In 2008 Russia fought against Georgia in the Russo-Georgian War. This resulted into a catastrophic situation for the people which live in the areas occupied by Russia. Still today, Russia claims that parts of Georgia are “independent” Countries which do not belong to Georgia.
So why do I start with this story? It’s simply because yesterday Putin officially announced to marsh into Ukraine and basically has the same strategy: he says parts of Ukraine are “independent” Countries which need to be free from Ukraine. That is basically the same Strategy Putin uses for years.
My primarily interest here is to find out how it will affect the stock market. The best way to make predictions about the future is to look in the past.
Back in 2008 the West (EU and US) were concerned but did nothing because they feared a war. If you look completely rational on that, it would mean that you could use drops in the Russian stock market to invest and make a profit in a few years or months…
However: This time it already resulted in consequences: Germany just froze the Nord Stream 2 Project of Gazprom. It is important to note here that Gazprom made big deals with China in recent years - so that could soften the situation of Gazprom.
Biden wanted to remove Russia from Visa, Mastercard and SWIFT, but he got criticisms and other important ppl said it wouldn’t be that easy to remove Russia from SWIFT, so currently this is just words without consequences.
I have Stocks around the world and think that if the playbook is similar with the Geogrian Situation, then the Russian stock market will drop a little bit for the next few years and then go back to its normal evolvement.
The only real big thing which could change that would be if the West really kicks Russia out of SWIFT, fights Russia and maybe even delists Russian stocks (American Depositary Receipts) on the US Exchanges, but that didn’t happen in 2008, back then the conflict happened with a Bush Administration. I am not a U.S. politics expert but if a Republican Politician doesn’t start a war in a similar situation, why should a Democratic Politician do that? Aren’t they usually the ones which gain votes by saying they are against wars?!
So how should you proceed? If you trade short term, then you can probably get some profit by shortening the Russian stock market. If you invest long term, then you shouldn’t think that this will affect Russian companies on the long-term - it didn’t in similar situations a few years back so the way international politics work would have to be changed first before it will really have a long-term impact on the Russian stock market.
Of course, you should think about if it is morally acceptable to invest in Russia. That’s probably why Russian stocks were so undervalued over the last years: Ppl didn’t want to invest in a country ruled by Putin but on the other side ppl who didn’t care about moral aspects could make big returns and profit from high dividend yields.
Update: I found out that Russia already has two alternatives to SWIFT: The SPFS “System for Transfer of Financial Messages” is basically a SWIFT clone from Russia and the Cross-Border Interbank Payment System (CIPS) is the equivalent from China.
Russia is a Cash focused country, so the ban of MasterCard and VISA would probably hurt these American Companies more than the Russian economy. Quote: “Approximately ten percent of payment cards issued in Russia were credit cards”, source.
This is not investment advice or a buy/sell recommendation. This is my personal opinion and is for information and entertainment purposes only.
Everyone acts independently with their financial decision and bears responsibility for it themselves. Trading in securities is always subject to risks and can lead to total loss or debt (e.g. in the case of warrants). Liability is excluded.