Pension and investment funds – a side victim of the conflict

The war collapsed capital markets, inflated inflation by at least 2%, could force central banks to raise interest rates

If a military conflict breaks out in Ukraine, global capital markets are likely to face severe challenges and much stronger shocks than other geopolitical events of the past few decades. AvaTrade chief market analyst Naim Aslam made this prediction to CNN a month ago.

A month later, his expectation was confirmed. “Now

nobody can

to predict

long term

trends

in these markets, because the war is almost completely unpredictable, “said Lyubomir Datsov, a former finance minister and member of the parliament’s fiscal council.

Capital markets have the feature that they are like a round-the-clock recorder of many events. Mostly young people with headphones and phones on are constantly in front of the screens. They react for a split second to any news. Millions and billions are gained in a split second, and similar losses are recorded in exactly the same amount of time.

“Capital control has sharply reduced the turnover on the foreign exchange market on the Russian stock exchange. Daily turnover as of March 2 fell from $ 10.7 billion last week to $ 2.7 billion the day before. The foreign exchange market is very volatile, with large exchange rate fluctuations within hours. Today, transactions in a large range have been reported, between 96 and 112.5 rubles per dollar “, gives the example of economist Georgi Angelov.

The difficulty in determining the effects is due to the fact that holders of shares and other securities

are different from

the owners

of companies

whose shares they own. The largest quantities of these shares are owned by pension funds and various investment companies, very often from different countries.

“Therefore, and for a number of other reasons, it is very difficult to predict the long-term effects of fluctuations in capital markets,” said financial analyst Ruslan Bonchev.

The assumptions of financiers and economists are that these failures will inevitably affect banks, pension companies, investment funds, which will later collect profits or losses.

The opinion of the former head of the Bulgarian Stock Exchange Viktor Papazov is more special. Regarding the ban on trading in shares of Russian companies on major Western stock exchanges, he said: “On my rough accounts

the loss for

western

investors

is of the order

at 100-150

billion dollars

Russia does not suffer any financial damage because the physical assets are on its territory and continue to operate and bring profits, but no longer to Western shareholders. The zeroing of these assets will be felt in the coming months and will be very painful because many have used them as collateral for subsequent financing. The domino effect will cause serious financial problems.

In addition to these expected effects in the near future, Papazov believes that the side victims of this decision will be all Western banks that have received refinancing from Russian banks or against Russian securities, including debt.

“We must take into account the fact that by issuing shares and bonds, companies obtain fresh financial resources at a good price,” Bonchev corrected. He is adamant that this will inevitably affect companies that are physically in place, but are deprived of such a resource indefinitely.

“The sanctions announced against the Central Bank of the Russian Federation,

will limit

serious access her to

international reserves

to support the currency and its financial system. International sanctions against Russia’s banking system and the exclusion of a number of banks from the SWIFT system have significantly damaged the country’s ability to receive payments for exports, pay for imports and participate in cross-border financial transactions, the International Monetary Fund said in a statement on Friday. .

According to most analysts, stock exchanges reflect the movement of commodities, more precisely the quotes in energy prices. All this is expected to make central banks

to raise

sharper

interest rates

percent,

to counter inflation. News that is welcome for deposit holders, and bad – for borrowers. The war in Ukraine will certainly add up to 2 percentage points to inflation in developed markets, especially in Europe.

According to economist Krasen Stanchev, for Bulgaria this supplement could be even more drastic – “I would increase my inflation forecast three times higher than planned for the budget,” he said.

“The economic consequences of the war in Ukraine are already extremely serious,” the IMF said. “Price shocks will have an impact on the world,

especially on

the poor households,

for which food and fuel account for a significant share of the costs. If the conflict escalates, the economic damage will be even more devastating. “Sanctions against Russia will also have a significant impact on the global economy and financial markets, and will have significant side effects in other countries,” the fund’s experts said.

What to do in this complicated situation

the small ones

owners of

sales and bonds?

The Financial Supervision Commission has advice that is not addressed to today’s situation, but is becoming even more important for personal decisions.

Every investment, including that in securities, has an element of risk. The risk of investing in securities is related to many factors – the state and development of the company in which you have invested, the state of a particular sector of the economy, the state of the capital market, the state of the economy as a whole. There is also a link between profit and risk. The rule is usually: low risk – low profit, high risk – high profit. “Before deciding whether to invest in securities, you need to carefully consider a number of factors such as your personal financial situation, the amount you are willing to invest, your future plans, the degree of risk you are willing to take. One of the popular tips is that when investing

you should not

use

funds that

you will need soon

When choosing an investment, it is good to know that the quality of the issuer is essential, ie. the issuer of the securities – shares or bonds. If the issuer is stable, with good financial condition and prospects for development, then this is usually a sign of stability and success of the investment in the securities issued by it “, say the FSC.

And the familiar: “Don’t put all your eggs in one basket”, which means not investing all your money in the same type of securities or securities of one company, because it is too risky.

How long will it be

continue

kapitaloviyat chaos

CFRA Research’s chief investment strategist Sam Stoval analyzes market reactions to 24 military and terrorist events since World War II. The survey shows that the leading Wall Street S&P 500 index typically falls by only about 1% in the initial news of a military event or terrorist attack and by only 5.5% throughout the conflict. It then took him an average of 52 days to recoup his losses, he found. “Stock markets are at greater risk of the inflationary consequences of a potential invasion of Ukraine than of the conflict itself. “History reminds investors that surprising military and terrorist activities have traditionally been short-lived and have in fact been an attractive purchase option,” Stoval said.

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