'No Direct Investment in Russian Government Bonds'... Securities Industry Takes a Relaxed Stance on Russia Sanctions

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Securities Industry Reports No Direct Investment in Russian Government Bonds

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Although the government has expanded the scope and methods of financial sanctions against Russia, the domestic securities industry is not expected to be significantly affected. This is because there was almost no demand for investment in Russian government bonds, and there has been a trend of reducing direct overseas bond investments since last year ahead of the base interest rate hike.

According to the Financial Supervisory Service on the 3rd, it has been confirmed that no domestic securities firms are currently directly investing in Russian government bonds. Russia is evaluated as having a small bond market size and high exchange rate risk, making it unattractive for investment.

In September 2013, Russia raised $7 billion (about 8.4 trillion KRW) by issuing government bonds with maturities of 5 to 30 years at interest rates ranging from 3.66% to 6.08%. However, after Russia forcibly annexed the Crimean Peninsula in 2014, it disappeared from the global capital markets for a while due to international sanctions. Later, in 2016, Russia raised $3 billion (about 3.6 trillion KRW) by issuing 10-year government bonds at interest rates of 4.65% to 4.9%, but investment demand was not high due to the impact of sanctions.

The perception that Russia is a high-risk market has expanded due to the impact of international sanctions, including the collapse in the value of the Russian currency, the ruble. A representative from Daishin Securities said, "Russian government bonds have high exchange rate volatility and a high possibility of losses," adding, "It is very rare for securities firms to directly manage Russian government bonds."

The decline in the attractiveness of the bond market ahead of the US base interest rate hike also weakened investment demand. A representative from Mirae Asset Securities said, "We had already significantly reduced the scale of direct overseas bond investments last year, and currently, there is no direct investment in Russian bonds."

If individual investors wish to invest in Russian government bonds, securities firms only act as intermediaries by selling through their branches, so it does not affect profits or losses.

Since the government has recommended suspending trading in the issuance and distribution markets for all newly issued Russian government bonds after March 2, even this will become impossible. Demand for Russian government bonds from individual investors is also very minimal, so there is no impact from the perspective of securities firms.

This content was produced with the assistance of AI translation services.