That said, the ranks of private investors in Russia, while relatively small, have grown. Jacob Grapengiesser, partner at the Swedish investment company East Capital, was until recently based in Russia. Before the war, he said, his wife’s younger colleagues asked her for stock selection after finding out what he did for a living. “That wouldn’t have happened even a few years ago,” said Mr. Grapengiesser.
But investing in Russian stocks is now a completely different proposition. Sanctions hit the Russian economy hard, and the measures Moscow is taking in response, including restricting access to foreign currencies and raising interest rates, further restrict what companies can do. Investors who screen their investments for environmental, social and governance or ESG principles are also rethinking their exposure to anything Russian.
Analysts at IHS Markit expect the Russian economy to contract by 11 percent this year and inflation to more than triple to more than 20 percent. According to their prediction, the country will not fully return to its pre-war size until the 2030s.
Russian state-owned companies, which tend to be the largest and most international, are increasingly cut off from foreign markets, especially if their owners are under Western sanctions. S&P Global Market Intelligence recently estimated that the average publicly traded company in Russia has a 1 in 5 chance of defaulting on its debt.
Russian companies listed on foreign markets, which continued trading after the Moscow market closed, have seen their value fall to near zero. The fact that companies are worth something at home, but are seen as worthless abroad, shows how completely separated the Russian market is from the rest of the world.
For some, that’s an opportunity. East Capital’s Mr. Grapengiesser said he received “three calls a day” from foreign hedge funds wanting to buy his Russian shares at deep discounts. (The company has hundreds of millions of dollars in Russian stock in its funds.) He is not interested in selling, nor does he know how to complete the transactions, as his assets as a foreign fund are frozen.
