Investing in US stocks without the risk of a freeze: what you need to know about the NASDAQ-100 futures

(ORDO NEWS) — In the context of sanctions restrictions, buying a share of a fund that focuses on the American index is one of the few ways to make money in the US market without the risk of asset freezes, experts admit. However, the moment for investing in American big tech in the face of Fed rate increases is not the most favorable.

As of September 6, Russian investors on the futures market have access to settled futures contracts for investment units of the Invesco QQQ ETF Trust Unit Series 1 fund managed by Invesco PowerShares. The fund’s basket includes shares from the US NASDAQ 100 technology index. The total value of the fund’s net assets exceeds $160 billion.

The futures is denominated in US dollars, but it will be traded and settled in rubles. The settlement price will be formed from the net value of the share on the date on the eve of the futures settlement day, multiplied by 41.

“Now you can be sure of the calculations only in rubles. In this sense, the futures market is more convenient: if there is no delivery of the underlying asset, then there are no specific risks that have materialized this year, which no one has taken into account before. We can make instruments that make it possible to invest in interesting assets, but do not carry the risk of non-delivery. If futures contracts for foreign stock indices are launched, they, like other futures contracts on the Moscow Exchange, will be traded in rubles,” Vladimir Yarovoy, Managing Director for Derivatives of the site, said at the end of August.

Risk avoidance

After the imposition of sanctions against Russia, the possession of foreign securities turned out to be associated with infrastructural risks. In particular, for a number of investors, foreign shares were “isolated” on brokerage accounts before the sanctions were lifted – they cannot be traded now. This decision was associated with the destruction of the NSD-Euroclear bridge, and then was backed up by blocking sanctions against the Russian depository by the European Union.

Nevertheless, investors’ interest in “unfriendly” securities has always been high. And investing in futures for foreign shares now looks safer than buying the shares themselves, which can be blocked at any time.

“Sanction risks are practically zero. This is a settlement contract that does not have a Western provider. Futures, despite its name, does not follow the index, but the publicly traded QQQ fund, which, in turn, follows the NASDAQ 100,” explains Valery Yemelyanov, an expert on the stock market at BCS World of Investments.

Futures and options on it may be of interest to investors who already have shares from the NASDAQ 100 for hedging risks, as well as those who are just going to add “American risk”, says Nikita Losikhin, head of investment advisory for ultra-wealthy clients at Veles Capital. “In the context of sanctions and restrictions, this is one of the few instruments on the Russian market that allows you to earn on US stocks without the risk of freezing assets,” he says.

Investments in foreign securities on the Russian stock exchange are now, in fact, frozen, so futures can become an alternative for those who want to get an asset linked to global trends, says Natalia Malykh, head of the Finam shares analysis department. “Moreover, these are, in fact, index investments that immediately provide good diversification through the purchase of one instrument,” she adds.

“The main advantage of a futures contract over buying a basket of shares is the relatively low transaction costs and the ability to buy / sell a diversified basket “in one click,” agrees Anton Startsev, chief analyst for foreign stock markets at Ingosstrakh-Investments Management Company.

Before the launch of the new futures, there was only one similar instrument on the derivatives market of the Moscow Exchange – a futures on the S & P 500 ETF, reminds Oleg Syrovatkin, a leading analyst at the Otkritie Investments global research department. The NASDAQ 100 futures may be of interest to speculators, as compared to the S&P 500 futures may show a more powerful percentage move, he adds.

At the same time, the demand for such an instrument would have been higher a few years ago, when the bubble in high-tech companies was just inflating, says Pavel Verevkin, investment strategist at Alor Broker. “It is illogical to offer this instrument to market participants during the active decline of the American market,” he believes.

What’s going on with American tech

The NASDAQ 100 index, to which the new Moscow exchange futures is linked, includes the 100 largest high-tech companies in terms of capitalization, traded on the American stock exchange of the same name.

Now, due to the increase in Fed rates, there is an unfavorable environment for investment in high technologies, says Anton Startsev from Ingosstrakh Investments. “Higher interest rates have a negative impact on the capitalization estimates of growth companies, whose investment attractiveness is largely based on expected future earnings. Those high-tech companies that have already reached profitability are experiencing pressure on profitability due to rising costs due to inflation and logistical problems, and may also face reduced demand due to recession in some developed countries and economic slowdown in developing countries. , explains the analyst.

In addition to interest rates, negative factors include high inflation and weak company reports, which turn out to be worse than expected, adds Nikita Losikhin from Veles. According to him, there are no drivers for the growth of US stocks yet, plus September is traditionally the worst month for the stock market in the US. Therefore, the most likely scenario is that the market will continue to decline. “Futures and options on the NASDAQ 100 ETF are a good tool to profit from in this scenario. You can either sell the futures or implement an options strategy and buy a put spread on the NASDAQ 100,” he says.


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