LONDON: While major western investors have dumped Russia in recent weeks, a small group of armchair investors see a bargain and shake off all ethical concerns.
At a time when many in Britain are pouring money into charities to support relief efforts in Ukraine after the Russian invasion, others are looking to take advantage and offer tips to “buy the dip” on social media.
“For me, it’s a unique opportunity to buy,” an investor told the Reddit website on March 4 about shares in the Russia-focused steel and mining group Evraz.
Just six days later, Evraz’s London-listed shares were suspended after major shareholder Roman Abramovich was sanctioned by the UK, meaning any investor who took a gamble on the shares had that money frozen.
Despite the risks, Russia-focused investments have proved popular with private investors, even as the war has taken a heavy human toll.
Russia – calling its actions a “special operation” – fired missiles on Friday at an airport near Lviv, a city where hundreds of thousands of refugees are hiding far from Ukraine’s battlefields.
Major investors have called Russia “uninvestable,” but do-it-yourself investors — many of whom started stock-picking during the “stonks” trading frenzy of the pandemic — were undeterred.
London-listed shares of Russia-focused companies — including Abramovich’s Evraz and gold and silver producer Polymetal — have recently jumped into the most bought stock charts on several of the largest UK investment platforms, according to a Reuters review of their websites.
Evraz’s stock plunged 67% before being suspended, 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 take aggressive bets. And that’s never going to change,” said Holly Mackay, founder and chief executive of the personal finance website Boring Money.
Market regulator the Financial Conduct Authority told Reuters it was monitoring the situation.
Investors should exercise caution when investing in companies that may be affected by the Russian invasion.
Evraz was in the top five most-bought stocks by customers on the AJ Bell, Interactive Investor(ii) and Hargreaves Lansdown platforms last week, prior to the stock’s suspension.
It was also the stock with the highest buy-to-sell ratio on the Freetrade platform. All four are specifically aimed at retail investors, non-professionals who trade securities through online platforms.
The UK has alleged in its sanctions that Evraz helped provide financial support to destabilize 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 client portfolios at the price it was suspended at, while ii said shares were being held until more information was available.
Polymetal was also one of the top 10 most bought stocks on the platforms reviewed by Reuters last week, and topped AJ Bell’s list.
The company is not subject to sanctions in the UK and its shares continue to trade, although the stock was removed from the indexes by FTSE Russell on Monday after many brokers refused to trade his shares.
Polymetal, which has eight gold and silver mines in Russia and earns most of its revenue in the country, has said the situation in Ukraine is “horrifying and heartbreaking” and has called for a peaceful solution.
Retail investors have become a bigger force in the markets in recent years as more platforms have offered commission-free trading and stock voters have become more vocal on social media.
Online platforms are the fastest growing part of the consumer investment industry in the UK, with new entrants much more likely to be younger or new investors.
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 warned not to be too restrictive.
Regulators have warned of risks to private investors in the past, particularly following the suspension of UK property funds in the wake of the Brexit vote in 2016 and COVID-19 lockdowns in 2020, and with the suspension and subsequent collapse of the flagship fund of investor Neil Woodford in 2019.
Hargreaves Lansdown and AJ Bell said they primarily provided a platform for clients to make their own investment decisions, taking into account their ethical beliefs.
“Our role is to help inform so customers can make their own decisions,” said a Hargreaves Lansdown spokesperson, adding that the company was “shocked by this human tragedy” and was working with regulators.
Freetrade said it was monitoring the situation, liaising with regulators and communicating regularly with clients to educate them on the risks of investing in Russia-linked stocks.
ii, which was bought by investment giant Abrdn in December, said the Russia-linked trades weren’t representative of a typical investor, adding that it was working on ethical filters for assets, though they weren’t specific to Russia.
“There will always be those who choose to lean on extreme volatility,” said a spokesperson for ii. “It’s always been that way, and we’re not here to judge.”
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