As the conflict in Ukraine raged on this week, Spy began to feel the impact much closer to home. Ukraine is such a voluminous wheat and barley supplier to the world, shortages are now showing up everywhere. Chinese brewers are, apparently, battling to buy the quantities of barley they need and that impacts Spy’s craft beer habit. Beer aside, Spy’s chat with an EM equity manager based in London this week brought some well-earned wisdom. “Experience and history have taught us time and time again that times of crisis are seldom the best times to panic.” Always easier said than done.
It has been a very tough ride for Chinese tech stocks of late. While so much commentary in the global financial media tends to get obsessed with the FAANGs, right on our doorstep, complete carnage has been taking place in China. The Nasdaq China Index is at its lowest since 2016. Alibaba, once the absolute darling of China, is now below its IPO price. All the gains seen since 2014 have evaporated. In the US yesterday, many leading lights were off 10% or more. For example, Pinduoduo down 17.5%, Jinkosolar down 17%, JD down 16%, Alibaba down 8% and Niu down 7.4%. What is this doing to China funds, you may ask? Spy took a peek at some leading lights and the last three months have been brutal. Fidelity’s China Innovation Fund is off 28%, Value Partners’ Classic Fund is down 27% and JP Morgan’s SAR Greater China Fund is off 25%. Since Spy is a long-term believer in China’s innovation sector, one may say these funds are actually on sale right now.
A cautionary note to the above: there is another old adage, “Just because things are cheap, that does mean they can’t get cheaper.” Russian stocks were already fairly cheap before Russia invaded Ukraine. Russian funds have plummeted to, in some cases, to become almost worthless. The change has been so swift it has been hard to keep up. Most Russia funds available in Hong Kong that Spy looked at from all the leading houses are down 30% or more in the last week alone – with 50% off some of them during the past three months. Putin may need to read Dale Carnegie’s “How to win friends and influence people.” What he is currently doing is not working.
An interesting debate is now raging across the world about ESG. Everybody, and Spy means everybody, used to agree that weapons companies, aka defence, were persona non-grata for ESG funds. Now, what if it turns out that defending your country is, in fact, a social good? What if investing in high carbon producing, but local, gas and oil production is a social good because your previous supplier has turned out to be a maniac who thinks nothing of bombing maternity hospitals? ESG has always had problems defining itself rigidly but in the volatile geopolitical era we find ourselves, even tougher questions will be asked. As pacifist Germany does the unthinkable and actually starts to build a real army with real weapons for the first time in eighty years, it is surely not beyond the realms of rationality to expect our previous ESG rules to go out the window, too! Time to start rewriting those ESG decks.
You have heard of bull markets; you have heard of bear markets. Spy has now heard a new one. Apparently, we are in a “kangaroo market”. This is when the market bounces up and down and goes all over the place at speed. On Spy’s travels to Australia, the locals all have the same bit of advice: “Be careful when driving in the Outback, you don’t want to hit a big red ‘roo. The car never wins.” Spy would imagine the same advice applies to a bouncing Kangaroo market, too…
US inflation hit a 40-year high in February. The print was 7.9%. The ECB’s hawks finally seem to be winning the argument with QE being scaled back. Absolutely no wonder whatsoever that despite Ukraine, government fixed income ain’t getting a look in. Whoever bought that Austrian 100-year bond at 0.88% a few years ago must be feeling like a right fool.
A timely reminder from Ritzholz Wealth Management that there is always a time to sell. Spy has seen dozens of variations of this chart over the years, and it always proves to be true. Sometimes the best thing a person can do is put their money in a fund they can’t sell for years. You can close your eyes and forget about it.
The list of companies* suspending operations in Russia or exiting entirely seems to be growing by the hour. If this level of economic dislocation does not concern ordinary Russians, nothing will:
- Apple Pay – full block
- Apple – complete exit from the market
- Adidas – refuses to work with the national football team.
- Audi – leaving the market
- AMD – will ban the supply of chips and soon it will be banned on the supply of video cards.
- Amazon – is a complete block of retail
- Adobe – is a complete block
- British Petroleum – 20% shares exited Rosnefti
- BBC – review of Broadcasting licences
- BMW – closes factories, blocks supplies
- Bolt – exits the market
- Boeing – exits the market
- Chevrolet – leaving the market
- Cannes Festival – Russian delegation bloc
- Cadillac – off the market
- Carlsberg – export restrictions
- Cex Io – a crypto platform that bans users
- Cinema 4D – app not working
* The full list is at the end of the article.
Spy is a tad surprised we have not had an ETF on the market yet that ,“promises to insulate your portfolio from the Ukraine conflict.” For the hyper-active thematic crowd, perhaps that is a step too far, even for them?
For the first time in a very long time, Spy’s photographers have managed to find a tram trundling around Hong Kong with some asset management advertising on its side. The Anglo-American firm is promoting a local favourite: property.
Until next week…
Russia exit list continued:
- Coca Cola – exit the market
- Danone – together with its subsidiary Prostokvashino, exit the market
- Disney – cancels all the movies
- Dell – leaving the market
- Dropbox – will stop working in the country in a few days
- Eurovision – disqualification
- Ericsson – exit from the market
- Exxon Mobil – recalling all specialists from Russian oil companies
- Etsy – block of all balances on Ru accounts
- Facebook – ban Russian media accounts
- FedEx – total delivery ban
- Formula 1 – tournament in Sochi cancelled
- Ford – closing all the stores
- FIFA – disqualification of the national team for the World Cup and ban on holding any international matches in Russia
- Google Pay – partial block
- Google Maps – an info block for Russia
- General Motors – stopping exports
- HP – ban on import
- Harley Davidson – discharge
- Instagram – blocking propaganda
- Intel – banned the supply of microchips
- Jaguar – coming off the market
- Jooble – removed the service and made a statement
- KUNA – exit market
- Lenovo – exit the market
- LinkedIn – preparing for a complete exit of the country
- MOK – all competitions are cancelled
- Mastercard – suspends card production, disable several banks
- Maersk – supply stop in/from the Russian Federation – goodbye shmot with Ali express and ASOS
- Mercedes – exit the country
- Megogo – deleting all Russian films
- Metro – laying off 10k employees
- Mitsubishi – dismissal of employees of the 141 service center
- Microsoft Office – a wide set of measures is being discussed
- Mobile World Congress – refusal of accreditation for Russian delegation
- NFT – a block of funds of Russian and Russian users, transferring their money to Ukraine
- NHL – complete block for Russian players
- Netflix – stopped working on Russian original projects.
- Nike – closing all stores.
- Nintendo – ban on purchases in rubles
- Nestle – closing all six factories in Russia
- OnlyFans – shutdown in the country
- Paysera – a lock down
- PayPal – withdrawal accounts freeze
- Paramount – movie rental block
- Parimatch – the franchise has been recalled
- Porsche – exit Russia
- Renault – exit =the market
- Samsung pay – service blocking
- Snapchat – out of the app in Russia and Belarus
- Scania – exit from Russia
- SpaceX – delivery of Starlink to Ukraine
And many more…
