Russia’s central bank reported net inflows of foreign capital into the domestic stock market for two consecutive months in 2025 as contacts between Donald Trump and Vladimir Putin underpinned expectations that some sanctions against Moscow could be lifted, paving the way for the possible return of foreign investors.
Historically, foreign investors played a crucial role in the Russian market, which lacked sufficient domestic capital to drive growth via equity financing. Before February 2022, when Moscow sent troops into Ukraine, foreigners held around 70% of the Russian stock market’s free float.
Today, they account for only a few percentage points and are unlikely to regain a significant presence unless Russia reverses its landmark decisions of recent years and lifts the capital controls imposed in 2022. Furthermore, certain financial sanctions against Russia would need to be lifted, and cross-border transactions re-enabled, to make a full-scale return of foreign investors possible.
Their place has been taken by Russian retail investors, a trend that gained momentum during the 2020 COVID year. In 2024, the share of retail investors on Moscow Exchange averaged 74%.
Still, the central bank’s monthly reports showed “non-residents from friendly countries” buying Russian stocks in March and April, driven by hopes of improving geopolitical conditions after the Trump–Putin dialogue and growing media speculation about a possible return of foreign businesses to Russia. Moscow considers countries that did not impose sanctions to be “friendly” – this includes the extended BRICS bloc, China, much of Africa and the Gulf region.
From a valuation perspective, the Russian market arguably remains attractive and could be among the darlings of global investors if not for the war and sanctions. Yet sanctions are not necessarily permanent and Russian officials have expressed openness to seeing foreign capital return to the Moscow Exchange.
“We don’t see it as a fantasy that foreign investors might return to the Russian market. Those of us who have been in finance long enough know one thing for sure – in the end, greed tends to trump everything else,” Deputy Finance Minister Alexey Moiseev said at the end of 2024.
What’s on the plate?
If foreign investors do return, the key question is which stocks they would favour. There are hundreds of instruments available on the Moscow Exchange, which even began trading orange juice futures last week. One useful indicator is the Exchange’s monthly ranking of the most popular stocks among retail investors – the group that has largely replaced foreign players.
In May 2025, retail investors continued to favour familiar names. Russia’s largest lender Sberbank led the list, with ordinary and preferred shares making up 31.4% and 7% of portfolios respectively, thanks to its strong earnings, dominance in retail banking and steady dividend payouts.
The largest non-state oil company Lukoil (14.8%) remained a favourite due to its stable cash flows, export exposure and attractive dividend yield. Gas giant Gazprom (13.3%) also drew interest, backed by its role as a strategic energy exporter and hopes for resumed dividend payments.
Formerly known as Tinkoff bank, T-Technology (6.7%) gained ground as a key player in Russia’s digital transformation and IT import substitution. Food retailer X5 (5.7%) stood out in the retail sector, praised for its resilience, market leadership and ability to adapt to shifting consumer habits.
Russia’s Google Yandex (5.6%) offered a tech growth story with strong positions in search, e-commerce and AI while the No.1 oil producer Rosneft (5.6%) remained a core energy holding, supported by robust production, favourable pricing and state backing.
Oil major Surgutneftegaz preferred shares (5.3%) were favoured for their large cash reserves and historically high dividends. Russia’s largest liquified natural gas producer Novatek (4.7%) lured investors due to its expanding LNG projects, strong export potential, and reliable dividend payouts, while No. 2 state-run lender VTB Bank (4.6%) attracted attention with its growing retail lending business and a recovery in profitability after restructuring.
Reshuffle in Investors’ Preferences: What’s Wrong with Norilsk Nickel and Polyus?
If and when foreign investors return to the Russian market, they are likely to examine the reshuffling of the “Retail Investor Portfolio,” which has undergone a significant shift. Shares of Norilsk Nickel and Polyus – long-time favourites due to their scale, liquidity and dividend track record – have fallen out of favour, replaced by Novatek and Yandex, according to data from the Moscow Exchange.
Norilsk Nickel’s absence marks the most notable shift. Despite solid fundamentals and a dominant position in global metals markets, the company is weighed down by what analysts describe as the “Potanin discount” – a reference to CEO and major shareholder Vladimir Potanin, reflecting growing governance concerns and a misalignment between the interests of the controlling shareholder and those of minority investors.
Shares in Norilsk Nickel have fallen nearly 24% over the past year, compared with a 14% drop in the benchmark MOEX Index, as investors grow increasingly uneasy over governance issues and the lack of clear strategy.
The “Potanin discount” reflects a growing investor consensus that the company’s valuation is weighed down not by operational weakness, but by concerns over how profits are managed under current leadership, which has publicly acknowledged the company’s underperformance – a stark contrast to Western corporate practices.
Previously known as a generous dividend provider, the company has in recent years suspended payouts, citing a shift in focus to capital expenditure. The move has drawn investor criticism, with some pointing to what they see as inflated and insufficiently detailed projects, including the closure of a strategic copper smelter in Russia and plans to build a new facility in China.
Further adding to investor concerns, Hong Kong–listed Russian metal producer Rusal, which holds a 26.4% stake in Norilsk Nickel, has been suing Potanin in London since October 2022, accusing him of asset-stripping and financial mismanagement. The case underscores a widening rift between management and shareholders.
Gold producer Polyus offers another striking example. Despite strong financials and high gold prices, the company also dropped out of the top ten. It boasts industry-leading EBITDA margins, substantial reserves and a projected 10% dividend yield in 2025. Still, investor confidence has eroded.
Concerns include a high debt load as well as perceptions of overvaluation. Some analysts expect a correction if gold prices stabilise. The recent rally in Polyus shares is widely seen as speculative, lacking fundamental support, which has prompted more cautious retail investors to reduce exposure.
The timeline for Western investors’ return to the Russian market remains unclear. Their comeback will largely depend on several factors: the pace of sanctions relief, shifting global perceptions of Russia, and progress on domestic reforms.
Trust remains a critical barrier. While Norilsk Nickel and Polyus – major producers of strategic metals – could quickly boost exports once sanctions are lifted, market reactions indicated that governance risks continue to overshadow strong commodity fundamentals. The pattern suggests that restoring Russia’s market appeal will require not only the lifting of sanctions but credible corporate reforms to rebuild investor confidence.
Main Image: State Bank Building. Central Bank. Rostov-on-Don, Russia by Vyacheslav Argenberg via Wikimedia Commons.
