Posted inFund news

Russia-exposed mutual funds suspend trading

However, Hong Kong and Singapore retail funds have limited allocations to Russian equities, according to Morningstar.
Independence square of capital city Kiev and Ukrainan flag

JP Morgan Asset Management yesterday indefinitely suspended trading in its JPM Emerging Europe Equity (available for sale in Hong Kong and Singapore) and JPM Russia (available for sale in Hong Kong). The decision to suspend the funds was taken with immediate effect, which means any requests to buy, switch, or redeem shares in either fund are now not being processed.

“This was in response to the escalating conflict between Russia and Ukraine and challenges around calculating net asset value amid impaired market trading conditions,” said Morningstar.

At this point, it is unclear for how long the suspension will last, but it will be reviewed on a regular basis. Morningstar analysts believe this to be in the interests of existing shareholders,

However, “given Russia makes up only a very small proportion of global emerging-markets benchmarks (Russia accounts for only 3.2% of the MSCI Emerging Markets benchmark), material manager exposure is not widespread,” Wing Chan, Morningstar’s head of manager research, Europe and Apac, wrote in a note today.

“The fortunes of Russian equities reversed quickly over the course of February 2022. Fund managers are expected to reconsider exposures in light of increasing sanctions being imposed by Western governments,” he added.

There are 13 actively-managed mutual funds selling in Hong Kong/Singapore which have more than 30% exposure to Russia, and just three have a primary focus on the country:

Fund Legal NameRussia Exposure %ISINSelling in Hong Kong/ Singapore?Fund Size  2022-01 USD2022 YTD Return USD %
UBS (Lux) Equity SICAV – Russia (USD)90.80LU0246274897Hong Kong92,550,098-26.94
JPMorgan Funds – Russia Fund87.59LU0215049551Hong Kong405,165,448-21.19
BNP Paribas Funds Russia Equity78.08LU0823432371Singapore767,814,786-23.54
Source: Morningstar Direct

In addition, there are three ETFs listed in Hong Kong which have exposure to Russia:

ETF NameTickerEquity Country Russia % (as of Jan 31)Equity Country Russia % (as of Feb 25)Fund Size USD2022 YTD Return USD %Primary Prospectus Benchmark
iShares MSCI Emerging Markets ETF (HK)30223.201.7113,505,733-3.95MSCI EM NR USD
CSOP Global Cloud Computing Technology Index ETF31940.650.27319,614-17.40Solactive Glb Cloud Comp Tech NR USD
Nikko AM Global Internet ETF30720.620.2619,880,332-19.92iEdge-Factset Global Interne NR
Source: Morningstar Direct

Among the Russian names held in the iShares MSCI Emerging Markets ETF (HK), most are from the energy and basic materials sector, topped by Gazprom (0.35% weighting), Lukoil (0.26%) and Sberbank (0.19%).

For the two technology themed ETFs, both only hold one Russian internet company: Yandex.

According to Morningstar analysts, exposures are likely to have been reduced in line with market/share price falls, but complete removal will be dependent on the stance taken by benchmark providers and rebalancing which occurs periodically.

Part of the Mark Allen Group.