Russia’s invasion of Ukraine is tragic and heart breaking from a humanitarian standpoint. Besides the humanitarian impact, it has also caused much uncertainty and anxiety in investment markets around the world.
When considering the impact to your investments, it’s important to know that Russia and Ukraine represent just 2% of global economic activity, however the impact on Europe and whether or not this emboldens other countries like China to pursue their territory disputes is also a concern.
The two countries also contribute a large portion of the worlds grains, almost 25%, as well as 17% of the world’s gas and 10% of the world’s oil. Russia supplies Europe with up to 25% of their energy requirements which gives them significant power in the region.
Ukraine and Russia’s main trading partners are China and the EU so the knock on effect of the invasion will hit these markets the hardest.
Source: OEC | 2019
Looking at our suite of preferred global equity funds, only one has direct Russian exposure of 1.7% of the fund. So the direct exposure is very small in your portfolios.
Of the companies listed on the JSE, Mondi has the biggest exposure to Russia, while Prosus has a 4% exposure. Some stocks like SASOL and the resource companies should do well during this time due to oil and commodity prices rising.
Russia invading Ukraine will result in volatility going forward while the full scale of the conflict is revealed. We are however comfortable that the fund managers we invest with have minimal exposure to Russia and Ukraine and have made decisions with the knock on risks in mind. The general view of fund managers is to stay the course, given that markets have already reacted negatively to the news of the conflict.