Amundi - Russia-Ukraine Tensions: Geopolitical Risk adds Volatility to Risk Assets Dienstag, 01. Februar 2022 - 11:00

Dear all,

Please find attached the new Amundi Investment Talks on the Russia-Ukraine tensions: geopolitical risk adds volatility to risk assets on the current situation in the border of Ukraine’s Donbas region, and the investment implications and a photo of Yerlan Syzdykov, Global Head of Emerging Markets at Amundi.

War of nerves between Russia and Ukraine, geopolitical risk back in focus

Despite a lot of military rhetoric over the last couple of months and tensions clearly building up, we consider a full-scale Russian invasion of Ukraine to be a low probability scenario, although an incursion at the boarder cannot been excluded, as well as the option that military forces on both sides will stay in the area for an indefinite amount of time, ensuring tensions remain constantly elevated.

We currently see three possible outcomes with a different likelihood of occurrence:

§ 60% probability of a peaceful compromise, a relief for risk assets;

§ 30% probability of a small-scale military incursion: further expanding the territory of the separatist controlled Donbas region, potentially building a land bridge to connect to the annexed Crimea region and recognising Donbas as independent state. The impact may depend on the scale of any intervention, but markets have priced a lot in already with a big correction of Russian equity and increased volatility globally;

§ 10% probability full scale invasion: occupying a significant part of Ukraine, including the capital Kiev, and installing a pro-Russia president. This can be considered a tail risk, but would trigger much higher volatility in risk assets and supporting safe heaven assets for hedging geopolitical risk such as the USD.

Please do not hesitate to contact us for further questions or if you would like to talk to one of the Amundi experts.

Kind Regards

Anette Walker

MediaWalker GmbH

Dr. Anette Walker

Mobil: +49 172 350 1101

Tel: +49 6196 561 2928

a.walker@mediawalker.de