Analysis: DIY investors eye quick buck in 'uninvestable' Russia

Evraz

18/03/2022 12:12

* Retail investors flock to plummeting Russia-focused stocks
    * Evraz, Polymetal hit most-bought UK retail stock lists
last week
    * London-listed Evraz shares suspended Mar. 10, freezing
holdings
    * Markets regulator the FCA says it is monitoring the
situation

    By Iain Withers and Carolyn Cohn
    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.  urn:newsml:reuters.com:*:nL2N2VL047
    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.
 urn:newsml:reuters.com:*:nL2N2VB11H  urn:newsml:reuters.com:*:nL1N2K32O1
    London-listed stocks of Russia-focused companies - including
Abramovich's Evraz  EVER.L  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.  urn:newsml:reuters.com:*:nL5N2VH1CT
    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.  urn:newsml:reuters.com:*:nL1N2TR2R7
    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.  urn:newsml:reuters.com:*:nL1N2T11DO
    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)
 ((carolyn.cohn@thomsonreuters.com; 44 207 513 4391;))