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Rumbles of Russia spread through markets – Trackinsight analysis

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Trackinsight’s detailed note on the effect of the Ukraine crisis on markets finds that as Russian tanks near the Ukrainian capital of Kiev, the ramifications of a war between two of the worlds’ largest energy producers have sent financial markets into turmoil. 

ETFs tracking shares listed in Russia and its neighbouring states were sent tumbling with ETFs tracking Russian equities falling on average -31.4 per cent this week, ETFs tracking Polish equities dropping -19.5 per cent and ETFs tracking the Turkish stock markets falling by an average of -11.9 per cent. 

Examples:
iShares MSCI Turkey ETF (TUR): -11.1 per cent, -USD1.7 million of outflows
iShares MSCI Poland Capped ETF (EPOL), -16.8 per cent, -USD3.6 million of outflows
VanEck Vectors Russia ETF (RSX) -15.9 per cent, +USD113 million of inflows

ETFs tracking the performance of countries that are largely reliant on Russian and Ukrainian energy also took as nosedive and saw significant investor outflows as disruption to energy supplies is expected to follow in the footsteps of the advancing Russian troops. Austria (-16.6 per cent, -USD250k outflows), France (-7.6 per cent, -USD1.7 million outflows), Germany (-7.7 per cent, -USD396 million outflows), Italy (-4.8 per cent, -USD223 million outflows).

However, despite horrific performance and the imposition of sanctions from US, UK, Europe and other nations that target Russia’s financial, travel, energy and technology sectors, investors have pumped USD237 million of new assets into ETFs tracking Russian equities this week, a significant proportion of the USD406 million of flows added to Russia-focused ETFs this year. 

Examples:
iShares MSCI Russia ETF (ERUS): -36 per cent, +USD20.5 million inflows
VanEck Vectors Russia ETF (RSX) -15.9 per cent, +USD113 million of inflows

Russia and Ukraine are both major producers of energy, agricultural commodities and metals, so fears that war will disrupt production and supply chains has seen ETFs that track the price of Wheat pop by 15.5 per cent over the week, while investors rushed at the opportunity adding USD41 million of new assets to ETFs tracking the commodity, for example, the Teucrium Wheat Fund (WEAT) picked up USD24 million of new assets alone and rallied by 14.6 per cent

Gold the traditional ‘safe haven’ for investors in times of war and crisis played its part this week, as Gold ETFs helped investors offset some of the widespread drops in equity markets, rising by an average of 4.8 per cent. USD1.7 billion of assets have flowed into Gold ETFs this week. 

Examples:
SPDR Gold Shares (GLD) +5.7 per cent, +USD603 million in flows
iShares Gold Trust (IAU), +4.3 per cent, +USD309 million in flows

ETFs tracking Silver also benefited from the flight-to-safety, with iShares Silver Trust (SLV), rising 6.5 per cent while seeing USD42 million of outflows.  

Cyber security stocks headed up as the Russian invasion of Ukraine turned attention to the rising risk of online attacks from state-sponsored and private actors as part of a digital war effort and as retaliation for sanctions against Russia – a Russian state-sponsored group known as “Sandworm” has just released a new type of malware called “Cyclops Blink” that attacks the firewalls of its targets and Ukrainian government and businesses targets are under sustained and ongoing cyber warfare attacks. 

The hacking group ‘Anonymous’ has also announced a retaliatory campaign of attacks against Russian targets, emphasising how digital infrastructure is becoming a new front on the modern battlefield.  ETFs tracking the sector include WisdomTree CyberSecurity ETF (WCBR) that rose 4.9 per cent and the Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO) that jumped by 4.6 per cent this week. 

 

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