How Russia’s sanctions are shifting portfolios
Incredibly, in a week that saw an escalation of fighting in Ukraine and skyrocketing oil prices, the ASX200 has closed up 2.3% over the last five days. It is up 1% over the month but remains down nearly 4% in 2022. The S&P500 has fallen nearly 8% this year. The biggest concern for markets remains the likelihood of interest rate hikes as inflation shows no sign of falling.
At home, BHP (BHP) is Australia’s largest company following its delisting from the London Stock Exchange; investors searching for a safe haven have flocked to the stock as it benefits from a rapidly appreciating iron ore price. Materials, as a result, have been propping up the ASX as other sectors flag. At a closing price of more than $50 on Thursday, it is up nearly 40% from its recent lows around $35, when many nabtraders were buying. At current levels, nabtrade investors are taking profits in large volumes.
BHP (BHP.ASX) shares over twelve months
Source: nabtrade
Unsurprisingly Fortescue Metals Group (FMG) has also seen huge volumes, as larger traders trim their positions on recent strength. At present, though, it is vying not just with BHP, but also with energy stocks and lithium producers.
As has become painfully apparent, Russia is the world’s third largest oil producer, and the second largest natural gas producer, and is critically important to Europe’s – and the world’s - supplies of energy. While initial sanctions against Russia excluded oil and gas transactions, the announcement over the weekend that ‘most’ of Russia’s banks would be excluded from using the SWIFT messaging system has made processing payments into and out of Russia for their energy supplies increasingly difficult. This is despite the assurance that energy payments would be exempt from the ban. Investment markets have responded to the sanctions by divesting (or writing down) Russian assets (including the Morgan Stanley Capital Index, MSCI, which has announced it will be excluding Russia from its global indices), driving up the oil price, and making bigger bets on battery technology and electric vehicles to reduce western dependence on fossil fuels.
As the oil price surges well past $US100, the local energy sector has seen a re-rating. Woodside Petroleum (WPL) has returned just 3% over five years, but is up 25% in the last month. Typically contrarian nabtraders have been selling WPL, along with Santos (STO).
Woodside Petroleum (WPL.ASX) shares over twelve months
Source: nabtrade
Core Lithium (CXO) shares rose over 10% on Wednesday on the news that the company had signed a deal with electric vehicle leader Tesla (TSLA.US) to supply 110,000 tonnes of lithium spodumene concentrate over four years. The shares rose a further 5% on Thursday, and are now up over 350% over twelve months; nabtrade holders have been taking profits.
Core Lithium (CXO.ASX) shares over twelve months
Source: nabtrade
On global markets, rising commodity prices and geopolitical tensions have not significantly altered investors’ intentions. Tesla continues to attract buys, as investors contemplate a shift away from fossil fuel dependency, as have luxury EV hopeful Lucid Group (LCID.US), Rivian (RIVN.US) and Chinese EV manufacturer Nio (NIO.US). Solar micro-inverter manufacturer Enphase Energy (ENPH.US) has also attracted buys.
Analysis as at 3 March 2022. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances.