(Bloomberg) — On Christian Wehr’s first investor road trip to Russia, he brought his dad along for moral support.
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It was December 2022, 10 months after Russia had attacked Ukraine, and friends had warned the 32-year-old software developer not to travel from his native Germany, designated an “unfriendly country” by the Kremlin.
But Wehr saw it as the only way to save his bet on Russian stocks from complete wipe-out.
He’s one of an estimated 100,000 European retail investors with money tied up in special accounts in Russia that hold in excess of $16 billion. Some, like Wehr, bought before the invasion; others saw a once-in-a-lifetime opportunity when it crashed Russian markets and sent Wall Street giants running for the exit: buy Moscow-listed companies on the cheap, hold until the war ends, and sell for a tidy profit.
The trade has created a windfall that – on paper – turned some into millionaires, according to bank statements and 10 investors interviewed by Bloomberg. But it’s out of reach as long as sanctions and Russian countermeasures are in place, and simply keeping hope alive has become a costly bureaucratic struggle.
The investors’ predicament won’t draw sympathy among their political leaders, who’ve sought to present a united front against Moscow’s invasion. Asked about the ethics of buying Russian companies during the conflict, all of them conceded they misread the Kremlin. They expected Ukraine to avert or quickly win the war, locking in a quick profit as markets corrected.
But many are in it for the long haul, drawn by what they saw as undervalued, profitable firms offering high dividends. Some drew parallels with Europe continuing to consume Russian gas, or oil traders profiting from the same geopolitical turmoil.
Wehr’s destination was a branch of Gazprombank JSC in the Russian exclave of Kaliningrad, just north of Poland. He needed a so-called type-C account with the Russian lender to hold his stocks including energy producer Lukoil PJSC, steelmaker NLMK PJSC and telecommunications firm Mobile TeleSystems PJSC.
The accounts were created on President Vladimir Putin’s order following sanctions to store the assets of investors from “unfriendly” countries, including large institutional players as well as individuals. While the exact amount held there isn’t public, Russian officials have said it’s comparable to the value of Russian assets frozen by the west.
Navigating Borders
As Wehr approached the border, he got nervous. Traffic thinned out until the few cars left on the road were those coming the opposite direction – out of Russia.
He carried on, guided in large part by a close-knit digital community of other Russia stock bulls that he’d found on Telegram and Discord. “Without this group I would not have traveled to Russia,” he said.
The power of this virtual community is emblematic of how retail investors have emerged as a force in markets across the globe. The…
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