A message from our CIO, Scott Phillips:
"G'day Fools. If you're like us, you're dismayed by the events taking place in Ukraine. It is an unnecessary humanitarian tragedy. Times like these remind us that money is important, but other things are far more valuable. And yet the financial markets remain open, shares are trading, and our readers and members are looking to us for guidance. So we'll do our best to continue to serve you, while also hoping for a swift and peaceful end to war in Ukraine."
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There are a broad and growing range of ASX exchange traded funds (ETFs) for investors to choose from.
Today, we home in on one ASX ETF that's been thrown into the spotlight in the wake of Russia's invasion of neighbouring Ukraine.
While Russia has yet to unleash its full cyber attack capabilities, the invaders have already been working to cripple Ukraine's digital infrastructure.
And that puts leading ASX ETF Betashares Global Cybersecurity ETF (ASX: HACK) squarely in the spotlight.
The HACK share price is up 1.33% in intraday trading, after gaining 7% on Friday.
What does this ASX ETF do?
If you're not familiar with this ASX ETF, HACK offers investors exposure to 35 leading global cyber security shares. The fund's top four holdings are Cisco Systems, Palo Alto Networks, Accenture, and Crowdstrike Holdings.
You can run through the entire list of 35 holdings and you won't find any Aussie companies among them. That's because the ASX cybersecurity shares don't, as of yet, have large enough market caps to be included.
Why is this ASX ETF suddenly in the spotlight?
As mentioned, Russia has begun to unleash some of its world leading cyber warfare capabilities against Ukraine. This could see demand for the services of many of the cybersecurity companies held by this ASX ETF surge.
As Bloomberg reports, citing three inside sources:
In the build-up to Russia's invasion, hackers detonated powerful data-destroying software on the network of Ukraine's Ministry of Internal Affairs, and they siphoned off large amounts of data from the country's telecommunications network…
Commenting on Russia's attack, Jean-Ian Boutin, head of threat research at cybersecurity company ESET LLC, said:
This was not a widespread attack. They pinpointed specific organisations and then went in and deployed the malware. The fact that this happened a few hours before the full-scale invasion, it leads us to believe these organizations were targeted for a reason.
And Ukraine is fighting back.
As the Sydney Morning Herald notes, "Ukraine has called on its own hacking underground to shore up critical infrastructure like power grids."
But Ukraine is doing more than just buffering its own cyber-defences. Russia is now increasingly finding itself on the receiving end of cyber attacks:
Russia has already been hit by cyber counter-strikes itself. Cyber citizens around the world, including some in Russia who oppose their government's invasion of Ukraine, have been sharing resources in an effort to launch disruptive attacks against the Kremlin…
What happens in Eastern Europe could spread
While these attacks are currently focused in Eastern Europe, cyber warfare, like shooting wars, can potentially spread across borders.
And companies hoping they can insure against cyber attacks may find it increasingly difficult, and costly, to do so.
The Australian points to a report from professional services consultancy Aon that shows "policy costs for cybersecurity insurance leapt more than 113% across its portfolio in the past year".
Notably, that was before Russia's land invasion and wave of new cyber attacks against Ukraine.
According to Aon cyber insurance practice leader Michael Parrant:
The average Australian organisation is probably no worse off in the current environment, as the major criminal groups are likely being subverted for nation state actions. But critical infrastructure is clearly not your average organisation and they are more likely to find themselves being targeted in the current environment.
It is possible that collateral damage may emanate from these global issues, and all organisations would be well advised to operate within a heightened risk environment.
We can only hope that wiser heads prevail. And that Russia's major escalations against Ukraine – both cyber and its military invasion – are short lived, minimising the need for the security services offered by the companies held by HACK.
But so long as cyber criminals – state sponsored and private – roam the virtual world, companies like the ones held by this leading ASX ETF will remain in demand.
