"China may become a safe haven for capital"
Author | Cao Meng Su Zichun
Edit | Zhaorui Gao Yang
On the 24th local time, Russian President Putin said in an emergency televised speech on the situation in Ukraine that he had decided to carry out special military operations in the Donbass region. Subsequently, the whole territory of Ukraine entered a state of wartime. Affected by this, the global financial markets are heavily volatile.
What will be the lasting impact of the war between Russia and Ukraine on the global economy? How should mainland residents and enterprises allocate assets to avoid risks?
Yan Xingyue, an economist on CreditEase Wealth's asset allocation strategy research team, told A Little Financial News that it is expected that the panic in the market in the later period will continue to remain at a high level. Overall, it is not conducive to risk assets, and safe-haven assets will be more favored by the market.
Tan Yaling of the China Foreign Exchange Investment Research Institute told "A Little Bit of Financial News" that the dollar itself should be a safe-haven currency, but from the perspective of the Fed's interest rate hike and the US economy, the depreciation of the US dollar is beneficial to the Fed's interest rate hike.
"Russia and Ukraine are both energy powers, but the conflict is unlikely to eventually lead to a reduction in Russian crude oil supply." Li Yunxu, senior energy analyst at SDIC Anxin Futures, told A Little Financial News, but did not rule out the possibility of short-term supply cuts in the complicated political game between all parties. Against the backdrop of geopolitical tensions, oil prices have also continued to be supported by geopolitical premiums.
"The mainland has little to do with the Russian-Ukrainian conflict, but as part of the global financial system, the negative impact is difficult to avoid, but the degree will not be too large." Wang Hao, chief macroeconomic researcher of CreditEase Wealth, told "A Little Financial News" that the current domestic economic situation is better than that of major european and American countries, with strong demand for RMB and relatively firm exchange rates, which is likely to become a safe haven for capital in the short term.
01
Global markets are in a panic
On the morning of the 24th Beijing time, the tense atmosphere between Russia and Ukraine was everywhere, and panic also shrouded the global capital market.
At the opening of the day, the major stock indexes in the Asia-Pacific region all fell. Australia's S&P/ASX200 index opened down 94.60 points, or 1.31%, the Nikkei 225 opened down 198.61 points, or 0.75%, and South Korea's KOSPI opened down 30.25 points, or 1.11%.
Peripheral markets continue to panic, and China's stock market has failed to maintain an independent trend. At the opening of A-shares on the same day, the Shanghai Composite Index fell 0.42%, the Shenzhen Component Index fell 0.67%, and the ChiNext Index fell 0.92%. The Hong Kong HSI opened 1.66% lower and the Kod index opened down 2.56%.
The Russian stock market (IMOEX) opened down, the Russian ruble and the Moscow Stock Exchange began trading after falling continuously, and later fell to the circuit breaker line, the ruble and the suspension of trading in securities.
Contrary to the stock market, affected by risk aversion, spot gold rushed to $1940, a new high in more than a year, and Brent crude oil broke through the $100 mark.
As of the close of trading on the 24th, the main Stock Index of the Asia-Pacific region fell across the board: the Korea Composite Index fell 2.6%; the Nikkei 225 Index fell 1.81%; the Australian S&P 200 Index fell 2.99%, and the New Zealand NZX50 Index fell 3.31%.
At present, the US stock market has not yet opened, but the three major index stock index futures have all fallen by more than 2%, the main contract of the P500 index futures has fallen by nearly 2%, the main contract of the Dow futures has fallen by more than 2%, and the main contract of the NASDAQ 100 index futures has fallen by more than 2.4%.
In terms of foreign exchange, the Russian ruble has been falling, and as of about 14:00 beijing time, the dollar has risen more than 11% against the Russian ruble, standing at the 90 mark.
The Russo-Ukrainian War also led to a sharp rise in cereal prices. Russia and Ukraine are the world's leading grain exporters, with the Russo-Ukrainian war causing CBOT wheat to rise 17 percent, corn to rise 10 percent and soybeans to rise 8 percent, according to Guotai Junan Futures.
02
Safe-haven assets are favored
"For the international financial market, the war between Russia and Ukraine will inevitably promote risk aversion." Yan Xingyue, an economist in creditease wealth asset allocation strategy research team, told "A Little News" that the global panic index has risen from 22% at the beginning of the month to a maximum of 32%, which restricts risky assets.
