Market recovers poise despite Ukraine invasion

Finance

Published: 25 Feb. 2022, 16:16

Market recovers poise despite Ukraine invasion

Screens in Hana Bank’s trading room in central Seoul show Kospi closing at 2,676.76 points, up 1.06 percent, and Kosdaq closing at 872.98 points, up 2.92 percent, on Friday from the previous trading day. [YONHAP]

Russia’s invasion of Ukraine is being closely watched by the markets, but investors haven't freaked out.

The Kospi bounced back 1.06 percent on Friday after it plunged 2.6 percent on news of Russia’s invasion of Ukraine the previous day. The secondary Kosdaq went up 2.92 percent on Friday, after it plunged 3.32 percent on Thursday.

Economic sanctions on Russia are expected to prevent the geopolitical tensions from rapidly escalating, said analysts.

“Though Russia invaded Ukraine, the market does not expect the worst scenario to be realized because both the West and Russia are avoiding making aggressive moves,” said Kim Il-hyuk, a research analyst at KB Securities.

Following the invasion, U.S. President Joe Biden sanctioned key Russian banks and said the U.S. would effectively “cut Russia’s government from Western finance.” But he did not remove Russia from the Society for Worldwide Interbank Financial Telecommunication, a high security network that connects thousands of financial institutions around the world. Also, Biden didn’t announce crushing sanctions on Russia’s energy sector.

“There weren’t any factors that could directly impose damage on the U.S. economy, like the exclusion of Russia from the international payment network, import restrictions of Russian oil, deployment of U.S. troops in Ukraine or direct sanctions on Putin,” said Julie Cho, an analyst at NH Investment & Securities.

“The expectation that the Federal Open Market Committee would slow the pace of monetary tightening in the March meeting due to the Russia-Ukraine conflict rather raised buying of growth stocks.”

Microsoft stock jumped 5.11 percent and Amazon up 4.51 percent on Thursday. In Korea, messaging app giant Kakao rose some 5.56 percent during trading on Friday, while portal giant Naver went up by 4.96 percent.

Energy stocks rose in Korea Friday on expectation the Russian invasion will push up oil and gas prices. Russia yields around 12 percent of the global economy’s oil and 17 percent of its natural gas.

The price of JoongAng Enervis, a distributor of petroleum products, jumped more than 20 percent during trading on Friday. Shares of Daesung Enenrgy, a distributor of natural gas, went up 19.89 percent during trading on the same day.

A full-scale war could cut the Kospi to as low as 2,500 points, according to a report from Korea Investment & Securities released on Feb. 23. “Since Korea became Russia’s fifth largest importer, the West’s sanctions against Russia could immediately affect sales of companies that export” to Russia, it wrote.

BY JIN MIN-JI [jin.minji@joongang.co.kr]