London, Feb 19 (Reuters) - According to an investment bank JPMorgan, a ceasefire or peace deal to resolve the conflict between Ukraine and Russia would have a positive impact on the currencies of nearby emerging economies.
The bank noted that much of this potential boost might already be taken into account in the markets, as stated in a research note.
JPMorgan maintained a neutral or "market weight" standpoint regarding Ukraine's government bonds until further clarity emerges on the specifics of a peace agreement. The note underlined the uncertainty, mentioning, "Even with a ceasefire seemingly imminent, the prospect of a sustainable peace deal acceptable to all parties remains uncertain."
The bank estimated that sovereign debt markets presently reflect a roughly 70% chance of a lasting peace deal.
In an optimistic scenario, Ukrainian bonds could experience the most significant positive effects, while its GDP warrants, a bond-like instrument tied to the country's economic growth, might have a more restrained upside.
The recent unexpected move by U.S. President Donald Trump to engage in direct discussions with Russia to end the lengthy conflict has unsettled Ukraine and European leaders, triggering speculation on the ceasefire's mechanics.
However, Trump's subsequent remarks have not alleviated tensions, with his criticism of Ukrainian President Volodymyr Zelenskiy on Wednesday. JPMorgan underscored that Hungary and Turkey's currencies could benefit the most if a ceasefire agreement lowers European gas prices, facilitating increased Russian gas purchases.
Hungary, the most gas-reliant economy in the region, faces the highest gas import expenses, equivalent to 4.9% of its GDP in 2022 and 1.3% in 2024.
The outlook for Ukraine's economy includes post-war reconstruction efforts, with yearly requirements potentially surpassing $35 billion and reaching up to $50 billion.
Despite these opportunities, JPMorgan warned of the risk of Russia reigniting hostilities, which could dampen enthusiasm for major reconstruction endeavors.