Russia to relax rules on foreign investors

Spotted a summary in Asian Investor the other day about the proposed regulatory changes and infrastructure improvements in Russia that may make it easier for foreigners to access Russian stocks. The main piece is probably now behind Asian Investor’s paywall, but these are the key points:

Micex-RTS plans to remove the requirement for foreign investors to pre-fund their brokerage accounts ahead of trading by the end of the year. This differs markedly from international practice, whereby cash and securities are settled two or three days after trade day (T+2 or T+3), and has been a big obstacle for international investors … the exchange will also set up a central securities depository (CSD) around the end of September to replace the group of registrars and separate depositories that was run by the Micex and RTS exchanges … The exchange will also introduce listing reforms that will create a new listing segment, ‘novy rynok’ (‘new market’), specifically targeting international investors … This segment will require higher corporate-governance standards of issuers than for those listed elsewhere on the exchange. Disclosure will be in English, with quarterly financial reporting based on IFRS accounting standards.

(Micex-RTS is the new unified exchange formed from merging the two main Russian exchanges towards the end of last year in an attempt to increase liquidity and attract more listings.)

Whether these changes – if they happen – will make much difference remains to be seen. Many major Russian companies already trade abroad in London as GDRs (and less commonly in the US as ADRs) and many foreign investors prefer to deal there – trading volumes in Russian stocks in London can often exceed activity in Moscow.


India considers opening stock market to foreign individuals

Reuters is reporting that the Indian government is considering relaxing restrictions on foreign individuals investing in Indian shares, in an attempt to attract more foreign capital. If this goes ahead – and that’s a big ‘if’ – it could be a very exciting development.

Very few countries actively bar foreign individuals from investing in their stock markets, although some make it difficult. Oddly enough, it’s the BRICs – the four emerging markets that foreign investors talk about the most – that are the hardest. And India is arguably the most frustrating of all.


St Petersburg Stock Exchange 1865-1917: Why diversification pays in emerging markets

Take a look at the chart below. Which of these two countries was the better investment?

On a very quick glance, it looks like the red line is the clear winner. But once you’ve checked the legend and dates, you’ll know it’s not so simple.