Event: on February 24, Russian President Vladimir Putin made a speech and decided to launch a special military operation in the Donbas region. The conflict between Russia and Ukraine broke out, and the whole territory of Ukraine entered a state of war.
Core view:
Tensions between Russia and Ukraine have been rising for years, and the current military action has raised concerns about the potential impact on financial markets and the global economy. In the short term, the events in Russia and Ukraine will lead to increased stock market volatility, increase the uncertainty of economic expansion in Europe and the United States, put the Federal Reserve into a dilemma game of controlling inflation and maintaining economic growth, and increase market instability. However, historical experience shows that geopolitical events usually do not have a long-term impact on the market and investors.
With the rise of global risk aversion, the recent strong trend of RMB exchange rate reflects a certain "risk aversion" attribute. In addition to the reasons for the strong resilience of exports and the high level of capital inflow under current accounts, it also reflects the confidence of overseas funds in China. In this case, we believe that China's capital market does not need to overreact, China's fundamentals are still "self dominated", and the stable growth policy environment and liquidity environment are still friendly. Therefore, the market decline should be treated rationally. The concentrated release of concerns in the short term is not expected to constitute a trend impact, and should not be killed blindly. After the emotional peak, the market is expected to usher in repair.
In addition, with the rise of global risk aversion, funds may withdraw from Europe and the United States and be more distributed to China's capital market. Recently, foreign investors have given signals to be optimistic about the long-term opportunities of A-Shares and began to accelerate the allocation of RMB assets. In the context of the global opening of the tightening cycle, the sharp fluctuation of risky assets and the rising risk aversion of investors, the global allocation of funds will find a safe haven. Based on China's institutional advantages and economic resilience, A-Shares are expected to reflect a certain risk aversion attribute to overseas funds, and China is the only major economy with monetary expansion space. Therefore, after the disturbance of short-term risk events, it is still expected to obtain the inflow of global funds.
