WAR AND SECURITIES
After being hit by the Russia-Ukraine crisis on February 24, the Vietnamese stock market quickly recovered. Many stocks have since bounced back. Does war always lead to a persistent selloff?
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The VN-Index lost over 38 points on February 24, but bottom fishing later reduced the loss and the main index closed down more than 17 points. The trade volume soared to over 1.15 billion shares on the Hochiminh Stock Exchange, with over 976.5 million shares matched, surging 48% day-on-day, proving that investors did not hesitate to pour capital into the stock market amid the war and a negative sentiment which was leading the market.
In the sessions on February 25 and 28, although the Vietnamese stock market indicators were in the red, the market was not as bad as forecast earlier. The market even split significantly, with some groups of stocks surging and some stocks unexpectedly bouncing back and continuously reaching their ceiling prices.
In the past, wars always worried investors in the stock market. However, wars could also be opportunities for others to purchase shares. Many analysts and large investors have encouraged others to turn wars into great purchase opportunities.
In 2003, the United States and its allies attacked Iraq in March and in April, the Dow Jones index of the United States rose 7.4% and continued its growth momentum. In March 2011, the United States and its allies, including NATO, attacked Libya and the Dow Jones index still went up before a short correction in the third quarter of the year and continued increasing later. In mid-April 2018, an alliance of the United States, the United Kingdom and France staged an airstrike in Syria, but the stock markets were not affected.
In later decades, wars have been local or proxy ones, in which large countries, especially those with nuclear weapons, have engaged in limited direct confrontations. Therefore, the risk of the spread of wars, which may cause world wars as in previous decades, is not high. As a result, financial markets will not face a great and lasting impact as in the past.
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In this crisis, Russia’s detachment of its military forces to Ukraine was not surprising, as it had been forecast earlier by many western countries. Therefore, many investors had anticipated the situation and were not too concerned. Many investors who had sold their shares repurchased them when Russia’s march sent many stock markets plunging.
The U.S. stock market, considered a lodestar of other markets, faced
continuous correction pressure from February 10 due to concerns over a war. However, when Russia officially launched its attack on February 24, Dow Jones, S&P 500 and Nasdaq suddenly bounced back strongly in the last two sessions of last week. Closing the week, Dow Jones inched down a slight 0.1%, while S&P 500 and Nasdaq added 0.8% and 1.1%, respectively. The concern over the war had been shown in the stock prices in previous days.
Meanwhile, optimistic investors expected the Federal Reserve (Fed) to delay the increase of interest rates at its meeting in March, as the war could threaten the recovery of the U.S. economy and the global economy as a whole. Nevertheless, with the increasing inflation and the soaring oil prices due to the impact of the war, the possibility of the Fed’s delaying increasing the interest rate is low.
In addition, the war has yet to escalate as strongly as imagined earlier, as Russia quickly entered the cities of Ukraine, and the United States and NATO are still outsiders to the crisis, arousing an expectation that the crisis will end soon and take place within the precincts of Ukraine. Recently, leaders of Russia and Ukraine entered into negotiations to seek peaceful solutions to the crisis.
However, investors need to continue to keep a close watch on the United States and Europe although they had affirmed not to participate in the crisis in Ukraine but impose economic sanctions against Russia. If they make a different move, the war may spread and financial markets may react more negatively.
If the crisis is long-lasting and the relevant parties are involved in the crisis, oil, mineral, steel and fertilizer stocks can benefit as Russia is a leading exporter of these products, according to analysts. Moreover, food and foodstuff stocks can attract capital as the war may lead to food hoarding worldwide, while food has been insufficient recently as both Russia and Ukraine are leading exporters of wheat and grain. These stocks have bucked the trend to skyrocket last week.
According to a report by BIDV Securities Company, Russia is the thirdlargest exporter of oil globally with an export volume of some 10 million barrels a day, following the United Arab Emirates and Saudi Arabia. Russia ranks second in steel exports to the European Union. The country also accounts for 75% of the total ammonium nitrate supplies worldwide, with an export volume of 15 million tons per year, so Russia’s ban on exporting ammonium nitrate may send the prices of nitrate fertilizers up worldwide.
In the past, wars always worried investors in the stock market. However, wars could also be opportunities for others to purchase shares. Many analysts and large investors have encouraged others to turn wars into great purchase opportunities.
Binh Duong Province will break ground on the third Vietnam-Singapore Industrial Park (VSIP 3) project in mid-March. VSIP 3 will cover some 1,000 hectares of land in Hoi Nghia Commune in Tan Uyen Town and Tan Lap Commune in Bac Tan Uyen District. This is the 10th project that has been invested in Vietnam by VSIP Group.
The Railways of Transport and Trade JSC (Ratraco) will run the first container train linking the central city of
Danang with Europe early this month. The train consists of 23 40-foot containers, transporting IKEA-branded furniture to Europe. The goods will be delivered to some European cities such as Liege in Belgium, Hamburg in Germany and Melzo in Italy. The train will depart from Danang to Dong Anh in Hanoi, stop at the Dong Dang International Railway Station in Lang Son for customs clearance and then travel on to China’s Zhengzhou station before connecting to the Asia-Europe rail line to get to its destinations.