Is it a good idea to invest in the Russian stock market?

Earlier this month we heard from George Nicholov from Toronto. Here’s his question: Are there a lot of Russians who invest in the stock market in Russia? Is it a good idea to invest money in the stock market or not?

George, it is hardly possible to speak about the precise figure of the number of investors, so let me just repeat your phrase – there are a lot of investors on the Russian stock market, more than a million private investor individuals.  And it certainly does not belong to the category of casinos, gambling organizations and hippodromes – as you also asked.

But let me say a few words about its history.

The first stock exchange was established in 1703 by Czar Peter the Great. At the time it quoted 312 types of shares and state obligations. Its main players were St. Peterburg’s banks. By 1913 there were about 100 exchanges. After the 1917 revolution exchanges began to disappear, and during the New Economic Policy introduced by Vladimir Lenin they were all closed.

Their second life began during Mikhail Gorbachev’s policy of re-structuring in 1991. The stock market began to grow rapidly, and very soon there were more than 2,000 of exchanges trading shares of share-holding societies, banks, investment funds and other organizations. With the development of stock market legislation many of them were closed, and at present our financial and business media that have also developed very fast in the last 20 years quotes two major exchanges – Moscow International Currency Exchange, MICEX, and the Russian Trading System, RTS.

According to the National Association of the Securities Market Participants, Naufor, aside from investment institutions and commercial banks its professional participants include specialized depositories and institutions licensed to quote and trade securities. To quote data for trading at the MICEX as on March 17th, its size of the stock market was 4,9 billion dollars ( as the statistics equivalent of the Russian rouble). The blue chips include GAZprom, VTB (Foreign Trade Bank), LUKoil, Norilsk Nickel, Rosneft, Rostelecom, Sberbank (Russian Savings bank) – I think you may have heard some of the names. Some of them are quoted at the London Stock Exchange. Then there are 14 major exchanges in major Russian cities, many mutuals, investment funds and so forth. Many of them hold IPOs in London or New York, so it certainly is profitable to invest in the Russian stock market.

The global financial crisis hit our stock market severely-in late 2009 it fell and The Financial Times called it the worst-hit international stock market. Before the crisis its capitalisation exceeded 56 billion dollars.

And of course it takes professional know-how to succeed.

I would also like to quote a typical analysis of the stock market, Alexei Zavialov, a colleague at Radio Business FM – just one media outlet, whose number is a legion.