Russia will start spending 175 billion roubles ($6.64 billion) of its wealth fund on buying top quality shares and bonds from next week, while the central bank pledged to keep supporting the rouble. "Today foreign investors are selling our shares. Russian banks and Russian companies are buying them and, as of next week, the National Wealth Fund (will join them)," Finance Minister Alexei Kudrin said on Friday.
"We will buy equities and bonds... with high ratings and it is important for us that the volume is normal and the paper is liquid. This is an investment of the national wealth fund into reliable and highly profitable securities." But the prospect of a cash injection was not enough to stop Russia's bourses from setting fresh 3-year lows on Friday.
Protecting the rouble during the stock market slump and capital flight has already cost tens of billions of dollars of reserves, but the central bank said it would not change tack. "In the near future we do not plan to review technical parameters of the rouble exchange rate support policy," First Deputy Chairman Alexei Ulyukayev told Reuters. Russia has pledged a rescue package worth around $200 billion to support markets, including the share purchases.
But a high-level government source said it was not trying to stop stock market falls and that buying shares was in line with the wealth fund's long-term strategy to be unveiled in November. State Development Bank (VEB) will act as Russia's agent for the share purchases in the beginning, with the government providing a model portfolio and VEB paying interest based on the performance of that portfolio, the source said.
The Russian power house of parliament, the Duma, approved on Friday the state budget for the next three years with the only amendment being made to include sums for stock purchases.