Source: stake in Moscow exchange bought by investors and hedge funds from Europe and the USA


MOSCOW, 4 February. On Thursday shares of the Moscow exchange during the auction fell at 6.82% to 92,78 rubles per one share amid reports Bloomberg reports that the Chinese Fund Chengdong Investment February 3, sold 119,1 million shares of the Moscow exchange (5,2%) at a price of RUB 89 per share.

The Fund Chengdong, a subsidiary of The Chinese state Investment Corporation, became a shareholder of “Moscow exchange” during the initial public offering (IPO), conducted by the exchange in 2013. The Fund announced the sale of a package with a 10 percent discount to the market price.

According to a source in the market, the buyers of the stocks the Fund Chengdong become long-term investors and hedge funds mainly from Europe and the USA.

According to the interlocutor of the Agency, long-term or strategic investors accounted for 54% of the new owners, and hedge funds that buy shares in order to maximize profits on a short horizon and can sell them at any time, 46%.

Thus investors from the UK accounted for 47% of new shareholders and investors from the US 36%.

RDIF was not involved in the transaction

The Russian direct investment Fund (RDIF) and other funds with bought shares of “Moscow exchange” in the transaction on sale of package Chinese Fund Chengdong, closed Thursday, said in a statement released by the press service of the Fund.

“Packages RDIF and Russian-Chinese investment Fund (RCIF) in the capital of the Moscow exchange remain unchanged. RDIF and RCIF carried out a series of investments in the capital of the Moscow exchange (before the IPO and subsequent placements) in partnership with leading international investors, who remain among its shareholders and believe the company’s prospects,” – said the press service of the RDIF.

RCIF belongs to the state Russian direct investment FUND and China Investment Corporation (CIC), the parent company of the Fund Chengdong.

Previously RDIF consisted of part of its stake in “Moscow exchange”, demonstrating the possibility of obtaining attractive returns, according to the Fund.

The sale of the package will increase the liquidity of Moscow exchange

Sell five percent stake in “Moscow exchange” owned by the Chinese Fund Chengdong, will increase the liquidity of the market and expand the investor base, says the statement of the Chairman of Board of Moscow exchange Alexander Afanasyev.

“The increase in the number of shares in free float implies a more differentiated investor base, further increase in share liquidity and increasing the weight of our securities in the stock indexes,” said Afanasiev.

The head trader added that as a result of this transaction, the share exchange shares in free float has reached 57%, the highest rate among Russian public companies. Stock liquidity depends on the frequency of transactions, the number of bidders and shares outstanding. The liquidity level of securities shows the possibility of its sale at any time at market price.

Afanasiev also noted that since the initial placement price of the shares has almost doubled, while the Chinese Fund has also received the dividend yield.

“We hope that the experience of the CIC will attract to the Russian market new investments from South-East Asia”, – said Afanasiev.

Sale of shares shows the attractiveness of the securities exchange

Sale of shares of the Moscow exchange China Fund Chengdong Investment Corporation investors from the US and the EU speaks about the attractiveness of securities exchanges, experts say. In their view, the consequences of this deal could be an increase in the weight of shares of Mosuri in international stock indexes, which will lead to new inflows of investment in these shares.

“As the company continues to generate cash flow, it is a short-term negative and a good opportunity to buy stocks. And this decrease can be seen as a correction to growth”, comments the technical picture in equities at the Moscow exchange Deputy CEO for investment analysis of IR “Zerich capital Management” Andrey Vernikov.

Price drawdown at the discount quite natural, says the analyst of Gazprombank Andrey Klapko. “Discount to the market price, but, first of all, volume of shares is still great. And, secondly, the discount of similar magnitude was when Mobira placed your package by the CBR in 2014. And then was the reaction negative, but then quickly turned around,” – said the expert. According to him, the positive aspect of the deal is that was able to quickly place the shares among institutional investors and an increasing share of the shares of Mosuri in free circulation, that allows to hope for increase in the weight of the exchange shares in top stock indexes.

The increase of free-float shares of the Moscow exchange increases the chances of the Issuer to the inclusion of securities in the composition of the index Market Vectors Russia Index in March, with a weight of 2.2%, which may lead to inflow of funds into shares of Mosuri in the amount of $35 million, according to VTB Capital. In addition, according to experts of the Bank, the weight of stocks in the MSCI index may be increased in may by 25 bps.p. to 1.47%, leading to an influx in the campaign another $7 million, and the weight in the FTSE can be upgraded for the past five trading days and may lead to an influx of $6 million.

Motives of Chinese investors

The decision of Chinese investors to sell shares of Moscow exchange analysts as expected and quite logical – the Fund long has owned shares of the company when that was not a strategic investor. “They started investing before the IPO, i.e. till 2013. May be coming to the end of the investment horizon. Initially this was financial, i.e. non-strategic investor. “- says Andrew Klapko from Gazprombank.

In addition, in recent years the shares of Masuri kept an attractive price, that could be another reason for sale, adds analyst, Sberbank CIB Andrey Pavlov – Rusinov. “The decision may be due to a desire to fix rather attractive price. In the last time the stock exchange grew. Since the beginning of 2015 the profit in dollars from withholding of shares subject to dividend yield was 20%. Since the IPO in USD exchange price dropped, but lately, equities have been rising, and the main reasons could be the desire to secure the best price at the moment.”, he said.

The volatility of the ruble could also play a role in deciding the Chinese Fund. “Their motives are unknown until the end. Perhaps the volatility of the ruble”, – says Andrey Klapko. The price of oil Brent following the results of 2015 fell by 49.6% since the beginning of 2016 fell 8% to $ 35/bbl., Atanov the ruble. The dollar from the beginning of 2016, grew by 5.6%, Euro – on 8,45%.

“Perhaps the return of Chinese investors is that the Chinese are somehow not very positive about the prospects of the ruble. Still, the Moscow exchange is the correspondent business, so foreign investors have currency risks associated with this investment,” adds Andrey Pavlov – Rusinov from Sberbank CIB.

The largest shareholders of the Moscow exchange on December 31, 2015 are Bank of Russia (11,77% of the number of shares outstanding), Sberbank (10%), VEB (8,4%), EBRD (6,06%), RDIF (5,26%).