Main impact time point of the event: it has been more than a month since the beginning of the conflict between Russia and Ukraine. At present, there are restrictions on the scope of official sanctions against Russia by the west, but the escalation of private commerce makes the impact of sanctions more complicated. The market is concerned about whether the EU, the main exporter of Russian energy, will impose sanctions on the import of oil and gas. However, we believe that it is difficult for the EU to find a short-term alternative to Russia’s energy dependence, and there is little possibility that the sanctions will further spread to oil and gas. According to the current news, the military conflict between Russia and Ukraine will continue for a certain period of time. However, the economic pressure brought by Western sanctions prompted Russia to seek to reach an agreement through negotiation as soon as possible. In addition, the two sides have huge war expenses every day and do not have the ability and willingness to fight for a long time.
Impact on market sentiment: since the conflict between Russia and Ukraine on February 24, the major European indexes hit the bottom and rebounded on March 8, which has been basically restored to the position before the outbreak of the conflict. However, the main impact of the conflict is to push up the global inflation expectation. The oil distribution price rose by more than 30% in the first quarter. The US Federal Reserve / European Central Bank‘s inflation rate forecasts for this year are 4.3% / 5.1% respectively, which is significantly higher than that at the end of last year. In addition, the irrational panic factors caused by the conflict between Russia and Ukraine were eliminated after the call between Chinese and US leaders in mid March. Therefore, we believe that the peak of risk impact has passed.
Investment suggestion: if the Russia Ukraine incident continues to ferment and there is a possibility that the oil price will rise by 140 US dollars / barrel in the pessimistic situation, the financial market will fluctuate sharply. However, we expect that after the event becomes clear: (1) the international oil price and gold price fall, but the oil supply side is tight in the short term, superimposed with low inventory. The international oil price remained at about $90 / barrel in the first half of the year, and gradually fell after the reversal of supply and demand in the second half of the year; The inflation level will support the gold price in the future or will continue the current high shock trend, falling back to US $1 Shanghai Construction Group Co.Ltd(600170) 0 / ounce at the end of the year; (2) The rise of market risk appetite is good for the overall equity market performance, especially for Russia and neighboring Europe; (3) As a European granary, the war in Ukraine may disturb the Shenzhen Agricultural Products Group Co.Ltd(000061) supply, and the price fluctuates at a high level in the second and third quarters, which is good for the resource rich + net oil and fuel exporters in the Asian market, such as Malaysia, Indonesia and other countries. As one of the few net commodity exporters, Indonesia’s palm oil exports account for 53% of the global market share, which can provide measurable alternative potential for sunflower seed oil (Ukraine is the world’s largest seed exporter, accounting for 40% of the global share). The expected rise in Indonesia’s global export market share is also conducive to the appreciation of its real effective exchange rate.
Risk factors: the conflict between Russia and Ukraine has further escalated.
