Dividends and Russia stops payments to foreign investors holding stocks, ruble bonds

A month or so ago, if you had diversified your money around the world, besides your home country, you likely thought investments in Europe, China and Russia was a good thing. In terms of Russia, the country does have about 150 million people, besides the Middle East has oil and gas reserves and is close ready markets in Europe and China. The big companies such as Gazprom and Sherbank (2 out of every 3 businesses has accounts at Russia’s biggest bank), are profitable and stable as investments.

Then Russia invade Ukraine and now according to an article from Reuters, because of the sanctions, foreign investors can not sell their holdings. The Bank of Russia put a temporary halt on payments and major overseas’ settlement systems stopped accepting Russian assets.

Foreigners (non Russians) held about 3 trillion rubes $28 billion worth of OFZs or ruble-denominated sovereign debt out of a total market debt of 15.5 trillion rubles. Foreigners held 19.7 trillion rubles in Russian shares as on July 1.

The world’s largest settlement systems, Euroclear and Clearstream are no longer accepting Russian assets. Settlement systems are a key part of the global financial system, holding trillions of dollars of assets for banks and investors and settling on their behalf.

Linking to dividend paying stocks, the shut down of the financial systems to force Russia to stop the war in Ukraine maybe a once in a decade or more lifetime event. It is the reason, even though diversification is a wonderful thin. There are risks going outside of the country, but there is always a risk inside your country. In a functioning economy, access to credit is necessary otherwise the system breaks down. As investors clearly the ultimate goal is peace and stability.

There are more questions than answers, till the next time – to raising questions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s