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Geopolitical tensions begin to weigh on CEE markets
Mon, Aug 25 2008, 07:10 GMT
by Danske Research Team
Since the outbreak of the Russian-Georgian conflict, some have voiced their concerns that it could spread. Not necessarily militarily though. Rather, most commentators seemed focused on the potential for "economic warfare"; for example Russia could choose to implement "economic sanctions" against countries that it views as hostile. The Baltic States, Poland, the Czech Republic and Ukraine are considered most likely to be perceived as "hostile" by Russia, and hence risk some kind of economic backlash.
However, there haven't been any major movements in the Polish, Czech and Baltic markets that could be mainly attributed to rising geopolitical risks in the region. On the other hand, both the Russian and Ukrainian markets have clearly been impacted.
For Russia, the impact has been most visible on the stock market - the main index, RTS, has dropped by more than 7% since the outbreak of fighting on 7 August. It should be noted that prior to the conflict, Russian stocks had been under strong selling pressure during July.
Similarly, there has a marked rise in Ukrainian Credit Default Swaps, which are now are trading at levels not seen since the most tense period of the Orange Revolution in 2004.
In conclusion, rising geopolitical tensions have become a key focus for CEE markets, and this is likely to remain the case for some time.
Published on Mon, Aug 25 2008, 07:14 GMT
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