The Moscow Stock Exchange (MOEX) has seen an increase in domestic Russian corporate interest for conducting IPOs and SPOs compared to 2023; with more than 20 transactions potentially taking place in 2024, according to Vladimir Krekoten, the Managing Director of the exchange.

Krekoten was speaking at the ‘Financial Markets: New Guidelines in a Changing World’ conference in Moscow and said “We see the pipeline of transactions that investment houses have, and we understand that this is a significantly larger figure than the 13 transactions that took place in 2023. However, in my opinion, everything will depend on the market situation. And demand as well, and the interest rate, and, accordingly, how financial markets will behave in 2024. I really hope we see a figure greater than 20.”

There were nine IPOs and four SPOs on the Moscow Exchange in 2023.

Natalya Loginova, director of the department for work with issuers on the MOEX, has stated that more issuers are planning IPOs in 2024 than in 2023, with about 7-8 companies preparing to go public in the first half of the year. Several of these are Russian-based businesses that have been sold off by their original Western owners and are looking for domestic investment capital. These can be expected to attract premiums.  MOEX is the largest exchange in Russia, operating trading markets in equities, bonds, derivatives, the foreign exchange market, money markets, and precious metals. The Moscow Exchange also operates Russia’s central securities depository, the National Settlement Depository (NSD), and the country’s largest clearing service provider, the National Clearing Centre. At the end of 2023, the total trading volume on MOEX platforms reached 1.3 quadrillion rubles (about US$140 billion).

The Russian economy will become the fourth largest economy in the world before 2030, with sustainable growth at a rate of at least 2% per year and gradual acceleration to 3%. This will yield approximately 20% growth by 2030, Russian First Deputy Prime Minister Andrei Belousov said at a meeting of Russian President Vladimir Putin with members of the government on March 14.

Belousov listed five main mechanisms (increasing productivity, increasing investment, growing non-resource non-energy exports, supporting SMEs, developing import substitution), which, in his opinion, will allow this GDP growth to be achieved.

“The President’s Address to the Federal Assembly formulated a key goal that must be achieved in the economic sphere, which is that, by 2030, our country should become one of the four largest economies in the world. Today, as you know, in terms of GDP at purchasing power parity, the Russian economy ranks fifth. Calculations show that Russia can become the fourth largest economy in the world, ahead of Japan, provided that sustainable growth is maintained of at least 2% per year with a gradual acceleration by the end of the period to 3%. In total, the country’s GDP needs to increase about 20% over the period until 2030.

The World Bank stated that the Russian economy grew by 2.6% in 2023, driven by significant fiscal support. The bank projected that Russia’s economic growth rate should decelerate to 1.3% in 2024 and further to 0.9% in 2025, with the tightening of monetary policy on the part of the Central Bank of Russia (CBR) likely to weaken domestic demand.

Russia’s Central Bank said that the Russian economy grew by 3.6% in 2023; and has predicted growth of 2.6% for 2024.

The Russian State Duma has approved in the first reading this March, a bill on the gradual decoupling of prices for goods on the domestic market of Russia from global indicators. This means about the possibility of the Russian Federal Antimonopoly Service (FAS) to not take these into account when determining the monopoly high and low prices of goods. The bill has already faced criticism from deputies due to the risks of widespread application of standards and even inflated prices on the domestic market. Experts acknowledge these risks due to the low level of competition in the domestic market; but note that the FAS will retain the same tools and the ability to reconcile with world prices. It makes it possible to decouple prices for goods in Russia from exchange and over-the-counter price indicators of world commodity markets.

The FAS supports the project, as it corresponds to the road map of the service for the development of exchange trading in goods. The document excludes from the concept of monopoly high and low prices of goods as aa comparison with prices on foreign markets: the FAS will not be obliged to take into account their exchange and over-the-counter indicators.

The explanatory note explains this by the fact that prices in Russia are often based on world prices without taking into account the situation in the domestic market, and the changes will ensure the priority of the interests of Russian consumers, regardless of external conditions.

The FAS agrees that prices within the country should primarily take into account the balance of supply and demand and the capabilities of the domestic consumer. The project will extend to goods for which domestic indicators have already been created, they add.

According to State Duma, this is the second version of the bill: it takes into account the pre-matureness of a complete abandonment of global indicators before the formation of their national system. However, the legal department of the Duma apparatus notes the risks of widespread application of the norm due to the lack of specification of cases of admissibility of the use of external indicators.

Ilya Dolmatov, the head of the Institute of Economics and Regulation of Infrastructure Industries at the National Research University Higher School of Economics, believes that using foreign indicators is not entirely objective for the domestic market in the changed geopolitical conditions, but if necessary, the FAS retains a tool for comparing prices with world prices.

There remains a possible increase in uncertainty in Russian markets, including fuels, metals, crops, fertilisers, chemicals, petrochemicals and medicines. Dolmatov said that “If the market is deprived of the opportunity to focus on world prices, benchmarks and pricing rules should be offered in return. Determining the market price within an isolated market seems extremely difficult.”

Although Russia is one of the largest global exporters and importers of raw materials, it does not have its own generally accepted stock exchange indicators. How far such a system is managed under State control or via an independent regulator will be a key debating point. It is also likely to give Russia more of a say over global commodity prices based on own its terms rather than as part of a global ‘basket’ largely dominated by Western players.