What to do now with the Russian ADR?

Wednesday, 12. April 2023
  • New opportunities in Kazakhstan –

Investors in Russia have been left behind so far because of the war and the nonsensical sanctions. Eastern European funds and ETFs with Russian shares have been suspended from trading since March 2022. Russian ADR programmes, i.e. certificates of deposit with US custodians, have been terminated. But even those who have managed to convert Russian ADRs into original shares cannot do anything with them at the moment, as foreigners are not allowed to trade on the Moscow Stock Exchange. The currently idle value of Russian ADR is over 100 billion euros, and it is a scandal that investors are not being compensated and the government is doing nothing to bring about compensation.

But there are still some bright spots and glimmers of hope, which are described here. There are also good alternatives in Eastern Europe, such as Kazakhstan and the Czech Republic, among others. The world and eastern stock markets have now recovered strongly after the banking crisis in March, but also oil, gold/silver and cryptocurrencies.

Andreas Männicke also gives his assessments of the new opportunities in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 209 at www.YouTube.com.

Will Russian shares now become worthless?

After a good year, many holders of Russian ADRs, i.e. certificates of deposit of Russian shares with US custodians that were tradable abroad on the New York or London stock exchanges, had hoped to now get some of their money back. So far, however, this has not been the case. It was possible to exchange some ADR for original shares at brokers such as Freedom Broker or Zerich Securities, but so far investors have not been able to do anything with them either, as trading by foreigners on the Moscow Stock Exchange is completely prohibited.

Now at least secure the high dividends of Russian shares

But at least some dividends were paid and could even be turned into cash, as in the case of Gazprom and LUKoil. Those who have not yet exchanged the ADRs for original shares are still formally entitled to receive the dividends after 3 years. The two brokers mentioned, Zerich Securities Ltd and Freedom Finance Europe Ltd, both based in Cyprus, but also some German lawyers with direct contacts in Russia can help you open these C accounts, such as at Raiffeisenbank International in Moscow or Citibank Moscow, but this is a lengthy and bureaucratic process.

Buying and selling Russian shares at a discount partly possible

However, new opportunities could now open up when the books are reopened by JP Morgan & Co. There will also be opportunities to sell the original shares at a discount. There are a number of ADR that are now still transferable via Euroclear – but not via Clearstream – and can also be sold at a discount at Zerich Securities Ltd. The list of ADR that are now still transferable via Euroclear, i.e. not via Clearstream, was published in the last stock exchange letter EAST STOCK TRENDS (can be ordered at www.eaststock.de).

Those who want to sell (or buy) their ADR or Russian Eurobonds must first open an account with Zerich Securities Ltd. at https://tran ade.mind-money.eu. At Zerich Securities Ltd, a broker from Cyprus, you can also participate in IPOs in the USA and Germany, as was recently the case with Porsche, and recently even in so-called pre-IPOs, as is now the case with the blockchain software company ConsenSys. OpenAI, with its ingenious software ChatGPT using AI, gives you an idea of how market valuations can jump even in the pre-IPO phase for good software products.

Delisting of Russian shares on NASDAQ planned

Some Russian companies such as Yandex, Ozon Holding, Qiwi and Headhunter Group were delisted from NASDAQ altogether on 24 March, after trading had already been suspended since March last year. The respective companies have appealed and filed protests, but this is likely to be unsuccessful. Also, US custodians like JP Morgan have closed the books at the moment, so no transfer is possible. The last transfer and exchange possibilities were until 31 March 2023. But that could change again and there could be a new window again until August 2023, when the books are reopened.

Seize new opportunities in Kazakhstan via Freedom Broker

It is therefore still worth opening an account with Freedom Broker under the link https://freedom24.com/invite_from/2952896. Competent advisors are also available there who can not only advise you on Russian ADRs and help you within the scope of your possibilities with direct contacts to Moscow, but who can also help you with direct entry into Kazakhstan. Furthermore, with Freedom Broker you can also participate in IPOs in the USA and perhaps even participate in pre-IPOs in the near future, which makes very high returns possible.

New opportunities are also emerging in Kazakhstan, with Freedom Broker recently opening up direct market access to Kazakhstan. Shares from Kazakhstan now offer a good alternative to shares from Russia, which are still not tradable. Interesting stocks from Kazakhstan include the banks Kaspi.kz and Halyk Savings Bank as well as the oil producer Kazmuniagas and the uranium producer Kazatomprom. In the next stock letter EAST STOCK TRENDS these shares will be presented in detail.

