Xi’s Russia trip — Another Game-Changing Event?
Published on 17th March 2023
According to news reports, the President of the People’s Republic of China will visit Russia to meet with Russian President Putin and speak with Ukraine’s President Zelensky.
While market participants and news broadcasters are fixated on the cracks which have appeared in the financial infrastructure and its impact on the industry, economy, and monetary policy, however, we suggest investors also closely monitor events about to take place in Russia and possibly Ukraine.
In his speech at the UN Peacekeeping Summit last year Chinese President stated that “Peace is the common aspiration and lofty goal shared by all of humanity.” The Chinese leader also proposed the Global Security Initiative2 in 2022 and issued the government issued the GSI Concept Paper last month. The focus on peace and collaboration seems to be a key policy priority for President Xi.
In addition, this month, China orchestrated trilateral meetings between the Kingdom of Saudi Arabia, the Islamic Republic of Iran, and the People’s Republic of China. On March 10, the three parties produced the Trilateral Statement by the People’s Republic of China, the Kingdom of Saudi Arabia, and the Islamic Republic of Iran. The joint statement states, “In response to the noble initiative of His Excellency President Xi Jinping, President of the People’s Republic of China,”…the three parties have reached an agreement.
The agreement between the two strained neighbours, Saudi Arabia and Iran, is to resume diplomatic relations that broke in 20163 and re-open their embassies and missions with a period not exceeding two months. In addition, they have affirmed respect for the sovereignty of states and the noninterference in the internal affairs of states. The statement is worth thoroughly reading to understand this event’s magnitude better. The statement also highlights that the two sides have agreed to let China host and sponsor further talks between the Kingdom of Saudi Arabia and the Islamic Republic of Iran.
Regarding the Russia – Ukraine war, if President Xi’s trip to Russia can produce, at the least, a dialogue on peace, it could trigger a sharp market reaction. While we are unsure of the likelihood of a significant positive development from Xi’s meeting next week, we are sure that the probability is greater than zero especially given President Xi’s focus on peace and positive momentum on peace initiatives.
Therefore we believe it is prudent to explore hedge solutions for the possibility of a positive risk event; constructive geopolitical news. Another game-changing event may be near.
Regarding the US and other banking system issues, the financial and banking infrastructure is critical to the economic security of the economy. It thus will likely be protected by any means necessary.
1. Joint Trilateral Statement by the People’s Republic of China, the Kingdom of Saudi Arabia, and the Islamic Republic of Iran
2. The Global Security Initiative Concept Paper
3. Before severing relations in 2016, diplomatic relations were suspended from 1987–1990.
The information provided herein constitutes marketing material, that may contain general information, and has been prepared by personnel in GMG Asset Management SA (collectively “GMG”) and is not based on a consideration of the prospect’s circumstances. This document reflects the sole opinion of GMG or any entity of the GMG Group and it may contains generic recommendation.
Non-Reliance: This document does not constitute a recommendation or consider the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your circumstances and, if necessary, seek professional advice. GMG is not soliciting any specific action based on this material it is solely intended for illustration purpose.
This document is not the result of a financial analysis and therefore is not subject to the “Directive on the Independence of Financial Research” of the Swiss Bankers Association.
This document is neither a prospectus as per article 652a or 1156 of the Swiss Code of Obligations, a listing prospectus according to the listing rules of the SIX Swiss Exchange or any other exchange or regulated trading facility in Switzerland, nor a simplified prospectus, key investor information document or prospectus as defined in the Swiss Federal Collective Investment Schemes Act. Any benchmarks/indices cited in this document are provided for information purposes only.
The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn from sources reasonably believed to be reliable. Subject to any applicable law, GMG shall not assume any liability in this respect.
Risk Disclosure: This document is of summary nature. The products referred to herein involve numerous risks (including, without limitations, credit risk, market risk, liquidity risk and currency risk). In respect of securities trading, please refer for more information on such risks to the risk disclosure brochure “Risks Involved in Trading Financial Instruments – November 2019”, which is available for free on the following website of the Swiss Bankers’ Association: www.swissbanking.org/en/home.
Material May Be Outdated: This material is produced as of a particular date. Accordingly, this material may have already been updated, modified, amended and/or supplemented by the time you receive or access it. GMG is under no obligation to notify you of such changes and you should discuss this material with your GMG relationship manager to ensure such material has not been updated, modified amended and/or supplemented. The market information displayed in this document is based on data at a given moment and may change from time to time. In addition, the views reflected herein may change without notice. No updates to this document are planned. In the event that the reader is unsure as to whether the facts in this document are up to date at the time of their proposed investment, then they should seek independent advice or contact their relationship manager at GMG.
Information Not for Further Dissemination: This document is confidential and should not be reproduced, published, or redistributed without the prior written consent of GMG.