For Societe Generale’s Kalen, central European currencies from Poland, the Czech Republic, Hungary and Romania are among the most vulnerable to Russian escalation and could see selling if risk aversion grows in the region.
Uncertainty has also hit Russian assets. The ruble is down more than 3% so far this year, but the largest U.S. exchange-traded fund tracking Russian equities, the VanEck Russia ETF (RSX), is fresh off five straight weeks of inflows.
Such volatility hasn’t stopped BNP Paribas Asset Management or Legal & General Group Plc from hanging on to more bullish calls on regional assets. BNP is keeping its Russian and Ukrainian fixed-income holdings with a strategy to stay nimble by avoiding the 10-year part of the yield curve, said Jean-Charles Sambor, the firm’s head of emerging-markets fixed income in London.
“My base case is that there is not a full invasion into Ukraine, but rather the ‘frozen conflict’ continues, as it has for the past eight years,” said Uday Patnaik, a London-based money manager at Legal & General Group Plc, who recently added to his holdings of dollar bonds issued by Kyiv-based Kernel Holding SA and MHP SE. “It is not new. It is one of the reasons that Ukraine trades relatively cheap.”
This article was provided by Bloomberg News.