Micex | News Room | The number of Russian retail investors has doubled in less than a year to 400,000

The number of Russian retail investors has doubled in less than a year to 400,000

December 18, 2007

Key points:

- As of December 1 2007, the number of individual Russian retail investors in equities topped 400,000 for the first time. The figure has doubled in less than a year, maintaining the trend established in 2006.

- An opinion poll commissioned by the MICEX Stock Exchange reveals that 50% of financially active Russians polled would buy stocks if they could afford it, suggesting a potential retail investor pool of 5.9 million people.

- However, 90% of respondents admit that they need a lot more financial education.

- MICEX Stock Exchange CEO Alexei Rybnikov calls for a joint effort by the Russian Government, regulators and professionals to bridge this education gap.

As of December 1st 2007, the number of Russian individual investors topped 400,000 for the first time. This figure represents individual retail clients registered in the trading system of the MICEX Stock Exchange, which is Russia▓s leading exchange and the focus for domestic retail investment.

The number of individual investors in Russia has been doubling each year, and is up from 198,900 at the beginning of 2007. The figure had more than doubled during 2006, when the number of individual investors started the year at 95,700.

Speaking at a roundtable held on December 18 and titled "The Stock Market and the Individual Investor: A Step Towards Each Other", Alexei Rybnikov, CEO of MICEX Stock Exchange, said:

⌠The Russian stock market has made a breakthrough. In a few years, the number of individual investors will be in the millions. But this potential makes the problem of investor [education] and the general financial culture of Russia▓s population ever more important. Investors entering the stock market should be well informed and realise the importance of their investment decisions and the risks existing in the stock market.■

The Exchange intends to develop a network of partners, including market participants and other interested organisations that could help to implement programmes aimed at improving the financial literacy of Russia▓s population.

The roundtable was held to debate the results of a study of the Russian population▓s investment culture commissioned by the MICEX Stock Exchange from the "Public Opinion" Fund and conducted in October andNovember 2007.

According to the results of the study, about 50% of the respondents would buy stocks if they could afford to, while 19% of the respondents would buy shares of investment funds. Only 5% of the respondents intended to buy shares of investment funds in the near future. The overwhelming majority of the respondents (90%) admitted that they needed more knowledge and information to be able to effectively invest money in securities.

The study was based on an opinion poll involving 2,500 "financially active■ citizens of the Russian Federation from 204 places in 63 separate constituent entities of the Russian Federation.

Дополнительная информация
download (27.5 kb)

— Over 39 million people (35.2% of Russia▓s population) are financially active. This is defined as the number of people with relevant experience in the use of various financial instruments, such as bank deposits, investments in the stock market, credit products, and insurance services. The number of potential investors who showed the most interest in investments in securities was 5.91 million √ 15% of the financially active figure, and 5.3% of the adult population of Russia.

— The economic literacy of these financially active citizens is not high. Respondents were best informed about traditional financial instruments √ bank deposits (98% know or have heard about deposits with Sberbank, the Russian savings bank, while 91% know about deposits with commercial banks), real estate investments (90%) and stocks (87%). Respondents were worst informed about more modern investment instruments such as investment funds, corporate bonds and bank-managed mutual funds √ 47%, 61% and 72% of respondents, respectively, knew nothing about these.

— A smaller proportion of the respondents was able to recall the names of the major Russian securities exchanges. Only 18% of the respondents named MICEX, and 11% named RTS. However, the names of these exchanges were known to 43% and 33% of "highly competent" respondents, and 34% and 23% of "potential investors".

— Respondents also knew little about the main market indicators √ 13% named the MICEX Index and just 6% named the RTS Index.

— But while they are aware of their own lack of knowledge, potential investors are cautious about trusting others. 30% of the respondents would prefer to manage their investments independently, while 45% would entrust their funds to professionals. Most of those who would entrust the management of their funds to specialists (38% of the sample group) would do it because they did not consider themselves competent enough in this sphere. But those who would prefer to manage their investments independently cited their distrust of any intermediaries as the main argument. This distrust was shared by most respondents in this group (and 21% of the sample group).

— When asked about the dangers of investing in stocks, 32% of respondents named the possible bankruptcy of the issuer as the main risk; 20% mentioned the possible decrease in the value of stocks; and for 5% the main risk was the inability of receiving profit from such investments (⌠not receiving my share or receiving low interest"). Fully 21% of the respondents believed that not only might they not make a profit, but that they could lose all the money invested. Interestingly, 6% believed that the main risks are associated not so much with this particular investment instrument as with the overall situation in the country, characterised by instability or even possible crises in the economy and politics. The same number of respondents feared fraud.

— Almost half of respondents were aware to some extent that the investor bears the risks associated with investments in securities. 47% understood that when stock prices plummet no one is obliged to compensate shareholders for their losses. However, more than a third of the respondents (37%) were convinced that in such a case the State was obliged to compensate shareholders for their losses. The study also revealed the prevailing distrust of the State and the financial system: 65% of the respondents believed that investors were not protected by the law, while 22% had difficulty in answering the question.

— The study revealed a dramatic shortage of information about investing possibilities in the media: 37% of the respondents said they never came across this information; 34% thought there was not enough such information, and only 15% said there was enough information in the media about investing. Of those who find this information in the media, more than half (32% of the sample group) said that it was usually too difficult to understand. Many would like to learn ⌠all there is to know about stocks in plain Russian.» And only a small proportion of those who use this information said that they could understand it easily (21% of the sample group).

— 44% of the respondents in all segments of the sample group named television as the most convenient source of information about investing. The second most convenient source of information is the press (22%), followed by the internet (12%) and radio (5%). Other respondents named as sources professionals, friends, special literature and banks (1% each). "Potential shareholders■ cited the internet as a convenient source of information even more often (22%) than the press (17%), while "highly competent" respondents cited the internet as often as printed editions (23 and 25% respectively).

— The level of financial culture among adolescents is fairly low. Most young respondents (86%) know about forms of investment such as deposits with Sberbank, and about half mentioned financial instruments such as real estate, deposits with commercial banks and investments in stocks. Roughly a quarter of teenagers said they could learn about stocks and the rules of trading and investing at school, though most respondents said they were never given classes in these subjects. According to the results of the study, although active users of the internet √ 39% use it on a weekly basis, another 11% use once a month √ only 2% of the respondents said they could find information about finances and investing on the World Wide Web, and few respondents were able to name particular web sites.