Sanctions are making Russian assets 'uninvestable,' says Goldman Sachs

good morning thank you for for having me i think the the last point that you mentioned the the reserves the targeting of the central bank's reserves i think is the most important piece of news here i think if you think about the russian ruble uh you know and a lot of the russian local assets the fact that they had this very significant amount of reserves you know upwards of 600 billion when you include the gold as well i think was the main and first line of defense against russian local assets i think with you know targeting of that freezing of those reserve assets uh i think it becomes very hard uh for for russia to essentially uh you know defend the the ruble from these sorts of uh you know the kind of pressure that you are seeing so i think that you know we should expect ruble to trade uh pretty weakly and it's no surprise the kind of volatility that you are seeing in markets today looking at the volatility that we're seeing in markets um you're looking at russian assets wider em and global markets how does the volatility we're seeing now compared to historical moments like this like the annexation of crimea in 2014 i mean if you think about the annexation of crimea in 2014 and the whole 2014 to 2015 period where towards the end of the year you also had escalation of all you know violence in the donbass you know big fall in oil prices uh there was a you know decumulation of russia's reserves of the order of you know upwards of 100 billion dollars so that just gives you a sense of the kind of you know and there were very significant interventions on a day-by-day basis in that period that gives you one sense of the kind of role that reserves play in stabilizing currencies and even at that time you saw a big sell-off in the ruble and so when you fast forward today if that main sort of defense mechanism is completely inaccessible or not very accessible to to russian authorities uh it's going to mean you know much more significant pain and volatility in the local assets and i think that is what you're seeing i think those assets apart from the sort of technical stance of you know how people transact in them are increasingly going to become uninvestable for a lot of a lot of global investors well on that point i was just going to ask i mean for investors em investors watching this program are russian assets investable at this point i think at this point it is very hard with the with especially i'd say you know with with the range of sanctions being put we still await a lot of details uh but it's very hard to to imagine that uh you know people will be looking for for you know fresh positions there i think the uh you know the the pressure is likely to be intense and it is likely to be sustained i think when it comes to the broader emerging market landscape i think that is the place where i think there may you know obviously there's going to be a big you know risk premium being put into all assets we're seeing that across global markets today as we sort of digest the news over the weekend the escalation and violence the new sanctions but you know further out you know we think the market will start to have to differentiate between assets that are closest to russia and where there is you know some legitimate risk premium russian assets first and foremost but when you go broader across the emerging market landscape some of the assets that are swept away in this in this volatility may actually become reasonable opportunities further down the line but i think that is still a few few days away which em assets are most insulated from what's happening between ukraine and russia i mean i would say that when you think about places that are a commodity producer so they sort of benefit from the tailwind of the kind of you know increase in commodity prices that we are seeing and b are sort of far away from the theater of conflict if you like and the theater of increased geopolitical stress those are probably the ones that are most likely to remain somewhat insulated over the medium term not today not this week but over the medium term and i think that that is you know obviously places in latin america is an important group of them a lot of them are commodity producers they will still have the negative impact of the higher oil prices and what that does to their domestic inflation uh but on the whole they should stay somewhat insulated from the relative to the to the others in in central eastern europe and then i would say there's just gcc area the gulf area the middle east you know again you know major commodity and energy producers somewhat far you know far away from that from the theater of conflict and i think that is also another area uh that may you know have some degree of resilience we already saw that a little bit last week through this volatility

Channel: CNBC International TV

Views: 13,856

Keywords: Squawk Box

Id: YMQpiY3P8s0

Length: 4min 30sec (270 seconds)

Published: Mon Feb 28 2022