Defense stocks rose in tandem with global tensions following President Vladimir Putin delivered tough talk on the Russia-Ukraine war on Wednesday. However, some were happy and some were sad, and as defense stocks rose, some seemingly unrelated stocks were hit hard.
In response to the recent Ukrainian raid to regain some territory and intensify the war, Putin on Wednesday summoned 300,000 Russian reserve soldiers to join the fight once morest Ukraine, and raised the possibility of using nuclear weapons.
Rob Stallard, an analyst at investment research firm Vertical Research Partners, added on Wednesday that the call-up would be Russia’s first such mobilization since World War II.
iShares U.S. Aerospace & Defense ETF (ITA-US) rose 1.7% in midday trade on Wednesday, when S&P 500 andDowrose 0.5% and 0.6%, respectively. The ETF was down regarding 1 percent following midday trading.
Defense-oriented corporate stocks in the ETF fared better, with an average gain of regarding 2.4%, including Lockheed Martin (LMT-US)、Northrop Grumman (NOC-US)、Raytheon Technologies (RTX-US) and General Dynamics (GD-US)。
Putin’s remarks also appeared to affect Chinese stocks. China has not condemned Russia’s aggression once morest Ukraine as strongly as Western countries.
Invesco Golden Dragon China ETF, which holds stocks of Chinese companies listed in the US (PGJ-US) fell more than 6 percent on Wednesday.
Chinese EV maker Xiaopeng Motors (XPEV-US), ideal car (LI-US) and NIO (NIO-US) tumbled 11.55%, 8.84% and 10.34% respectively. But the sell-off was not limited to a single industry, with 55 stocks in the ETF falling and only 11 ending higher.
The aerospace and defense ETF is down regarding 2% so far this year, but larger defense stocks have averaged regarding 12% so far this year. Defense stocks have been relative winners this year.
The Invesco Golden Dragon ETF is down regarding 26% so far this year, in part due to heightened U.S.-China tensions.
So far this year, the ADRs of China’s three major U.S.-listed EV makers are down an average of 47%. In addition to geopolitical tensions, rising interest rates are also a major hurdle, as this is detrimental to highly valued growth stocks such as Xpeng, Ideal and Weilai, etc. Combined sales of the three major Chinese automakers are expected to increase by 68% this year compared with last year, but none of them are generating consecutive profits at this stage.
