SINGAPORE, Jan 5 (Reuters) – Global investors are facing a fresh surge in geopolitical risk after the U.S. capture of Venezuelan President Nicolas Maduro, although initial market reaction has been relatively devoid of nerves with oil volatile and safe-haven flows lifting gold.
Stocks rose, buoyed by tech and defence sectors while the dollar advanced on Monday. [FRX/] [MKTS/GLOB]
Here are some comments from market analysts:
DAVID CHAO, GLOBAL MARKET STRATEGIST FOR ASIA-PACIFIC, INVESCO, SINGAPORE
“The weekend’s developments are unlikely to have any significant near‑term impact on global macro conditions or markets, given Venezuela’s relatively minor role in today’s energy landscape. This is why there hasn’t been any significant movement for oil prices, U.S. equity futures nor major shifts in other macro assets.
“The broader message is that geopolitical uncertainty has become an integral part of the macro environment, and this should continue to underpin demand for precious metals amid elevated volatility.”
GARY TAN, PORTFOLIO MANAGER, ALLSPRING GLOBAL INVESTMENTS, SINGAPORE
“From EM perspective, the more immediate impact of growing U.S. presence in Latin America is likely to be felt in credit markets. We expect some narrowing of credit spreads, particularly for lower-rated sovereigns, as geopolitical risk premiums stabilise.
“On the geopolitical front, we do not anticipate a meaningful shift in China–Taiwan dynamics as a result of developments in Venezuela. At this stage, Asian policymakers are more likely to view U.S. engagement in Latin America as a regional strategy rather than a signal of reduced U.S. commitment in Asia.”
RONG REN GOH, PORTFOLIO MANAGER, EASTSPRING INVESTMENTS, SINGAPORE
“For Asia-based investors, Venezuela is mainly a headline risk. Direct exposure in the region is limited, so the impact comes more through market sentiment and, to a lesser extent, what it could mean for oil prices over time.
“Fixed income markets have benefited from a relatively calm, carry-friendly backdrop in recent months. Events like this are a reminder that unexpected shocks can still happen, especially when markets are more tightly priced.”
CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE
“We’re in a regime where geopolitics has become a persistent feature, not a surprise. Unless it threatens the broader supply chain, investors tend to fade the first shock and rotate back to rates, earnings, and positioning. This is more geopolitical shock than oil shock for now.”
VISHNU VARATHAN, HEAD OF MACRO RESEARCH, ASIA EX-JAPAN, MIZUHO, SINGAPORE
“We are being reminded that geopolitical risks are much larger than some number cast on imports.
“The sanctions on Venezuela and their exceptional reliance on only oil exports … that means that the Venezuela regime change impact via trade channels, investment channels quite naturally is limited and ring-fenced. So that’s why you don’t get a huge selloff.
“The case and the question in mind is – Is broader LatAm stability at risk? The flow-through effects and all could be much greater.”
KYLE RODDA, SENIOR MARKET ANALYST, CAPITAL.COM, MELBOURNE
“The implications are limited in the short-term and relatively contained to the energy complex. We are definitely seeing a response in precious metals though and that’s the market front-running governments and upping their exposure to non-dollar (and non-fiat) alternatives. Otherwise, I think the markets are looking forward to what’s ahead rather than what happened on the weekend.”
TAI HUI, CHIEF MARKET STRATEGIST FOR ASIA-PACIFIC, J.P. MORGAN ASSET MANAGEMENT, HONG KONG
“The lack of reaction so far is because of two factors. Venezuela’s oil production relative to global output is small (around 1%). Years of under-investment means it won’t be able to ramp up production and add to global supply any time soon.
“It remains unclear what will happen to the new regime as President Trump announced the U.S. would be ‘running’ Venezuela in the short term. The impact on global markets would at most be through the energy market. Of course, there should be broader geopolitical implications from this event, but in my view, the financial markets are not very efficient in pricing such risks accurately.”
VASU MENON, MANAGING DIRECTOR FOR INVESTMENT STRATEGY, OCBC, SINGAPORE
“While President Trump has pledged U.S. industry support to revitalise oil production in the country (Venezuela), restoring operations will require significant time and substantial capital investment before the oil taps can be fully reopened. Supply disruptions amid ongoing political turmoil could push oil prices modestly higher in the short term.
“However, the impact may be limited, given that Venezuela is not currently a major oil producer. Production decisions by OPEC could also help stabilise prices. It remains to be seen whether the Trump administration has an appetite for more regime changes.”
(Reporting by Rae Wee and Gregor Stuart Hunter in Singapore; Compiled by Ankur Banerjee; Editing by Shri Navaratnam)
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