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Tax Reform Will Attract More Private Investors to the Stock Market, says NAUFOR

22.04.2014 13:28 / Interfax

National Stock Market Participants Association (NAUFOR) expects an increased flow of private investors to the Russian stock market due to recent change in the tax law.

“Positive change in the market are expected following the tax reform that took place late last year. I think it is one of the major developments in the stock market, the change that will greatly accelerate nonbanking finance development, and breathe new life into the Russian stock market”, said association Chairman Alexey Timofeev at a press conference in Ekaterinburg on Tuesday.

According to him, NAUFOR members have highlighted the internal investor issue as key to the Russian capital market development.

“We have seen little interest in the stock market from private investors for a long time, the people who essentially are the internal investor, putting money into the stock market directly, through brokers or indirectly, through asset managers and non-state pension funds. People tend to better understand the country’s economy, they are less sheepish than foreigners, they tend to buy when foreigners sell, it is an intrinsic quality of the internal investor, making the national market different from others”, he said.

In his opinion, tax amendments will help improve the situation with low interest in securities from Russian private investors.

“Starting this year, amendments have reinstated the tax benefit for long-term securities ownership. If you have bought the securities after 1 January this year, you may expect to sell them in 3 years without having to pay profit tax. This tax exemption is limited, since it is aimed at the middle class, not oligarchs”, said Timofeev.

The head of NAUFOR added that even more important tax amendments are due early next year. “In 2015, we will be able to open so-called individual investment accounts, and this is what we have been fighting for in the past five years. Our goal was creating a real alternative to bank deposits”, he said.

Timofeev says that the conservative outlook for 2020 is that these accounts could accumulate up to RUB 1 trillion.

All of these changes, he says, boost private investment in the stock market.

Also, today the number of private investors is already on the rise. In 1Q 2014, some 150 thousand people have become private stock market investors in Russia.

“We already see relatively high private investor activity. In a quarter, some 150 thousand people have become private stock market investors, something that has not happened for a long time. I do not see this as directly related to the 3-year tax benefit and the upcoming individual investment accounts. I think it is related to Russians seizing the historic opportunity to buy securities that are currently very cheap”, said the Head of NAUFOR.

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