World stock markets recover strongly after the banking crisis – tech stocks in demand again

After the correction as a result of the banking crisis in March, stock markets around the world have already recovered again, including in Eastern Europe. The DAX even temporarily reached a new high for the year in recent weeks and is now up 11 percent again. But shares on Wall Street have also recovered strongly since mid-March, with tech shares in particular being in demand again. The NASDAQ Composite Index has already risen by 16 per cent since the beginning of the year to over 12,000 index points. It will be interesting to see whether the Fed will raise interest rates again on 3 May, which would be bad for banks and bond prices.

Oil, gold/silver and cryptocurrencies with strong upward price jumps

However, oil shares also made significant gains last week after OPEC and Russia decided on further production cuts. The price of crude oil rose again to 85 USD/barrel. However, gold at over 2000 USD/ounce and silver at almost 25 USD/ounce were in demand, but they are now facing important resistances such as gold at 2070 USD and silver at 25 USD/ounce. If these important chart marks are broken, the upward trend can continue.

However, cryptocurrencies such as Bitcoin, Ethereum or Ripple, where there will soon be an important, groundbreaking court decision, namely whether Ripple will be classified as a security or not, performed best again this year. Bitcoin, as the leading currency among cryptocurrencies, gained 30 percent in 1 month to 28,000 BTC/USD, although the purchase was also previously recommended in the EAST STOCK TRENDS (EST) stock letter.

Good opportunities in Eastern Europe in the Balkan region and the Baltic States

In Eastern Europe, even bank stocks are a good alternative to Western bank stocks. The Bank of Georgia even reached a new all-time high recently, but has now corrected somewhat. The Balkan and Baltic regions are also very stable. The CROX index for shares from Croatia even rose by 13 percent and the CTX index for shares from the Czech Republic by 20 percent since the beginning of the year. Both Eastern European indices were able to clearly outperform the DAX. 8 stock exchanges from Eastern Europe are again among the 30 best-performing stock indices in the world. There will continue to be outperformance opportunities in Eastern Europe, so that it is still worthwhile for German investors to look beyond their own backyard to the East.

First inform, then invest

But there are also new opportunities in Eastern Europe in general, where there are always outperformance opportunities. Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Kazakhstan, Georgia and Ukraine.

Review: In 2018, 10 stock markets from Eastern Europe were among the best performing stock markets in the world, all clearly outperforming the DAX and also the US stock market. The Moscow Stock Exchange was the clear outperformer among all world stock markets in 2019, with a gain of over 46 per cent in euro terms. However, the Bucharest Stock Exchange (Romania) also rose by over 32 per cent in 2019. The stock markets in South-Eastern Europe and also in the Baltic countries remained very stable on the plus side (Croatia +13 per cent). In 2020, 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and last year even 11 stock exchanges from Eastern Europe. In 2021, shares in Kazakhstan rose by more than 80 per cent. Last year, 5 Eastern European stock exchanges, mainly from the Balkans, clearly outperformed the DAX, and this year there are already 8 Eastern European stock exchanges among the 30 best-performing stock markets in the world. The CTX index for shares from the Czech Republic has already risen by 20 percent this year and the CROX index for shares from Croatia by 12 percent. So even after the Ukraine war, it is still worth looking beyond the horizon to Eastern Europe.

Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend/bond special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter. The next EST will be published in April 2023 with a special on Kazakhstan and Russian ADR/Russia.

TV/radio notes: The last radio interview was on 2 March 2023 and previously on 31 October on Börsen Radio Networks. The next radio interview is on 2 October 2023 Stock Exchange Radio Networks. Also watch the latest EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities of the Eastern European stock markets. Every 14 days Mr. Männicke is also on YouTube at the “Finanzstammtisch” of Capital-Manager.com, most recently now again on 21 March 2023 at 2.00 p.m. with the topic: “The shocking truth about the banking crisis that everyone needs to know “. You can download the interviews and videos at www.eaststock.de, there under the heading “Interviews” as well as the videos from EastStockTV. By the way: have you already subscribed to the EastStockTV YouTube channel?


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EST Stock market letter

The stock exchanges of Central and Eastern Europe have been among the top performers among the world’s stock exchanges since 1998. In recent years in particular, many CEE stock exchanges have performed far better than the established Western stock exchanges. In 2019, for example, the Moscow Stock Exchange not only clearly outperformed the DAX and DJI, but also ranked among the 30 best-performing stock exchanges in the world.

Many investors have so far criminally neglected the CEE stock exchanges. Yet the selection of promising stocks is growing. Eastern Europe still has its future ahead of it.

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