Russia-linked shares are falling – is it time to sell?
Shares of Russia-linked companies are taking a beating following the full-scale invasion of Ukraine, as investors hit the panic button.
With the threat of Western sanctions hanging over Russian companies, and some sanctions already enacted, it’s no surprise that shares in major London-listed Russian firms have taken a dive. And it’s not just European stocks that have been impacted, but also US-listed shares of Russian giants.
Many investors have hit the panic button and are looking for a way out – either through the safe haven of government bonds or a shift towards equity markets. However, what is clear is that stocks exposed to Russia are falling in a dramatic way.
Losses are stacking up
The most notable losses have affected a number of Russian financial and energy giants. These companies have used the London Stock Exchange as a destination for “secondary listings” in addition to their primary listings in Moscow.
As of February 24, 2022, London-listed shares in state-owned Russian bank Sberbank dropped by 74.6%, while Gazprom, a state-backed oil and gas producer, saw a fall of 37.9%. For a 5-year view of the performance of these shares, see the graphs in our dedicated guides. Just click on the company name to view.
US-listed shares are also being affected. Shares of Russian Internet giant Yandex N.V. lost half their value since the rout began, while companies with operations in Russia, such as QIWI plc and Ozon Holdings dropped 17% and 38% respectively.
The companies have tried to settle investor concerns, saying they are prepared for any measures. But the threat of further sanctions, which could include being taken off the London Stock Exchange or the Nasdaq, has proved too much for many investors. Most appear to believe the next round will impact their ability to invest in Russian stocks.
Is it time to re-evaluate?
Any aggressive event such as an invasion can cause sell-offs in the market. And Russian-linked stocks have the potential to fall further as the West imposes more sanctions on Russia – effectively damaging its ability to do business around the globe.
For investors with exposure to Russian-linked stocks, it could be time to re-evaluate portfolios. Investing is never without risk, but having a diversified portfolio can minimise some market shocks. Having a share trading account that makes it easy to access the markets you’re considering and offers the best value for money can help if you are looking to make changes to your portfolio. Take a look at our guide to comparing share dealing accounts.
Where should investors look to buy?
Due to the nature of the conflict, oil and energy prices are likely to rise. So some might argue that the energy and oil sector is one to keep an eye on. Similarly, defence companies tend to do well out of conflict. And there could be increased interest in cybersecurity firms if relations between Russia and the West worsen.
For some investors, finding a “safe haven” may be the way to go. One option is committing to government bonds, though these are struggling against the potential of interest rate rises this year. Another option could be to rotate your equity exposure more towards UK stocks, as well as financial stocks, and include some gold.
However, questions will remain over how much further the market will fall. And unfortunately, only time will tell.