Thursday, May 23, 2024

How will the Ukraine crisis affect stock trading in Singapore?

The Ukraine crisis is driving Singapore’s stock investors to seek hedges and avoid firms that could get hit while also considering the ramifications of a lengthy war.

Given Russia’s importance as an exporter, Singapore commodity and shipping equities are now seen as safer bets due to a lack of essential materials. At Goldman Sachs Group, strategists advocate a shift to commodity-heavy Australia and suggest being overweight in the energy sector. Meanwhile, shares of companies that rely on Russia for a substantial portion of their revenue, such as Japan Tobacco, are at risk of lower earnings.

The longer-term consequences will be more complicated: essential goods will continue to cost more, straining customers’ purchasing power. It also reduces profit margins for businesses that cannot pass on expenses. You can stay on top of the Singapore stock markets by visiting https://www.home.saxo/en-sg/products/stocks daily.

Here’s a rundown of Asian equities that the Russia-Ukraine conflict has impacted.

Commodities

Following the invasion, prices for raw materials rose considerably. This week, the Bloomberg Commodity Index surpassed all time highs. In Asia, energy and oil firms continued their rally last year, thanks to the resumption of economic activity following the epidemic.

Woodside Petroleum and Santos, for example, outpaced the MSCI Asia Pacific index by outperforming it by 4%. Dialog Group was up 1.8% in Malaysia.

Shipbuilders

In particular, South Korea’s shipbuilding industry looks to improve further as Europe’s nations search for seaborne sources of natural gas amid rising tensions. It may increase business for Korean shipbuilders such as Daewoo Shipbuilding &amp, Marine Engineering Co and Hyundai Heavy Industries Co, which rose at least 10% this week.

Meanwhile, large oil users like airlines have already seen significant drops in share prices. The value of Asia’s airline companies tumbled more than 5% this week, dragged down by India’s InterGlobe Aviation, China Eastern Airlines Corp, and Japan Airlines Co.

Food

In addition, Ukraine and Russia account for over a quarter of the global wheat trade and a fifth of corn sales, giving potential food shortages reason to be concerned. The head of consumer equity research at Tellimer in Singapore, Nirgunan Tiruchelvam, said that emerging market food suppliers would see increased demand due to prospective supply disruptions.

Analysts believe that giants in the food business, including Nestle SA and Campbell Soup Company (CSP), could be negatively affected by the new WTO rules. Analysts are divided on whether or not it would benefit companies like Singapore-listed Wilmar International Ltd. and Thailand’s Charoen Pokphand Foods. This week, shares fell 5.7% and 1%.

The shares of firms that include Russia and Ukraine as end markets tumbled. The price of United Co. Rusal International stock plummeted 22% in Hong Kong this week. According to data from Bloomberg, the firm receives around a fourth of its yearly income from Russia.

Other companies gaining exposure include Japan Tobacco and Hitachi, which dropped by more than 6% this week. Russia made up 7% of Japan Tobacco’s sales and 18% of its operating profit in 2021, according to Citigroup Inc analyst Nobuyoshi Miura. The conflict may only have a “temporary” influence on sales volumes, but the ruble’s fall might hurt the company’s earnings.

Jefferies Financial Group analyst Bolor Enkhbaatar predicts that shares for Hitachi, a maker of electronic goods, may “overreact” due to its ownership of GlobalLogic, a unit. The subsidiary has software development centres in Ukraine and accounts for around 1% of sales, according to Bolor.

Chipmakers

The sector’s stock prices have dropped in the face of a report that Russia’s incursion into Ukraine does not pose a threat to microchip supply, despite comments from the Semiconductor Industry Association to the contrary. Samsung Electronics is down about 3%, while Taiwan Semiconductor Manufacturing Co has fallen more than 5%. The Lasertec Corporation and Disco Corp Tokyo-listed chip equipment manufacturers have lost around 3% this week.

Banks

With the prospect of more stringent Russian sanctions, traders are keeping a close eye on Japanese banks, including several companies dependent on Russian natural gas. While this varies by bank, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group had about $2 billion to $4 billion worth of exposure due to their involvement in the country.

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