European stocks exposed to Russia have been under pressure for weeks amid fears that Russia could invade Ukraine and the standoff has sparked volatility in the European stock market.
After Russian-backed separatists in breakaway regions of eastern Ukraine announced the evacuation of residents on Friday, Germany’s main stock index, the most susceptible to potential conflict in Ukraine, fell more than 1% and headed for a low from four months earlier. this week.
The United States has said Russia could invade Ukraine at any time and could create a surprise pretext for an attack. He reaffirmed the commitment to defend “every square inch” of NATO territory.
Investors are watching the stocks most exposed to potential Russian sanctions, including banks and oil, mining, consumer and building materials companies with exposure to Russia and Ukraine.
Citi analysts said their basket of European companies with exposure to Russia underperformed during times of heightened tensions, such as in 2014 and 2018, following Western sanctions against Russia.
The investment bank’s list of nearly 40 European stocks with exposure to Russia and Ukraine includes beverage companies Carlsberg and Coca Cola, which make 13% and 15% of their sales respectively in Russia, the maker of Nivea Beiersdorf and French food giant Danone, with about 6% of its sales in Russia.
European stocks with exposure to Ukraine include London-listed iron pellets producer Ferrexpo, whose entire operation is based in the country, Citi said.
According to analysts at Jefferies, French video game company Ubisoft has 4% of its workforce in Ukraine, while Swedish healthcare and diagnostic services provider Medicover makes 8.5% of its sales in the country.
European banks with local branches in Russia are most at risk from potential sanctions in the event of further escalation, JPMorgan said.
Austria’s Raiffeisen Bank International earned 39% of its estimated net profit last year from its Russian subsidiary, while Hungary’s OTP, UniCredit and Societe Generale made between 6% and 7% of theirs in Russia last year , according to figures from JPMorgan.
As Russia supplies 35% of European gas demand, tensions in Ukraine have increased the risks of energy disruptions in Europe, Goldman Sachs analysts said.
“We would expect the German DAX and MDAX [the mid cap index] be more vulnerable than indices of other countries, mainly due to the dependence of their companies on energy for their production,” they said.
They expect oil and gas companies to outperform on the headlines of further escalation and rising gas prices in Europe, citing Total and Equinor as the main beneficiaries.
Update: February 19, 2022, 2:30 p.m.