Aug. 21 (Bloomberg) -- After a Swiss fund manager lost most of Larisa Dolgikh’s savings last year, she began buying and selling stocks from her Moscow home. Now “there are days when I don’t get up from the computer,” she said.

Dolgikh, 41, an interior designer who also mediates family disputes for extra income, is part of a growing number of novice day-traders who are helping make Russian shares the world’s most volatile. This year’s six-fold surge in non-institutional trading helped push swings on the Micex to twice the level of Brazil’s Bovespa, data compiled by Bloomberg show.

That’s a buy signal to BlackRock Inc., Templeton Asset Management and F&C Asset Management. More buyers and sellers makes it easier to profit at a time when shares on the benchmark Micex Index are the cheapest among emerging stock markets valued above $20 billion, fund managers said. Shares of OAO Sberbank, Russia’s biggest lender and Dolgikh’s first buy, change hands every 10 days on average versus 77 days for HSBC Holdings Plc, Europe’s largest bank, Troika Dialog and Bloomberg data show.

“We like volatility because it gives us opportunity,” said Sam Vecht, an emerging-market equities fund manager in London for BlackRock, which oversees $1.4 trillion. “We recognize the markets we invest in can be volatile. We just have to time our entry and exit points.”

Rising Volumes

Enticed by the market’s steepest seven-month rise since 2006, almost 630,000 individuals had trading accounts as of July. They generated $1.3 billion in average daily volume in June, or 27 percent of the total for Russian shares across all exchanges, up from $220 million, or 15 percent, in January, data from Micex and Troika, Russia’s oldest investment bank, show.

The change has caught the attention of Russian regulators, who attempted to reduce volatility last September by banning short selling for eight months after the market fell 47 percent in four months and lost more than $500 billion.

“The increased number of retail investors on the market calls for certain changes in regulating speculative trades, spot, marginal, and short sales, as well as greater efforts to raise general financial literacy,” said Vladimir Milovidov, the head of the Federal Service for Financial Markets, in an e-mail response to questions. The agency “is actively pursuing” such proposals, he said.

Internet Bubble

Regulators also plan to more than triple to 35 million rubles ($1.1 million) how much capital brokerages must have on hand, a move aimed at wiping out “dubious fly-by-night” operations, Milovidov said on state television Aug. 14. Day trading in the U.S. helped create the Internet-stocks bubble that sent the Nasdaq Composite Index down 78 percent from March 10, 2000 through Oct. 9, 2002.

The trend also concerns Sberbank’s brokerage, which boosted accounts by 12 percent this year and allowed online trading in July, said Andrey Golikov, who runs the service from Moscow. The firm doesn’t lend money to clients to invest.

“We perfectly understand how volatile the Russian market is today and what risks this carries,” Golikov said. “Unfortunately, a large number of our population which is not well educated in financial matters will make losses.”

Yulia Kotlyarova, 29, started trading in June 2008, investing 300,000 rubles while on maternity leave from her job as a financial director for a beauty salon and dentistry chain outside Moscow. Her plan was to make money “over a month or two” and then cash out.

Georgia War

It didn’t work out that way. The Micex tumbled 65 percent in the second half of 2008, nearly double the fall of the MSCI World Index of developed market stocks. Russia’s five-day war in August with Georgia and oil’s plunge from a record $145 a barrel to $34 triggered what BNP Paribas SA data show was a $300 billion August-to-March cash exodus from the world’s biggest energy-exporting nation.

This year, the Micex has rallied 79 percent, the steepest gain among benchmark indexes for the world’s 30 biggest markets, posting its largest monthly increase in nine years in May. The measure remains 21 percent lower than a year ago.

The Micex climbed 4.1 percent today, according to the index’s website, as crude advanced to the highest level in New York this year.

By increasing volatility, the influx of day traders creates more opportunities for more experienced investors to profit, said Mark Mobius, executive chairman for Templeton in Singapore, in an e-mail.

Over the past 60 days, the Micex has been the most volatile of 71 benchmark stock indexes worldwide, as measured by the relative rate at which the price of a security moves up and down, Bloomberg data show.

