The world's attention focused on Ukraine in February. In addition to further announcing that Russia recognized the two countries of Donetsk and Lugansk, a full-scale invasion had also begun. The United States and the European Union responded with immediate sanctions. There is no doubt that Russia has a vast territory, which is much larger than Ukraine and possesses nuclear weapons. Its population is about 3.26 times that of Ukraine. Ukraine also lacks territorial defence in depth. Without foreign aid, the current regime is likely to collapse. However, the war in the severe winter is extremely unfavourable for the attackers. In terms of modern ethics, it is impossible to carry out saturation bombing of civilians. In addition to the pressure of rain and snow weather on the supply line, it is predicted that the chances of a full-scale invasion on land before the snowmelt and even in the rainy season are relatively low. At present, the focus is still on missile attacks that intensify chaos and bring down the government. However, the crisis has been enough to make the market sentiment worse and the price of gold has risen sharply, reaching around $1,950 an ounce at the time of writing. Under the high-risk aversion, the trend is understandable. In terms of the reasons for Russia's invasion, apart from the dissatisfaction caused by Ukraine's pro-Western approach, Russian culture has always regarded Ukraine as the hinterland and the former's "old territory", so the friction with Western civilization over the Ukraine issue is inevitable. Among them, there may be a distraction of the people to solve the related economic problems caused by the pandemic. 

The biggest enemy of an investor is always the investor himself. Especially they know that the atmosphere is unfavourable, they still feel optimistic and even hope to recover from the loss, which leads to a wrong judgment. Fear of missing a transaction reflects the investor's investment psychology, which makes it easy for them to lose the opportunity to exit. The important thing in March is to maintain strategic flexibility and increase the level of cash as much as possible. There are many opportunities for investment and cash is always king. It is suggested to continue last month's suggestion to increase cash or transfer the investment to Japan, Northern Europe and the Middle East. 

In terms of U.S. stocks, although the Dow and Nasdaq rebounded for a while in early February, they were close to the lows at the end of January when I wrote this. Last month, it is mentioned to avoid U.S. stocks as much as possible. For the time being, we still maintain the view that the local market is weak. The chances of the Fed raising interest rates in March are still high, but a conditional interest rate increment proves that the US economy has conditions to recover. If Russia and Ukraine go to war, the interest rate increment plan will inevitably be delayed, and the impact on the U.S. stock and investment market will be greater at that time. 

In February, the Hong Kong stock market was subject to the 25,000-point. The Hang Seng Index once peaked at 25,050 and was unsustainable. Affected by the political situation, it dropped by more than 800 points in a single day to 23,336, which was almost the same as the low of 23,469 at the end of January at the time of writing. Even if the valuation of most of the Hong Kong stocks has fallen to a reasonable level, the external market conditions are limited for the mainland economy and Hong Kong stocks. Especially during the outbreak in Hong Kong, the daily number of confirmed cases is high. It is suggested that it would be more suitable to reduce holdings if the epidemic spreads to the mainland unfortunately or further hit the mainland economy. In terms of the industry, upstream resource stocks such as crude oil, gold mine and coal are still relatively strong recently. The shipping stocks that I have been recommending are also favoured by the continued high freight rates and remain strong relative to the market. As for the local banking stocks mentioned last month, you can also look at the top line for the time being. 

This month, the author recommends China Energy Construction (3996). The company is directly under the State Council and is responsible for more than 90% of the mainland's electric power planning, scientific research, consultation and evaluation, survey and design, and industry standard-setting. Therefore, there is no doubt about the ability to obtain projects in the mainland. The revenue is also directly linked to the investment in electricity in the mainland. Last year, the total amount of new contracts reached RMB 872.61 billion. The number of new energy projects in line with national policies increased by 53.2%. In addition, the cost-effectiveness of Gezhouba Group Corporation will appear. There is still a lot of room for speculation this year as it has also split A-share listing and development of hydrogen energy concepts, etc. It is still a very important goal to solve the problem of power shortage in the mainland, and the business is more likely to be further developed due to the possible constraints of Russian natural gas exports. Unless there is a major outbreak in the mainland, it is necessary to stop the loss as soon as possible. 

Last month's recommendation of First Pacific (0142) was quite good. It once reached a new 52-week high of $3.47, and it reached $3.3 at the time of writing. There is an increase of 10% in the month, which is an anomaly in the recent weak market conditions. Geopolitical tension may have a certain impact on the prices of global agricultural raw materials, but its markets are mainly concentrated in ASEAN, Africa and the Middle East. Due to the requirements of halal certification, the cost pressure caused by the increase in the price of agricultural products is not large. It is recommended to continue to hold. You may make an earn first and buy again until it falls to around $3.

Kay Ho (CE No.: ANV293)

Acer King Capital Hong Kong Limited

Statement: The author is a licensee of the 1st, 4th, and 9th types of licenses of Securities and Futures Commission, SFC. Acer King securities Limited and Acer King Capital Hong Kong Limited are affiliated companies of Hantec Group and were invited to contribute articles in Hantec Group's monthly newsletter. The writing does not represent the position of Hantec Group. As the author does not personally hold the above-mentioned shares, investors should exercise caution when buying or selling relevant securities and investment instruments.