Since 2022, retail investors have become the driving force behind Russia’s stock market following the ban on trading operations for foreign investors. Let’s examine how their share has evolved across different segments of the Moscow Exchange.
Stock Market
Between January 2021 and February 2022, retail investors accounted for an average of 39.6% of all stock market turnover. However, after February 2022, when foreign investors were barred from the Russian market, domestic individuals significantly increased their participation.
The peak share of retail investors in stock turnover was recorded in August 2023, reaching 82.7%. Since then, this figure has declined, averaging 76% since 2022 and 74% in 2024. Despite the slight drop, these levels remain historically high, with retail investors continuing to play a dominant role in driving the market.
Notably, retail investor activity has shown that stocks with increased attention often experience growth or suffer less severe declines than other instruments. In 2023, retail investors were actively increasing their investments in stocks. However, 2024 saw more modest contributions, with capital outflows starting in August. This trend coincided with a prolonged stock market downturn from May to September 2024—the longest in a decade.
The main factor behind the outflows was the Central Bank of Russia’s key interest rate hikes, which made bonds and money market funds more attractive. As of October 2024, retail investments in exchange-traded funds (ETFs) reached a record 104.5 billion RUB.
Bond Market
Before February 2022, retail investors represented an average of 15.3% of bond market turnover. Their share has since more than doubled but has not exceeded 40% at its peak.
In late 2024, the attractiveness of bonds has risen, as evidenced by the increasing share of retail turnover. This shift aligns with higher interest rates, which have made fixed-income instruments particularly appealing.
Conclusion
Retail investors have become a central force in Russia’s financial markets, particularly in stocks and bonds. While their dominance in the stock market remains significant, recent trends suggest a growing preference for bonds and money market funds, driven by rising interest rates. The evolution of retail investor activity highlights their adaptability to changing market conditions and their influence on the Moscow Exchange’s dynamics.
Source: Alfa Investments
