To The Moon

Chart Room: Ukraine war adds to inflation and brings further supply chain woes As the appalling human cost of the war in Ukraine continues to grow, the knock-on effects for the global economy are also becoming clearer. 17/03/2022 By Fiona O'Neill, Director, Global Equity Research & Sector Investing Gita Bal, Global Head of Research, Fixed Income Terry Raven, Director, European Equities Yi Hu, Investment Writer Mark J Hamilton, Senior Graphic Designer Higher costs and further disruption to supply chains are the immediate global economic impacts of the war in Ukraine, according to Fidelity International’s latest monthly Analyst Survey. Of the 147 analysts surveyed worldwide, some 82 per cent rank higher cost inflation as a major second-order effect of the war, while about two thirds cite deteriorating supply chains. Another key effect observed is reduced sales. Decreased investment and higher sales/prices rank as smaller impacts. “There is more concern about raw material inflation and pressure on margins,” says one industrials analyst covering China. As Russia and Ukraine account for a substantial part of global agriculture, the war has also dealt “another input cost hit” to companies relying on those commodities, a fixed income analyst covering consumer staples in North America notes. Consumer staples and telecoms are the two sectors where all analysts see cost inflation as a key effect of the war. In the utilities sector, analysts highlight supply chain disruptions but also increased interest in switching to renewables on energy security grounds. An equity analyst covering the sector in North America notes that there is evidence that Europe will accelerate its transition to clean energy to cut reliance on Russian supply. Unsurprisingly, energy and materials are sectors that may see some positive second-order effects of the war, with about 60 per cent of analysts in these two sectors selecting “higher sales or prices” as a main impact. “Excluding Russia, the majority of companies will be benefitting from higher commodity prices but with higher cost inflation also,” says an equity analyst covering mining in EMEA and Latin America. Elsewhere in the survey, Covid-19 emerges as the most commonly cited reason for supply chain disruptions, a reminder that global logistics were already under historic pressure before the war in Ukraine began. This publication is prepared on a general basis for information only. It does not have regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive it. You should seek advice from a financial adviser. Past performance and any forecasts on the economy, stock or bond market, or economic trends are not necessarily indicative of the future performance. Views expressed are subject to change, and cannot be construed as an advice or recommendation. References to specific securities (if any) are included for the purposes of illustration only. This advertisement has not been reviewed by the Monetary Authority of Singapore. FIL Investment Management (Singapore) Limited (Co. Reg. No.: 199006300E). Fidelity, Fidelity International, and the Fidelity International Logo and F Symbol are trademarks of FIL Limited. CMO-2022-798375-(SG)