Moscow Exchange bets on Russia-China investments

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A senior official with the Moscow Exchange (MOEX) said increasing cross-border financial cooperation between Russia and China remains a priority, especially with more products expected for companies and investors to raise funds and buy securities.

Russia and China have signed a series of agreements over the last two years, including memorandums of understanding between Bank of Russia and China’s central bank on clearing and settlement of Chinese yuan payments in Russia, and cooperation on gold exchange trading.

But cross-border individual and portfolio investment has been slow to materialize, with Chinese investors now holding only about 3 billion US dollars in Russian equities and bonds, compared with 65 billion US dollars in annual trade between the two countries.

“The ultimate goal is to reach with China the same level of partnership we have had for many years with western financial markets,” said Igor Marich, who oversees MOEX’s money and derivatives markets.

New issuances currently under discussion include exchange-trade funds along with the long-anticipated issuance of a yuan-denominated bond at MOEX, said Marich, who expected fixed income to be a main driver, with some Russian sovereign bonds offering yields of more than 8 percent.

China’s Belt and Road initiative, the global infrastructure and investment strategy included in China's Communist Party constitution last month, should also accelerate developments.

“I see growing interest of Chinese investors into Russia,” said Marich, “that’s one reason for cautious optimism. The other real transactions have happened.”

Marich pointed to CEFC China Energy’s 9.1 billion-US dollar purchase of a stake in Russia’s Rosneft Oil ROSM.MM and the participation of China’s Fosun International Ltd. in a consortium of investors that bought a 10 percent stake in Polyus, Russia’s top gold producer.

Marich was in Beijing to promote the Moscow Exchange and Belt and Road investment opportunities on the final leg of a three-city tour that included Shenzhen and Shanghai.

In May, MOEX signed an expanded strategic cooperation agreement with the Shanghai Stock Exchange that included provisions to improve collaboration on market data and develop and launch yuan and ruble quoted products.

In December, MOEX also signed an agreement with CITIC Securities and Galaxy Securities to see the Chinese brokerages provide access for their clients to Russian securities traded in Moscow.

Source(s): Reuters