Yan Xingyue believes that it is expected that the panic in the late market will continue to remain at a high level, even if the situation between the two countries is temporarily eased in a short period of time, it will also be due to the repeated disturbances of the situation in Russia and Ukraine, on the whole, it is not conducive to risk assets, and safe-haven assets will be more favored by the market.
Yan Xingyue said that according to statistics, from 2007 to the present, among the 15 currency pairs, the top three best safe-haven currencies are the Japanese yen, the US dollar and the Swiss franc, while the rest of the currencies have shown different degrees of decline, especially the Canadian dollar, the Australian dollar and so on have been more negatively affected. The upside of the US dollar has further inhibited non-US currencies.
And China Foreign Exchange Investment Research Institute Tan Yaling told "A Little Financial News", under the influence of the Ukrainian-Russian incident, the sentiment of the dollar depreciation took the opportunity to play a significant role, the dollar itself should be a safe-haven currency, but from the perspective of the Fed's interest rate hike and the US economy, the dollar depreciation is beneficial to the Fed's interest rate hike. Technically and strategically, the dollar has chosen to devalue in order to raise interest rates and stabilize the U.S. economy in the future.
Russia and Ukraine are both resource countries, especially energy, agricultural products and industrial metals, and the sustained impact of the two countries will push the overall commodity index upwards, which will further exacerbate the rise in global inflation risks. At the same time, the United States, Europe and other countries have implemented sanctions against Russia, which will strike at global trade in goods and capital, further increasing the global supply chain problem.
Li Yunxu, senior energy analyst at SDIC Anxin Futures, said that the possibility of Russia's conflict eventually leading to a reduction in Russia's crude oil supply to Europe is small, but it does not rule out the possibility of short-term supply cuts in the complicated political game between all parties, and oil prices continue to be supported by geopolitical premiums in the context of geopolitical tensions.
However, it also believes that if the expectations of the United States and Europe sanctions against Russia involve further fermentation of crude oil exports, oil prices will inevitably continue to soar sharply, but if the situation is eased or the British and American sanctions measures do not have a substantial impact, it is expected to give back part of the geopolitical premium, and the details of sanctions and related expectations are the most important focus in the short term.
Precious metals and sovereign bonds are also relatively good hedging tools. Experts said that in the Russian-Ukrainian conflict has not been significantly alleviated, precious metals will remain at a high level, but the overall volatility will increase.
After the sudden change in the situation in Russia and Ukraine, the sovereign bond yields of major economies have shown different degrees of decline, and Yan Xingyue's team expects that in the absence of clarity, the performance of sovereign bond yields will mainly reflect the hedging function.
It is worth noting that under the influence of the Ukrainian-Russian incident, the price of Bitcoin plunged.
Sun Yulin, a senior researcher at the Ouke Cloud Chain Research Institute, said that as of 14:00 on February 24, the price of bitcoin fell by nearly 7%; at the same time, the master data on the Ouke cloud chain chain also showed that there were a number of large USDT transfer transactions on the same day, and the market risk aversion was high. Bitcoin was once known as crypto gold, but now with the changes in the situation in Russia and Ukraine, the safe-haven attribute of this asset has ceased to exist.
03
China may become a safe haven for capital
Wang Hao, chief macroeconomic researcher of CreditEase Wealth, told "A Little Financial News" that from the current situation, the risk appetite of the international capital market has begun to contract. From a global perspective, the stock markets of most countries will most likely fall significantly, followed by the depreciation of local currencies caused by capital flight. In this case, the dollar safe haven effect is likely to appear, and capital inflows will lead to a short-term strengthening of the dollar and a decline in US Treasury yields. Another currency that could benefit is the Japanese yen, which is also based on hedging considerations.
"The mainland has little to do with the Russian-Ukrainian conflict, but as part of the global financial system, the negative impact is difficult to avoid, but the degree will not be too large." Wang Hao said that the current domestic economic situation is better than that of major European and American countries, with strong demand for renminbi and relatively firm exchange rates, which is likely to become a safe haven for capital in the short term. The asset most likely to yield will be interest rate bonds. The contraction of risk appetite may increase the overall volatility of the A-share market, which will have a greater impact on growth stocks and higher dependence on foreign trade.
Wang Hao also believes that upstream resources such as crude oil, petrochemicals, natural gas, nickel, and agricultural products such as soybeans and wheat will rise significantly, and domestic related industries and individual stocks are expected to benefit in the short term.