Analysis: DIY investors eye quick buck in ‘uninvestable’ Russia

A man is silhouetted in an electronic board showing the FTSE MIB Index for the Italian equity market in this photo illustration taken in Rome August 9, 2011. REUTERS/Tony Gentile

LONDON, March 18 (Reuters) – While the West’s big investors have ditched Russia in recent weeks, one small group of armchair investors sees a bargain and is shrugging off any ethical qualms.

At a time when many in Britain are pouring cash into charities to support relief efforts in Ukraine after its invasion by Russia, others are looking to profit and offering tips to “buy the dip” on social media.

“For me it is a one (sic) in a lifetime chance to buy,” said an investor about stock in Russia-focused steel and mining group Evraz on the Reddit website on March 4.

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

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

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

Major investors have called Russia “uninvestable”, but DIY investors – many of whom took up stock-picking during the “stonks” trading frenzy in the pandemic – have been undeterred. read more

London-listed stocks of Russia-focused companies – including Abramovich’s Evraz and gold and silver producer Polymetal (POLYP.L) – have recently leapt into the most-bought stocks tables at several of Britain’s largest investment platforms, according to a review of their websites by Reuters.

Evraz stock plummeted 67% prior to its suspension, and Polymetal is down more than 85% since Russia’s invasion began on Feb. 24.

“It’s playing with fire and seems mad to me, but some people want to take aggressive bets. And that will never change,” said Holly Mackay, founder and chief executive of personal finance website Boring Money.

Markets regulator the Financial Conduct Authority told Reuters it was monitoring the situation.

“Investors should take care when investing in companies that may be impacted by the Russian invasion,” the regulator said.

Evraz was one of the top five most bought stocks last week by customers on the AJ Bell (AJBA.L), interactive investor (ii) and Hargreaves Lansdown (HRGV.L) platforms, prior to the stock’s suspension.

It was also the stock with the highest buy-to-sell ratio on the Freetrade platform. All four cater specifically to retail investors, non-professionals who trade securities through online platforms.

The UK has claimed in its sanctions that Evraz has helped provide financial support towards destabilising Ukraine and may have supplied steel used for the production of Russian tanks. Evraz denies the claims.

AJ Bell said Evraz holdings would remain in customer portfolios at the price it was suspended at, while ii said shares were being held until further information was available.

Polymetal was also one of the top 10 most bought stocks last week across the platforms reviewed by Reuters and was top of AJ Bell’s list.

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

Polymetal, which has eight gold and silver mines in Russia and makes most of its revenues in the country, has said the situation in Ukraine is “horrifying and heartbreaking”, and has called for a peaceful resolution.

‘MAKE THEIR OWN DECISIONS’

Retail investors have become a bigger force in the markets in the past couple of years as more platforms have offered commission-free trading and stock-pickers have become more vocal on social media. read more

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

The platforms may need to consider providing more warnings or ethical filters as more established investors have done in the Ukraine crisis, Mackay said, though she cautioned against being too restrictive.

Regulators have in the past warned of risks to retail investors, particularly after the suspension of British property funds in the aftermath of the Brexit vote in 2016 and COVID-19 lockdowns in 2020, and with the suspension and subsequent collapse of investor Neil Woodford’s flagship fund in 2019.

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

“Our role is to help inform so that clients can make their own decisions,” a spokesperson for Hargreaves Lansdown said, adding the company was “horrified by this human tragedy” and was working with regulators.

Freetrade said it was monitoring the situation, liaising with regulators, and communicating regularly with customers to educate them about the risks of investing in Russian-linked stocks.

ii, which was bought by investment giant Abrdn (ABDN.L) in December, said the Russia-linked trades were not representative of a typical investor, adding it was working on ethical filters for assets, though these were not Russia-specific.

“There will always be some who choose to lean on extreme volatility,” a spokesperson for ii said. “It has always been the case, and we are not here to judge.”

Reporting by Iain Withers and Carolyn Cohn; Editing by Sinead Cruise, John O’Donnell and Jan Harvey

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