1. Russian stocks have taken a beating following the invasion of Ukraine and the sanctions placed on Russia. Some profiteers may be looking at buying Russian stocks on the cheap. Let’s look at the impact at some of the more well-known names.
2. Gazprom is the largest publicly listed natural gas company in the world and the largest company in Russia by revenue. The stock has dropped 30% in the past month even though commodity prices have shot through the roof.
3. Note that the drop is measured in Rubles. If we consider forex, the loss is worse since Rubles have weakened against other currencies. Gazprom share price was US$4.25 a month ago and now it is US$2.23. That is a 48% drop.
4. Gazprom has a majority stake in Nord Stream 2, the gas pipeline from Russia to Germany. Given the sanctions, Nord Stream 2 has declared bankruptcy. Gazprom wouldn’t be able to profit from any gas sales to the West.
5. Another familiar name would be Yandex, the Google equivalent in Russia. Besides its search engine business, it has Uber-like taxi services and e-commerce segment too. Yandex share price has tanked 59% in a month and 71% in a year, measured in USD.
6. Sberbank is Russia’s largest bank and rank third in Europe. The exclusion from the SWIFT network is going to hurt the Russian financial institutions badly. Very quickly, the Austrian subsidiary has declared bankruptcy and the branches in Croatia and Slovenia were sold to local banks.
7. Measuring in USD, Sberbank share price has tanked 61% in the past month.
8. Aeroflot is the Russian national airline. Countries like US, UK and Canada have banned Aeroflot from flying into their airspace. Manchester United has also killed off Aeroflot’s £40m sponsorship. Aeroflot probably can only fly to selected countries or make money mainly from domestic flights. So much for benefiting from Covid recovery.
9. Aeroflot share price has declined 50% in the past month in USD terms.
10. Even if you are interested to buy some of these companies, you can’t. Interactive Brokers is one of the firms that offer access to Russia-listed stocks and it has announced that only selling is allowed. In fact, non-residents of Russia are blocked from selling by order of her Central Bank.
11. For those ADRs listed in US, for example Yandex, you can’t trade them too. Nasdaq and NYSE have temporarily halted trading in the stocks of Russia-based companies listed on their exchanges.
12. How about Russian ETFs? There are two and you are still able to buy them – iShares MSCI Russia ETF and VanEck Vectors Russia ETF. The ETF managers have stopped creating new ETF units and investors are basically changing hands on the available ETF units.
13. There has been insatiable demand and given the limited supply, the ETF prices have shot up so much that they have deviated away from the Net Asset Value of the funds. iShares MSCI Russia and VanEck Vectors Russia ETF are trading 60% and 177% above their values.
14. This is risky and investors will lose a lot if the managers decide to close the ETFs. You only get back the underlying value and not the price you have paid.
15. Personally I don’t think it is worth the risk considering that the West is all out to destroy Russia financially. The companies will suffer. Some think that these are temporary measures but I believe Russia has crossed the line on this and there’s no going back. It will take a long time even if there’s a slightest chance to normalise. It will be a big opportunity cost when the capital is stuck with the Russian stocks.
