Do-it-yourself investors are eyeing quick money in “uninvestable” Russia

Retail investors are flocking to falling Russia-focused stocks

Retail investors are flocking to falling Russia-focused stocks

While big Western investors have deserted Russia in recent weeks, a small group of retail investors see a bargain and shrug off any ethical concerns.

At a time when many in the UK are pouring money into charities to support Ukraine’s relief effort following Russia’s invasion, others are taking to social media to offer tips on how to buy the dip.

“It’s a once-in-a-lifetime opportunity for me,” an investor said on Reddit on March 4 of shares in Russia-focused steel and mining conglomerate Evraz.

Just six days later, Evraz’s London-listed shares were suspended after its largest shareholder, Roman Abramovich, was sanctioned by the UK, meaning any investor who took a stake in the stock had their money frozen.

Despite the risks, investments focused on Russia have proved popular with retail investors even as the war has taken a heavy human toll.

Russia – which describes its actions as a “special operation” – on Friday fired missiles at an airport near Lviv, a city where hundreds of thousands of refugees are sheltering far from Ukraine’s battlefields.

Big investors have labeled Russia “uninvestable,” but DIY investors — many of whom began stock picking during the “Stonks” trading frenzy during the pandemic — were undeterred.

London-listed shares of Russia-focused companies – including Evraz von Abramovich and gold and silver producer Polymetal – have recently jumped onto the best-selling stock charts on several of the UK’s largest investment platforms, according to a recent review of their websites by Reuters.

Evraz stock plummeted 67% before its suspension, and Polymetal is down more than 85% since the Russian invasion began on Feb. 24.

“It’s playing with fire and seems crazy to me, but some people want to bet aggressively. And that’s never going to change,” said Holly Mackay, founder and CEO of personal finance website Boring Money.

The market watchdog, the Financial Conduct Authority, told Reuters that it was monitoring the situation.

“Investors should be cautious when investing in companies that could be affected by the Russian invasion,” the regulator said.

Evraz was one of the five best-selling stocks by clients on the AJ Bell, Interactive Investor (ii) and Hargreaves Lansdown platforms last week before the stock was suspended.

It was also the stock with the highest buy-to-sell ratio on the Freetrade platform. All four are aimed specifically at retail investors, laypeople who trade securities via online platforms.

The United Kingdom has claimed in its sanctions, Evraz had contributed to the financial support of the destabilization of Ukraine and possibly supplied steel for the production of Russian tanks. Evraz denies the allegations.

AJ Bell said Evraz stocks would remain in client portfolios at the price at which they were exposed, while ii said shares would be held pending further information.

Polymetal was also among the top 10 most bought stocks on platforms verified by Reuters last week and topped AJ Bell’s list.

The company is not subject to UK sanctions and its shares are still trading, although the stock was removed from the indexes by FTSE Russell on Monday after many brokers refused to trade their shares.

Polymetal, which has eight gold and silver mines in Russia and derives most of its revenue in the country, said the situation in Ukraine was “terrible and heartbreaking” and called for a peaceful solution.

“MAKE OWN DECISIONS”

Retail investors have become a bigger force in the markets in recent years as more platforms offer commission-free trading and stock picking has gotten louder on social media.

Online platforms are the fastest growing part of the UK consumer investment industry, with newcomers being much more likely to be younger or first-time investors.

Platforms may need to consider providing more alerts or ethical filters like more established investors did in the Ukraine crisis, Mackay said, although she cautioned against being too restrictive.

Regulators have in the past warned of risks for retail investors, particularly following the suspension of UK property funds following the Brexit vote in 2016 and the COVID-19 lockdowns in 2020, as well as the suspension and subsequent collapse of investor Neil Woodford’s flagship fund in the UK year 2019

Hargreaves Lansdown and AJ Bell said they primarily provide a platform for clients to make their own investment decisions, taking into account their ethical beliefs.

“Our job is to inform so customers can make their own decisions,” said a spokesman for Hargreaves Lansdown, adding that the company was “appalled by this human tragedy” and is working with regulators.

Freetrade said it is monitoring the situation, liaising with regulators and communicating regularly with clients to educate them on the risks of investing in Russia-related stocks.

ii, which was bought by investment giant Abrdn in December, said the Russia-related trades were not representative of a typical investor, adding that it was working on ethical screens for assets, although they were not Russia-specific.

“There will always be some who choose extreme volatility,” said a spokesman for ii. “It’s always been like that and we’re not here to judge.”

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