The axiom known for almost a century that the “crowd” comes to the market last, usually buying the top before the inevitable collapse, has found yet another confirmation in Russia.
January's precipitous stock market crash, which was one of the top 4 of the past decade and burned $31 billion in terms of the capitalization of the RTS index, caught off guard hundreds of thousands of new investors who entered the market last year in hopes of making money and saving their savings from inflation.
According to the Moscow Exchange, in 2021 the number of individuals with brokerage accounts almost doubled and reached about 17 million. At the same time, the activity of private investors broke all records: about 2 million people made transactions every month.
During the year, "private traders" invested 532 billion rubles in shares on the Moscow Exchange, enjoying a rally that the market has not seen for many years. During the year, the Moscow Exchange index, which includes shares of 43 largest domestic companies, rewrote all-time highs for eight months in a row, which has not happened since 2003.
According to the Central Bank, the total portfolio of average people investments in shares of Russian companies as of October 1 reached 2.6 trillion rubles. This month, stock indices set highs, after which they began to decline, which turned into a full-fledged collapse with the advent of the new year.
In morning trading on Wednesday, January 19, the Moscow Exchange index lost 14% since the beginning of the month, and from the peaks shown in October, it fell by more than a thousand points, or 24%. As a result, all the growth of the market, shown last year, was destroyed, and the mass investor who bought the shares found himself in a loss.
The most popular paper in the portfolio of a private investor at the end of last year was Gazprom. Its share was 32.2%, or approximately 837 billion rubles in monetary terms (based on the statistics of the Central Bank).
Since the beginning of the year, the papers of the gas monopoly have fallen by 18%, which could bring a loss of 150.6 billion rubles to individual holders.
The second most popular issuer was Sberbank (22%). Moreover, a record number of private investors invested in its shares - 1.1 million. Of these, almost 500 thousand bought paper last year.
The January collapse lowered Sberbank quotes by 25%, to the lowest level since November 2020. This means that everyone who bought them during last year's stock market boom turned out to be in the red.
Russians could invest 437 billion rubles in ordinary securities of Sberbank, follows from Finanz calculations based on statistics from the stock exchange and the Central Bank. This means that the loss in January could amount to 109 billion rubles.
The third most popular security was Norilsk Nickel - 12.5%, or 325 billion rubles. Its quotes fell at the moment by 14%, which could bring a loss of 45.5 billion rubles.
Lukoil accounted for 8.6% in the portfolio of a private investor, or 223 billion rubles. The fall of almost 9% cut off 20 billion from this amount. However, the papers of the largest private oil company turned out to be more resistant than others to the stock market panic and almost completely recovered by the end of trading on January 19.
On VTB shares (5.4% in the portfolio, or 140 billion rubles), individuals could lose about 20 billion rubles at the peak of the fall, reaching 14.5%.
Thus, only on five blue chips, private investors could suffer a loss of 345 billion rubles. And from October 1, losses could exceed 600 billion rubles (assuming that the portfolio of "physicists" approximately corresponds to the composition of the Moscow Exchange index).
Many investors had to fix their losses. The last wave of the market decline, on Tuesday, January 18, was accompanied by massive margin calls from individuals, representatives of brokerage companies told VPost.
It was private investors who succumbed to panic and dumped papers, while sales of institutional clients were not so significant, according to Natalia Orlova, chief economist at Alfa-Bank.
This is not surprising: retail investors who came to the market during the period of growth, for the first time faced with such volatility, points out the head of the dealing center of Metallinvestbank Sergey Romanchuk.
At the auction on Wednesday, January 19, the Moscow Exchange index rebounded by 3.24%, and the RTS - by 3.45%. But whether the worst is left behind is unclear. "The Russian stock market, like the economy as a whole, looks very weak and vulnerable," said Alexei Antonov, chief analyst at Alor Broker.
The answer to the question of whether the market has reached the bottom is likely to be negative, says Eric De Pouy, a leading analyst at Gazprombank: not only the geopolitical background is affecting, but also fears in connection with the end of the Fed's loose monetary policy period.
Orlova, on the contrary, believes that the scenario of easing the situation is more likely than its escalation. Firstly, the sales did not come from non-residents, but from Russian investors, who are more sensitive to the topic of the war with Ukraine, and secondly, the scale of the fall in the markets was more caused by the situation with liquidity than by the change in the attitude of investors towards Russian assets, she explains: “The market bonds reacted first, while the stock market was seriously lagging, and the ruble is still in relatively good shape.”
Russian assets remain hostage to geopolitics: in the event of a further escalation of the situation, in the worst case scenario, stock indices could collapse by another tens of percent, investment strategist of Arikacapital Management Company Sergey Suverov warns.
Western money is still very important for the market, he notes, and their flight could send stocks in search of a new bottom.
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