Datamonitor's Central and Eastern European Retail Savings & Investments Database shows that Russia is considerably ahead of the other countries in the region in terms of retail holdings of equities. These are forecast to grow significantly over the next five years, being boosted by rising oil prices, which will further widen the gap.
According to Datamonitor's recently updated Central and Eastern European Retail Savings & Investments Database, which covers the deposits, mutual funds, equities, and bonds asset classes, Russia is leading the Central and Eastern Europe (CEE) region in terms of total retail investments in equities, accounting for 40% of the total holdings in 2011. The database forecasts equities to record a compound annual growth rate of 18.3% between 2011 and 2015.
This will see the already significant gap between Russia and the other large markets in CEE widen further, consolidating Russia's position in the region. However, the uncertain economic recovery in the developed world and the resulting shifts in oil prices continue to have a major impact on the share prices of oil companies - with the likes of Gazprom, Rosfnet, and Lukoil constituting 69% of the Russian stock market - and thus on equity holdings as a whole.
Russia is the second largest oil producer and the leading natural gas producer in the world; booming oil prices in 2010 and 2011 contributed to boosting both economic and stock market performance. However, according to a recent World Bank report, over-reliance on revenues from mineral fuels makes Russia vulnerable to changes in world supplies and prices. In addition, the escalating European sovereign debt crisis is expected to impact Russia. Europe is still the main consumer of Russian oil, accounting for 75% of the country's oil exports in 2010.
As a matter of fact, in 2011 the Russian stock market lost about a fifth of its value compared to a year earlier, mainly due to the uncertainty surrounding the outcome of the European sovereign debt crisis. Russia has countered this risk by diversifying its target markets for oil exports. A new oil pipeline between Russia and China became operational in January 2011. The pipeline supplies China as well as a number of other Asia Pacific countries, and provides Russia with a counterweight for lower demand from Europe, offering more stable long-term prospects to the Russian oil industry and the country's stock market.
Russia's new links with China, the stabilizing European economy, and rising oil prices are all expected to have a strong positive effect on the Russian stock market, consolidating Russia's dominant position in the CEE region in terms of retail holdings of equities and boosting its position from 40% of the total balances in the region in 2011 to 45% by the end of 2015.
For further information please see Datamonitor's Central and Eastern European Retail Savings & Investments Database 2011 (January 2012, CM00144-003).
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