Event: Recently, the tension between Russia and Ukraine has escalated rapidly, the war seems to be imminent, and the panic in the global market has intensified.
In terms of market performance, the panic index VIX soared by more than 40% in five trading days, and the global equity market was under pressure. The continuous rise of gold has exceeded US $1900 / ounce, and the high yield of US bond 10Y fell back to 1.8%. In addition, geopolitical conflicts have pushed up the expectation of tight supply of bulk commodities, the prices of energy and other commodities have risen strongly, and Brent crude oil has exceeded the integer level of US $100.
Our comments are as follows:
(I) the outbreak of war between Russia and Ukraine will lead to a sharp rise in the volatility of major global assets
For most of the time after World War II, Europe enjoyed a peaceful environment. The last typical war was the Kosovo war more than 20 years ago. If a war breaks out between Russia and Ukraine, its impact will be similar and different from that of the Kosovo war, but the overall impact will be greater and affect the global market.
Ukraine is on the edge of Europe and Kosovo is closer to the hinterland of Europe. It seems that the direct impact of the Russian Ukrainian war on the European economy will be relatively small. However, the key point is that Russia and Ukraine are important Shenzhen Agricultural Products Group Co.Ltd(000061) and energy exporters in the world. Russia's natural gas exports account for 21% of the world, and the two countries account for 25% of the global wheat and barley trade. Europe is highly dependent on corn, barley, nickel, copper, natural gas, wheat and other products imported from Russia and Ukraine, of which 36% of Europe's natural gas imports depend on Russia; The former Yugoslavia and other countries that broke out the Kosovo war in that year are neither major industrial countries nor important commodity exporters. Therefore, the outbreak of the war between Russia and Ukraine, especially if a comprehensive energy embargo is imposed on Russia, will have a great impact on the global market, and the volatility of major assets may rise sharply in the short term.
(II) hedging assets may further strengthen
If the conflict between Russia and Ukraine continues to escalate, the global risk aversion will further heat up and the performance of risk averse assets will be brighter.
On the one hand, US bonds, European bonds, gold and the US dollar with risk aversion are expected to benefit from the rise, which will depend on the duration of the crisis. However, it should be noted that if there is a large decline in European and American stock markets, institutions may sell non mainstream assets such as gold to supplement liquidity.
On the other hand, for risky assets, the impact needs to be seen in two. The global equity market as a whole will be under pressure, and the volatility of European stock markets may be greater than that of U.S. stocks and A-Shares in the short term. At the same time, U.S. stocks should stabilize before European stocks, while some commodities may benefit from the tightening on the supply side and continue to rise.
(III) it is necessary to be vigilant against the rising trend of commodity inflation
As a major exporter of energy, Shenzhen Agricultural Products Group Co.Ltd(000061) , industrial metals and other bulk commodities, the fermentation of geopolitical conflict will have a violent impact on commodity prices. Here, we divide it into two scenarios for deduction and analysis.
Scenario 1: if the sanctions against Russia involve commodities, crude oil, Shenzhen Agricultural Products Group Co.Ltd(000061) and other varieties are expected to continue the current rising market, and may lead to the continuous surge of global inflation expectations. Overseas markets may have "quasi stagnation" concerns, which will also strengthen the downward trend of global stock market and the upward trend of gold.
Scenario 2: if the sanctions measures do not involve combating bulk trade in Russia, it is expected that there is little room for the rise of relevant commodities, and the market will be dominated by risk aversion.
(IV) there are two paths for the impact of Russia Ukraine conflict on a shares
Historically, there are usually two paths for the impact of geographical conflicts on China's equity market:
1. If the global stock market represented by U.S. stocks falls due to geographical conflict, the risk appetite of Chinese investors will also decline, and the trend of A-Shares will be subject to periodic pressure and intensified volatility.
2. If the conflict pushes up energy and bulk prices, the market may worry about the increase of raw material costs and upward inflation, which will affect corporate profits and monetary policy; However, the impact on corporate profits may be relatively differentiated. The impact of rising energy prices on upstream raw material related enterprises is the expected increase in profits, but it means an increase in costs for midstream and downstream enterprises. This path chain is long, and it is possible to see this situation only when the bulk price remains high for a long time.
It should be pointed out that the external factors are not the leading factors of a shares. China's equity market is mainly dominated by internal factors such as enterprise profitability and liquidity. If the conflict between Russia and Ukraine ends in a short time or the intensity is limited, the external factors will only interfere with a shares.
