then <...> we transferred it to our own platform. It was around 2018. If I remember correctly, we got something like 100,000 investor clients <...> over six months, — Oliver Hughes, Chief Executive Officer, Tinkoff Group.