Although there once was uncertainty about the situation between Russia and Ukraine and what it meant, now the answer is glaringly clear – Russia has invaded Ukraine. Our hearts break for everyone affected by this unnecessary war.
With thousands of civilian and military deaths, millions of fleeing refugees, and billions of dollars spent, we cannot overlook the economic and investment effects on investments worldwide.
And, of course, when the world is affected, so is South Africa. Here is one take on the effects of the Russia/Ukraine war on specific investments.
The war has definitely affected investments in commodities. South Africa’s exported commodity prices have risen which is expected to affect our current account balance and GDP positively in the short term. The rand hasn’t been doing too shabby either! Unfortunately, higher commodity prices also mean increased inflation in South Africa and lower purchasing power for consumers.
JSE-listed shares like Naspers and Prosus
The prices of Naspers and Prosus declined by 35% since February 2022 but have rebounded quite nicely since then. There are even talks of Naspers and Prosus having record days! The group’s small direct exposure to Russia accounts for about 2-3% of the overall value. The drop in the share price could have been because of fear of an increasingly divided world, leading to concerns about Tencent’s long-term value (Naspers is their biggest external shareholder).
The drop could also be attributed to a more realistic outlook about the more speculative technology sectors Naspers has been investing in lately, like food delivery.
Other affected investments
Some other shares and investments that have been or can still be affected by the conflict in Ukraine include:
–British American Tobacco (BAT) is the number two cigarette player in Russia, and the market accounts for about 2-3% of BAT’s profits.
-Glencore (diversified natural resource company) and AB InBev (drink and brewing company) have very small Russian interests compared to their overall businesses.
-Oil holdings in companies like Sasol have benefitted from the higher oil price. Still, as we know, a higher oil price places a lot of pressure on South Africa’s economy, finances, consumers, and it can cause inflation.
-Gold has increased slightly because many investors still view it as a haven. As for platinum group metals (PGMs), South Africa and Russia are the two biggest global PGMs suppliers.
Focusing on the long-term opportunities
The pandemic and now the conflict in Ukraine have taught us that our world can change very quickly. Not long ago, people laughed at warnings to not be too dependent on Russia’s resources; now, almost every Russian stock has gone to zero. Investors are panicking over the effects of the conflict, and yes, it is terrible, but the reality remains that no investment is risk-free.
As a member, client, or broker to one of mCubed Group’s Retirement Funds, we strive to provide you with the best investment administration and advice, excellent service, and complete transparency for the best long-term results. We will continue to inform our decisions based on long-term earnings power, diversified portfolios, and bonds. As always, our fund-appointed FAIS accredited financial advisors are here to ensure you get to a safe, financially sound, and prosperous retirement.
For assistance regarding your investments, please feel free to contact us.