Anton Tabakh: Increasing the Investment Appeal of the Far East

This statistical compilation was prepared by the Federal State Statistics Service of the Russian Federation based on data from enterprises and organizations obtained through statistical monitoring and market investigations. The publication reveals the economic development level of the Russian construction sector.

In this publication ACRA analyzes the effect of the current geopolitical crisis and the sanctions on Russia’s economy. Also, ACRA has adjusted its macroeconomic forecast.

The placement of SNs under the Russian law can be incentivized by the introduction of access criteria for non-qualified investors. Federal Law 75-FZ introducing SNs in the Russian securities market entered into force in October 2018. The SNs novelty rests in that under certain circumstances, specified in issue documents, their issuer is allowed to pay the note holders less than the face value of the notes. Those circumstances include a range of triggers, such as changes in the costs of goods and securities, currency exchange rate, interest rates, official statistic data, inflation rate, etc. Circumstances determining the payments to note holders also include the default by corporate, sovereign and municipal entities (reference entities), which laid the groundwork for the issuance of Russian CLNs.

So far, there have been no SN offerings under the new law. Structured products (including those originated in overseas jurisdictions) were available to Russian investors previously. The notion of a ‘structured instrument’ is broader than that of a ’structured note’. Structured products include not only instruments that do not guarantee the face value of a note, but also those that protect the investors’ capital against loss (the so-called investment bonds). The latter entitle their holders to claim from the issuers the repayment of their face amount, a minimal fixed-rate coupon and additional sums (depending, e.g., on prices for some assets. Typical examples of these products are deposits and bonds whose issuer has a sovereign-grade rating, which also contain a derivative component (a put option on some asset).The embedded derivative component allows a higher yield, while the interest income on the note ensures the repayment of the face amount.

On June 30, 2019, there were 168 structured instruments issued by Russian market participants, including capital-protected products, , equivalent to around $2.15 billion, of which 109 issues ($90.366m) were denominated in rubles, 52 ($654.7m) in US dollars, and 7 ($71.6m) in euro.

The fifth issue of the annual report, prepared jointly by the Russian International Affairs Council (RIAC), the Institute of Far Eastern Studies of the Russian Academy of Sciences, and the Institute of International Studies of the Fudan University, offers the shared vision of Russian and Chinese experts in international affairs for continued collaboration between Russia and China in 2018 and the first quarter of 2019.