Money managers in Asia who have exposure to Russia's resource-rich country are unsure what to do with their stock portfolios.
According to data from research firm Morningstar, 48 of the 52 equity funds available for sale in Asia with Russian investments have lost money this year. According to the data, funds managed by big-name money managers BlackRock and UBS have also been hit hard, losing at least 52% of their value and ranking among the worst performers.
The most pressing issue confronting fund managers is that they are unable to exit the stocks in order to mitigate the risks posed by Russia's invasion of Ukraine, with Moscow ordering the suspension of trading on its stock exchange amid a slew of western sanctions. Through February 25, Russia's benchmark Moex index had lost a third of its value.
While it is unclear when the trading halt will end, one thing is certain: Asian funds with Russia exposure will experience another round of dramatic net asset value declines upon resumption, mirroring the debacle that Russian companies trading abroad are experiencing.
Rusal, the Hong Kong-listed aluminium company, has fallen 42% since the war began on February 24, while Sberbank, Russia's largest lender, saw its London-listed shares lose 99 percent of their value in the week of March 4 before trading was halted.
In an emailed response, Samuel Meakin, an associate director at Morningstar in London, said, "with the market in effect frozen and sanctions in place, assets are generally being marked down to zero. ."
According to Morningstar data, the BlackRock Emerging Europe Fund, which has US$294 million in assets under management, had a 59 percent loss in 2022 and was the worst performer among Asian funds investing in Russia. Since February 28, the fund has been halted.
According to Bloomberg data, the fund invests 62% of its assets in Russian stocks and the rest in Poland, Greece, and Hungary. Lukoil, Russia's second-largest energy company, Sberbank, and Gazprom are among its top holdings.
The French bank's BNP Paribas Funds Europe Emerging Equity was ranked second worst performer, having lost 53% of its value so far this year after investing 66% of its assets in Russian stocks. UBS Equity SICAV-Russia came in second, with an 81 percent exposure to Russian equities and a 52 percent loss over the same time period. Novatek, Russia's largest energy producer, is one of their largest holdings, along with Sberbank and Gazprom.
So far, Chinese fund managers with Russian stock investments have performed better, with Shanghai-based Huaan Fund Management and Bank of China Investment Management being the only two funds with such exposure.
According to Bloomberg data, Huaan's 385 million yuan (US$61 million) index fund, which tracks the S&P Global Oil Index, has gained 7.7% this year, while the 30 million yuan Bank of China S&P Global Natural Resources Index Fund has gained 0.4 percent. Both of them put at least 9.7% of their money into Russian stocks.
By fLEXI tEAM