Continuous Disclosure: Why the war in Ukraine is driving turmoil in global markets
The uncertainty created by Russia’s war on Ukraine has driven turmoil in global financial markets while western nations have piled sanctions on.
Russia’s central bank has banned brokers from selling investments on behalf of international clients and the Moscow Stock Exchange has been on a trading halt for more than a week.
In the latest episode of the investment podcast Continuous Disclosure Tamsyn Parker talks to NZX chief executive Mark Peterson about why the war has unsettled markets.
“When you hit situations like this it creates uncertainty and in effect uncertainty then means that people start to think about their positions more. They start to potentially think about downside risks and they may even start positioning for those downside risks.
“It all comes down to certainty and in this instance the lack of it really.”
Western nations have acted quickly to freeze Russia’s financial assets and limit its access to the international banking system. Over the weekend Visa and Mastercard both decided to pull their services over the invasion of Ukraine.
Peterson said direct conflict was not in the interest of anybody so financial sanctions were a way to put pressure on Russia to make them think hard about whether they wanted to make war.
“By having these range of sanctions, and I suspect we were all quite surprised how quickly the west has come together on those and the impact some of those were having.”
Peterson said the sanctions would be putting pressure on the broader Russian economy and that would impact all the citizens of Russia with the hope that those citizens would then put pressure on the decision makers in Russia.
“It’s all about responding in a way which reminds everybody that you can’t just do this kind of stuff without some sort of consequence.”
Peterson said the Moscow stock exchange closure would be designed to ensure a fair and transparent market for all investors.
“The movement on asset prices within the exchange in Moscow has been extraordinary. If you can’t operate a market in a fair, orderly and transparent way then they halt the market and they would look to have things settle down before they open that market again. But who knows how that might play out.”
So far the New Zealand stock exchange has weathered the global market storm.
Peterson said New Zealand was “somewhat removed” from the real tensions.
“We have just gone through a reporting season which has been pretty solid. That bodes well for investors. And generally we have got stocks that are well-supported with earnings and a combination of good performance, strong governance and local economy which has got its challenges no question but at the end of the day we are somewhat removed from a lot of this geopolitical situation.
“It probably means we are a little more resilient than some of those other markets around the world.”
But that hasn’t stopped the NZX from being caught up in it and its KiwiSaver scheme SuperLife is also now in the tough position of needing to address its Russian investments.
“We don’t have direct exposure. We invest in some funds which are global funds and those suppliers of those global funds…we have been in contact with them quickly as to what they are going to do.
“Obviously it’s a fast-moving world and they have got to keep up and they are working out how they comply with those sanction rules at the moment.”
Continuous Disclosure is available on IHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts. New episodes come out every second Wednesday.
You can find more New Zealand Herald podcasts at nzherald.co.nz/podcasts or on IHeartRadio.
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