A rebound in global markets that began in New York extended into the Asian day, with traders betting on equity and currency markets linked to commodities, while others bought assets deemed to have been oversold.
The MSCI Asia-Pacific Index of shares rose about 1 percent after dropping 3.1 percent the day before.
That came after the S&P 500 closed 1.5 percent higher in New York, while the Cboe Volatility Index fell from a one-month high.
Benchmark Treasury 10-year yields slipped by about 3 basis points after a similar move on Thursday.
Strategists and fund managers are favoring equities and currencies linked to commodities such as oil, while still advising clients to maintain holdings of haven assets such as gold and the Swiss franc.
China also ramped up liquidity support for its markets, helping to support sentiment.
“Southeast Asia will be more resilient because the commodity stocks are showing negative correlation to the Russia-Ukraine conflict,” said Alan Richardson, a fund manager at Samsung Asset Management (Hong Kong) Ltd. “Based on historical precedents where commodities production is affected by war, volatility will be high and the commodity price spikes can last for about two months.”
Richardson said that he is buying into stocks linked to oil, nickel and aluminum after Thursday’s selloff.
“We’re making a few buys of stocks we like,” Cambiar Investors LLC chief investment officer Brian Barish said. “Broad based — consumer and industrial names mainly. Usually you want to buy these kind of events, not sell into them. I think that is broadly true here, but we still do have a market valuation challenge ... that may have further to correct over the balance of the year.”
“We expect high market volatility to continue in the near term, but note past conflicts have often provided interesting entry points for long-term investors,” said Kristina Hooper, chief global market strategist at Invesco in New York. “The war and the risk of stagflation strengthens the case for portfolio diversification given the heightened volatility and uncertainty.”
“If a further escalation caused even larger oil price increases in the days ahead, this could mean that ‘oily’ currencies like the Canadian dollar on the G10 side, and the Colombian peso, Mexican peso and Malaysian ringgit on the EM [emerging markets] side, could benefit,” Goldman Sachs Group Inc strategist Ian Tomb said in London.
“It is time to keep hedges in place and stay cautious, but not overreact to excesses that we will likely see in the coming days,” Amundi strategists led by Pascal Blanque in Paris wrote in a note. “Some duration, gold and safe-haven currencies can provide a cushion to risk assets. Equities, which have ample liquidity, will be the first target of risk reduction for markets and credit will likely follow.”
Bond-market fluctuations because of the Ukraine crisis have done little so far to change the medium-term outlook, said Chris Rands, co-portfolio manager of the Yarra Capital Management in Sydney.
The fund is avoiding riskier trades at the moment, while favoring positions to benefit if the Reserve Bank of Australia raises interest rates at a slower pace than the US Federal Reserve, Rands said.
“So long as the US and EU do not push forward to ban Russia’s access to the SWIFT payment network or to restrict its oil exports, market may enjoy a relief rebound,” said Margaret Yang, a strategist at DailyFX in Singapore. “Gold, crude oil and Swiss franc remain some of the havens against the backdrop of heightened geopolitical tensions.”
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