Originally published on Feb 27, 2022
The highlight of this week has to be the Russian-Ukraine war which crashed global markets.
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| 2022 year-to-date stock indices and forex market performance |
The stock market and forex market are telling us that the biggest loser in the Russian-Ukraine war is the war aggressor who started the war - Russia.
Year-to-date, the biggest stock index loser is Russia. Russia MOEX index is down 34.77% YTD. Year-to-date, the biggest currency loser is Russian Ruble(RUB). RUB is down 11.3% against USD YTD.
Despite the horrible Russian market performance, I started a small position in a Russian equity fund yesterday(24Feb2022) against my usual rules. I broke my rule of not buying stuff that is in a severe downtrend. Rules, especially time-tested ones, are meant to be followed most of the time but should not be followed all of the time. Uncompromising stubbornness in following rules will lead to stagnation.
Here's why I broke the rule.
Russia MOEX index crashed 45% at one point on 24Feb2022, the day I took action to buy. A fall of this magnitude is very rare and is an obvious sign of panic dumping. The odds of a quick rebound and quick money to be made is high. Buying when others are panicking is an edge that never dies.
I am likely to take some profits off my position later, if an opportunity presents itself, and leave the remaining for longer-term investment.
It is dangerous to buy in a downtrend because what goes down tends to go down more. This is particularly so for individual stocks. Companies can go bankrupt. Stocks can go to zero. However, it is almost impossible for stock indices which are essentially a diversified portfolio of big-cap stocks to go to zero. Can you imagine blue-chip companies declaring bankruptcy all at the same time?
I bought an equity fund benchmarked to the Russian RTS index. I have no experience with Russian stocks, so buying an equity fund and relying on professional fund managers with expertise investing in that country is more sensible than DIY.
I liked what I saw on the price chart. When price crashes after a period of an uptrend, it is a signal to get ready to sell. On the other hand, when the price crashes huge after a period of a downtrend, it is a signal to start buying some. Hence, I bought an equity fund to gain exposure to Russia on the day when the Russian stock index crashed 45%.
Commodities are on a strong uptrend in 2022. Stock indices of commodity-dependent countries like Saudi and Brazil stock indices are the top 2 performers year-to-date. Yet, Russia is down right at the bottom by a wide margin. Minus the geopolitics, economic fundamentals for Russia is strong.
The fund bought was JPMorgan Russian Securities(JRS) listed on the London Stock Exchange.
The fund is currently trading at a discount of 13.3% from its net asset value at this point of writing. The dividend yield based on current price is 10.45%. This is why I bought a fund from the London Stock Exchange(LSE) and not at U.S exchanges to avoid the 30% dividend withholding fees imposed on Singaporeans for U.S securities, though there is an expensive 0.5% stamp fee on LSE.
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ReplyDeleteCommodities are on a strong uptrend in 2022. Stock indices of commodity-dependent countries like Saudi and Brazil stock indices are the top 2 performers year-to-date. Yet, Russia is down right at the bottom by a wide margin. Minus the geopolitics, economic fundamentals for Russia is strong.