Translation. Region: Russian Federal
Source: Moscow Exchange – Moscow Exchange –
An important disclaimer is at the bottom of this article.
"RBC Investments" talked with the head of the Moscow Exchange Viktor Zhidkov about promising instruments on the Russian market, investor confidence, measures to stimulate IPOs and what will be the key idea for the next five years.
In this text:
Key growth tools New names on the Russian market What will be the market driver in five years
In February 2024, President Vladimir Putin ordered that the capitalization of the Russian stock market be increased to 66% of GDP by 2030.
– How do you see the role of the Moscow Exchange in the context of the task of increasing the capitalization of the stock market? – The task of the Moscow Exchange is absolutely utilitarian – we need an investor to be able to purchase those assets that seem reliable and promising to him at any time, and issuers to gain access to capital.
This task can be broken down into the following growth points:
The first is to improve the management efficiency of companies that are already traded on the market. We are constantly in dialogue with issuers to improve corporate management and create incentives for investors to receive more open information from companies; the second track, which will increase capitalization, is new names on the market that arise from the desire of businesses to realize themselves in new directions. Here, our task is quite simple – to help the company realize its ambitions to enter the stock exchange and contribute to the removal of possible barriers and difficulties. In Russia, it is very important that every entrepreneur wants to enter the stock exchange, which in the future will create a new generation of businessmen for whom this will become a realizable dream and will carry great meaning; the third vector is natural market growth, which would lead to a fair assessment of the Russian market relative to other global markets. Today's discount in the value of Russian business is 70% in relation to the value of assets in the markets of other developing countries. This component has more weight, but, unfortunately, it is very difficult to influence it.
Now our actions should be aimed at increasing the stability of the financial system. When the period of uncertainty ends, this will allow us to integrate faster. I am sure that when the situation stabilizes, the Russian market will be revalued upwards. Capital always strives for the most effective use. And now we have very promising assets for purchase.
– What measures are needed to protect the rights of minority shareholders in the context of the growing number of private investors?– Minority shareholders must be confident in the inviolability of their rights to securities acquired at organized trades. It is extremely important that today's practice, including law enforcement, does not undermine, but rather strengthens the confidence of retail investors in long-term investments in the stock market. We expect a proactive position from issuers as well. High-quality corporate governance works to protect the rights of minority shareholders, while reducing legal and business risks through well-established risk management systems, corporate decision-making, and streamlined audit and compliance procedures.
This also concerns information transparency. We see that recently the ability of investors, especially minority shareholders, to monitor the situation with some issuers has been reduced. This complicates investment decisions. I am sure that the industry will eventually need to determine acceptable standards of information disclosure and establish uniform reporting requirements. And, of course, for investors, both private and institutional, a predictable dividend policy that is observed by companies is important.
Tools for growth
– It seems that the Bank of Russia is betting on the development of the collective investment market. What role will the instruments of this market play in the context of the task of increasing the capitalization of the stock market?
– The collective investment market will play one of the key roles in attracting mass investors to the market. At the same time, this segment has a number of features from the past and there is room for improvement in this market:
lack of distribution channels. Until recently, collective investment funds had no way to sell themselves except through bank branches and within their own ecosystems; high commissions for aggressive trading. Some investors were disappointed because they did not receive the desired growth in their wealth and incurred high costs; infrastructure that required setup. Due to complex paperwork, a client could receive a purchased share in three days and was not sure of the final commission amount.
– A logical question arises: what steps need to be taken to develop the collective investment market?
– Our task is to offer every Russian a financial product that will not only help them invest profitably, but will also suit their character and lifestyle.
The collective investment market already has a sufficient set of tools to meet the needs of the mass investor, and there is no great need to expand it. For example, a restaurant may have a large menu, but people will most often take three or four standard items from the entire list. The same is true for mutual funds: the shelf will be large, there will be a sense of choice, but they will still buy, so to speak, an index on bonds or shares. This is enough to solve the problem of the mass investor.
For further development of the market, it is necessary to strengthen the marketing of existing instruments so that the investor can look at the charts, at the growth and make the right choice.
– What role can opinion leaders play in attracting people to the market? If we have a “Russian Warren Buffett,” will that help attract people to the market and instill in them a culture of long-term investment?
– I am firmly convinced that collective investments need a cohort of leaders who will lead people. In general, people value national examples, heroes, models of correct behavior, and so on. At the same time, they should be different, because people are also different – some are interested in adventurers, while others are guided by conservatives. In investments, many things work the same as in other areas of life. People buy clothes that their idols wear. Investors buy shares because Warren Buffett decided to buy them.
In the spring of this year, Finuslugi, together with the management company Alfa-Capital, launched three funds, and in the summer a fourth proprietary mutual fund appeared, the strategy of which is determined by financial influencers. At the same time, the Bank of Russia sees risks in the trend of funds under the management of investment bloggers. Moreover, the regulator intends to equate misleading investors with market manipulation.
New names
– Pre-IPO and IPO are important drivers of capitalization. In your opinion, how can this segment be developed? What proposals does the Moscow Exchange have regarding stimulating IPO and pre-IPO on the Russian market, for example, tax incentives?
– This segment already has everything necessary for companies to actively attract capital on the open market. If a company says that it does not attract money because it does not have, say, tax incentives, this will probably be disingenuous.
In general, all technological nuances are just tuning. Wind does not arise because trees sway, but vice versa. If, for example, small businesses are reimbursed for the costs of conducting an IPO, this may affect the decision to enter the stock exchange only for a limited number of companies. We are definitely not talking about hundreds of businesses.
One of the main reasons why companies do not go public en masse is that their owners do not understand how the open market works. Entrepreneurs believe that by taking a company public, they will lose control over it. For example, there is a misconception among businessmen that the board of directors prevents them from managing the company. This is a classic cognitive distortion, because in fact, over the long term, a competently operating supervisory board, on the contrary, helps to develop the business and gives it a lot of advantages.
Last year, we launched the MOEX Start pre-IPO platform, which allows small companies to raise capital by offering their shares to a limited number of qualified investors.
We have created the entire technological chain, and now all that remains is for people to learn about it. Our task is to remove all barriers so that any entrepreneur understands how it works. So that they receive guides and can communicate with those who have already gone public, so that a community of professionals who deal with IR and corporate management appears.
– What companies may appear on the Russian market in the near future?
– I would say cautiously that 20 companies are, so to speak, on the move. They are ready. However, the current market situation is forcing them to shift their plans for entering the market, since the owners are striving for the fairest possible valuation of their business.
– What sectors could these companies be from?
– Various companies from the technology sector – medtech, biotech, ecotech, as well as manufacturing companies.
Overall, there are about 500 companies in Russia that are suitable for placement on the stock exchange. These are actively growing and interesting businesses for the market. However, it is premature to predict the rate at which these companies will enter the stock exchange.
The Next Big Thing
– What will be the next big thing in investing in the next five years? What products will be the most in demand on the market?
– Now everyone is talking about artificial intelligence, explaining this by the fact that we have never lived in conditions of such rapid changes before.
Artificial intelligence has the ability to get to the point faster than anyone else, and therefore the mediation of various classifieds will disappear. Using AI technologies in the stock market can help a person choose the best investment strategy from dozens available. It is only important to formulate the task correctly at the entrance.
What we call subjective opinion today will begin to disappear, and artificial intelligence will help make more objective decisions in the stock market. AI is quite rational. By studying you, it will be able to warn you that the investment in question is not suitable for your risk profile and suggest alternatives.
Eventually, there will be far less distortion in the market, with some people losing money recklessly and others getting rich overnight. It will all be quite rational. Will this generally help the economy? I think so.
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