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Investors should not make the mistake of thinking markets will react to another ramping up of geopolitical tensions in the same way they are currently reacting now, Deutsche Bank CEO Christian Sewing has said.
Speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, the veteran banker warned investors against complacency as he argued another incident that worsens international relations could quickly lead to a major market event.
The German CEO warned further clashes between state powers could quickly see markets lose their composure, as he said it should not be taken for granted that markets will remain as resilient in the face of conflict as they currently are now.
“My biggest fear is that there is one more geopolitical escalation, and that can happen pretty quickly, and the markets at some point in time actually give up their calmness, and then you have a market event,” Sewing said.
The Deutsche Bank
DBK,
CEO, in turn, said market participants should stay alert to the risks posed by geopolitical conflict, as he warned investors against mistakenly believing that markets will continue to remain unstirred.
“We all need to stay very much on alert with regards to risk appetite, stress testing, and simply don’t do the mistake and simply think that the markets will remain that calm as they are right now,” Sewing said.
The banking chief’s comments come as global markets have stayed relatively still following Hamas’ attack on Israel on Oct. 7 and Israel’s subsequent attack on Gaza over recent weeks.
Stock markets have also shown a relatively muted response to the war in Ukraine over the previous year. Oil futures
CL00,
on Tuesday traded below $80 per barrel.
Research published in the International Review of Financial Analysis has shown the reaction to Russia’s invasion of Ukraine was significantly less than the market reaction shown following COVID-19 and the 2008 crash.
Speaking after Sewing, Morgan Stanley
MS,
CEO James Gorman said he also believes a political or geopolitical event is likely to be the cause of the next market crash, as warned of growing threats to democracy across the globe.
“I don’t know what triggers it. I mean nobody in this room, I think, predicted COVID. It is likely to be something geopolitical/ political,” he said. “The challenges to democracy in some countries around the world are pretty evident,” Gorman said.