Volatility

The measure of 60-day volatility climbed to a reading of more than 52 this week from last year’s low of 18, and has averaged 30 in the five years ending with 2007. The same measure for Brazil’s Bovespa index dropped to a two-year low of 25 on Aug. 14. Since its inception in 1997, the Micex has been more volatile than the MSCI Emerging Markets Index of stocks in 22 nations for all but five months ending January 2008.

Volatility “enables us to buy at unusually low prices and sell at unusually high prices,” said Mobius, who oversees $25 billion at Templeton. The firm had 6.8 percent of its investments in Russian stocks in June, up from January’s 5.9 percent, he said.

The increase in individual speculators is a reason to be wary of Russian stocks, said James Beadle, chief investment strategist at Pilgrim Asset Management in Moscow. Day traders “appear to provide liquidity, but not sustainable liquidity,” he said.

Foreign Investment

The economy provides another reason: It’s struggling to recover with oil at about half its 2008 peak and a surge in non- performing loans to more than 5 percent of total in June from 2.8 percent in January. Russia’s economy shrank a record 10.9 percent in the second quarter. It may contract 5 percent this year and grow 6 percent next year, Troika forecast July 2.

Russia’s foreign direct investment plummeted an annual 45 percent, the most on record, to $6.1 billion in the first six months of the year, data from the Federal Statistics Service showed today.

“Russia has become a low-conviction, opportunistic trade for many investors, leading to big swings on the upside and downside,” said Curtis Butler, chief investment officer for $400 million in emerging-market equities at Lombard Odier & Cie., in a phone interview from New York. Butler has converted Lombard Odier’s Russia and Eastern Europe fund to a Europe, Middle East and Africa fund in May and cut Russian holdings to 25 percent, below the 30 percent weighting of the fund’s benchmark index.

Relative Value

Shares on the Micex trade at about 8 times profits, up from 3.7 at the start of year and less than the MSCI Emerging Markets index’s 18, Bloomberg data show. Benchmark indexes in China, Brazil and India trade near 32, 24 and 18 times earnings, respectively.

“We like the valuations” in Russia, said Jeff Chowdhry, who oversees $1.8 billion as London-based head of emerging- market equities at F&C Asset Management and has been “overweight” the country’s stocks for six months. “We like Sberbank because there is liquidity in the system,” along with consumer stocks, he said.

By focusing on day traders, privately-held ZAO Finam has become the biggest broker by trading volume on the Micex exchange. It aimed at individuals after Russia’s 1998 default because “there was virtually no one covering retail,” said Victor Remsha, who founded Finam in 1994 when he was 24 and is its chairman. Now Russia’s largest banks, including Sberbank, are ramping-up retail brokering businesses.

Finam hosts seminars, some free, on stock investing in 86 Russian cities, Kazakhstan and Germany, attracting 25,000 people last year, double 2007’s attendance.

‘Headless Speculators’

Elena Belyaeva, 45, taught one of the Finam classes in central Moscow this month. She said she started looking at the U.S. market as a hobby around the time communism collapsed in the late 1980s after watching “Wall Street,” starring Michael Douglas.

“Most students think the market owes them something,” Belyaeva said. “Our task is to make them aware of the risks and turn them from headless speculators to investors.”

Artur Kroitor, 42, attended the class. He quit his job as vice president at a food trading and industrial company in April to become a trader. He got the investing bug after converting his former employer’s rubles into dollars “on a hunch” last August, just before Russia’s currency started a 33 percent tumble, making the company 7 million rubles.

‘Just Play Around’

He hasn’t bought shares yet because “I want to learn how to drive first before I hit the highway,” Kroitor said. “The family doesn’t understand what I’m doing. They think I’ll just play around, get it out of my system, and then get a real job.”

Dolgikh, the interior designer, said she started trading because she no longer trusted financial firms to safeguard her money and Finam offered the lowest trading fees. Since her first trade in March, she has increased her investments to 1.2 million rubles from 150,000, posting a profit of about 110,000 rubles.

“I’m new to this; I’m a dummy,” said Dolgikh. “I’m not really a financier or a businesswoman through and through, but I’m curious how money works.”

Price fluctuations don’t scare her. “When world markets are volatile, that’s when you can make money,” she said.

To contact the reporters on this story: Yuriy Humber in Moscow at yhumber@bloomberg.net; Laura Cochrane in London at lcochrane3@bloomberg.net

Last Updated: August 21, 2009 13:00 EDT