Investment Risks Amidst the Russia-Ukraine Crisis

Investment Risks Amidst the Russia-Ukraine Crisis

Investment Risks Amidst the Russia-Ukraine Crisis
The most significant risk right now towards investment lies with respect to the oil prices and sanctions that have been placed on Russian exports and how it might impact the global economic growth thereafter. The cut in energy supply from Russia to Europe might result in a slowed consumption rate. 

The potential inflationary impacts result in a reluctance to impose further sanctions on energy exports. 

The West primarily focuses on financial sanctions for the Russian assets and individuals who impacted the Russian markets. The potential war widening has definitely been a daunting experience for investors. With the investment prices dropping every day, it has caused a negative impact on the consumer’s sentiment and increased investment volatility amongst them. 

It is important to review the investment client’s objectives, risk parameters, advisory capacity, and investment timelines to see how adversely the Russian-Ukrainian situation might affect them. If any of the stated parameters change, then positions should be adjusted, and if the parameters are the same, the positions shall remain untouched. Financial plans should be curated so that each client incurs minimum losses during the turmoil. 

If you are an investor, these are a few things you must consider right now –

  • What are your long and short-term investment goals and objectives?
  • What is the right approach to achieve these objectives?
  • Do you have faith in the assets you have already invested in, or do you want to change your portfolio?
  • Will these assets help you achieve your goals?
  • What is your risk appetite?
  • What is your equity exposure?
  • Is your portfolio diversified enough?

Is this an entry opportunity for investors?

Many investors focus on the buy low, sell high rule and enter markets during the crisis with an expectation of the market prices rising later that would reap them hefty profits. And this is one opportunity opportunists can grab right now with a positive future outlook.

Most financial market impacts are only short-lived, especially with the geopolitics involved, and only last anywhere from one to three months. Hence, this provides investors with the ideal opportunity to enter low and exit high later. The stocks are going to withstand the geopolitical struggles, enabling investors the right set of entry signals in the market. 

What does the current situation look like?

The financial world is definitely witnessing turmoil that no one expected or imagined a few months back, and here is what the financial situation looks like right now –

  • The Norwegian energy firm, Equinor has started to disinvest its joint ventures in Russia.
  • Crude oil prices have jumped by over 5% to over $100 per barrel.
  • Dollar and gold prices have also increased as investors are now diverting their funds to these assets.
  • European markets have fallen due to the financial instability fears, with London’s FTSE 100 dropping by more than 1%, and Paris and Frankfurt is 2% lower than before.
  • Gas prices over the next few months are going to soar by over 24%, reports say.
  • Wheat prices are witnessing the largest one-day gain for the first time in the last decade to the supply bottlenecks from Russia and Ukraine. 
  • Market benchmarks have drastically fallen in Hong Kong as well.
  • Shares in Russia increased 15% as the Ukraine invasion began. 
  • Sensex rose by some points in India while Nifty also increased by some percentage. 
  • Sectoral indices in most countries have also increased.
  • Metal and realty indices rose by 4 to 6 per cent in total.
  • Mid-caps and small-caps in India also increased by 4 per cent each.
  • PSU banks and power in India also increased by quite some percentage.

Concluding note

Right now, it is not easy to predict what the future holds in terms of the investment scenario or for how long these tensions will prevail. Everybody is unsure of how far things will escalate. This is why it is necessary that everybody focuses on facts and avoids any speculative gains and losses for the time being. Investors can act swiftly according to the market sentiment and direction as the scenario unfolds. 

Russia invading Ukraine is most certainly going to have a beyond negative imagination impact in the financial markets, especially in the energy and metal sector. 

 “While the developments in Russia-Ukraine front will keep influencing the directions of the market, resuming of supply disruption and commodity inflation will hurt many economies at a time when they were starting to recover from the very recent Omicron threat” was Deepak Jasani’s statement, head of Retail in Research in a top leading Indian company in the banking sector, HDFC securities. 

 

Want to learn more about investing during times of high volatility? Request an introduction from us to speak with an investment specialist.

 

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