Russia\u2019s Central Bank sees no realistic path to meeting President Vladimir Putin\u2019s target for expanding the stock market by 2030, a senior official said, as falling share prices and limited investor demand push the goal further out of reach.<\/p>\n
The Central Bank and Finance Ministry are reassessing what level of market capitalization Russia can achieve, Interfax cited First Deputy Governor Vladimir Chistyukhin as\u00a0saying<\/a> Thursday.<\/p>\n Putin ordered<\/a> Russia to double its stock market capitalization to at least 66% of gross domestic product by 2030 in a decree issued in May 2024, shortly after beginning another presidential term.<\/p>\n \u201cOur calculations simply do not get us to 66%,\u201d Chistyukhin said.<\/p>\n The assessment underscores the difficulties of expanding a market that has lost access to much of its foreign investor base since Russia invaded Ukraine and now relies heavily on individual investors.<\/p>\n Market capitalization, the combined value of listed companies, has fallen by about a third since Putin issued the decree.<\/p>\n \u201cWe are moving very quickly, but unfortunately in the opposite direction,\u201d Sergei Shvetsov, chairman of the Moscow Exchange\u2019s supervisory board, said<\/a> previously.<\/p>\n According to Central Bank calculations<\/a>, the MOEX stock index has been among the worst-performing financial instruments both since the start of the war and this year. Investors have lost 10.5% since the beginning of 2022, even after accounting for dividends.<\/p>\n Rating agency Expert RA estimated<\/a> that stock market capitalization had fallen from 47% of GDP to 23%, meaning it would now need to roughly triple to meet Putin\u2019s target.<\/p>\n The Center for Macroeconomic Analysis and Short-Term Forecasting, a think tank close to the Kremlin, projects<\/a> that capitalization will reach 40% of GDP by 2030 in its optimistic scenario. Its pessimistic forecast puts the figure at 28.8%, below the level when Putin signed the decree.<\/p>\n Market capitalization can grow through rising share prices or new listings. Chistyukhin warned that the measures under consideration might still be insufficient to reach the target.<\/p>\n Meeting it would require enormous share offerings, he said, raising questions about whether investors could absorb them.<\/p>\n Since the invasion, funds belonging to investors from countries Moscow designates as \u201cunfriendly\u201d have been frozen in special accounts. Individual investors now account for about two-thirds of share trading on the Moscow Exchange.<\/p>\n Chistyukhin cited the roughly 30 billion ruble ($354 million) initial public offering by state housing finance company Dom.RF, the largest in recent years, as a deal individual investors had been able to absorb.<\/p>\n Offerings of 300 billion rubles ($3.54 billion) or 500 billion rubles ($5.9 billion) would pose a much greater challenge, he said.<\/p>\n Expert RA has also warned that individual investors cannot replace foreign funds in large deals worth 50 billion rubles ($590 million) or more.<\/p>\n Sberbank CEO German Gref and Central Bank Governor Elvira Nabiullina have both identified<\/a> investor confidence as essential to increasing stock market valuations.<\/p>\n Repeated tax increases, nationalizations and the seizure of shares bought on the exchange have raised concerns about the security of investments.<\/p>\n