Mar 4, 2022
Last week, Vladimir Putin shook the world when he instructed the Russian military to invade neighboring Ukraine. This adds another layer of uncertainty to an already struggling stock market.
Many investors are wondering what to do with their capital in the face of rapidly rising geopolitical risks.
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In a recent interview with Bloomberg, Mark Mobius — founder of Mobius Capital Partners — suggested that investors consider three specific places to defend against the conflict between Russia and Ukraine. Let’s take a quick look at his recommendations.
1. Chinese equities
Mobius believes that China will stay in the “middle ground” with respect to this conflict, refusing to side with either Russia or Ukraine. He also believes that China will continue to grow despite the political turmoil occurring in Europe.
But which Chinese companies should you put on your radar? If you’re interested in a blue-chip-type stock, consider technology and entertainment conglomerate Tencent (TCEHY).
Tencent operates an impressive portfolio of well-known subsidiaries such as Riot Games and Tencent Music. The company also holds large ownership stakes in public companies such as Sea Limited.
For investors with a little more appetite for risk, Chinese e-commerce up-and-comer Meituan (MPNGY) might make sense for your portfolio.
Using its wildly popular online platform, consumers are able to purchase a wide variety of services from Meituan including entertainment, dining, delivery and travel services. In 2021, Meituan’s revenue totaled $24.4 billion.
Of course, one of the smartest ways to gain access to the Chinese stock market is through diversified, low-cost ETFs like the iShares MSCI China fund (MCHI) or the iShares China Large-Cap fund (FXI).
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2. Emerging market stocks
China isn’t the only Asian country Mobius is bullish on. He also mentions places like Indonesia, Taiwan, Thailand, the Philippines and Vietnam as countries that investors should seriously consider.
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As one of the world’s most valuable chip companies, Taiwan Semiconductor (TSM) is a relatively stable way to do that.
Taiwan Semi boasts an impressive roster of customers including the likes of AMD, Apple and Nvidia. A company with innovation as a core value, Taiwan Semiconductor is the first foundry to provide 7- and 5-nanometre production capabilities.
For investors who’d rather not dabble in individual companies, the iShares MSCI Taiwan ETF (EWT) and the Vanguard FTSE Pacific ETF (VPL) offer diversified Asian exposure.
Mobius ended the segment by also mentioning opportunities in South America.
3. Gold
Mobius has long been a large proponent of gold, recommending that investors hold 10% of their portfolio in the commodity.
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In light of the conflict between Russia and Ukraine, Mobius doubled down on his yellow metal bullishness, stating that investors should treat it as a safe haven — specifically, as a hedge against the devaluation of currencies around the world and rampant inflation.
The price of gold is up 8% over the past month versus a 3.5% decline in the S&P 500.
Although gold bullion and coins are the most direct way to invest in gold, these options aren’t very accessible (or even practical) for everyday investors. Gold ETFs and mutual funds can be viable alternatives for most people, offering several advantages over other forms of gold investment.
First, these funds provide more liquidity than holding physical gold. In addition, investors need not worry about storage and security (and the associated costs) when investing in gold funds. Finally, gold funds can provide investors with solid diversification across companies and even regions.
Popular gold ETFs include the SPDR Gold Trust (GLD) and the VanEck Vectors Gold Miners ETF (GDX).
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Jed Lloren is a freelance contributor at Moneywise.
