The Wall Street Journal reports, "two historic event in two significant emerging markets and investors … yawn. There hasn’t been much reaction in markets to the news that Crimeans voted overwhelmingly to secede from Ukraine and rejoin Russia – despite Western nations’ complaints that the referendum was illegal. Meanwhile, China widened the trading band for the yuan, to which investors responded by driving the China currency lower but without doing anything of note in other markets.
There is perhaps relief among investors that the Crimean vote wasn’t closer – even though it almost certainly translates into annexation by Russia. It means there is little the West can do about it and so diminishes the prospect of a wider regional conflict. And in China’s case, the government had done such a solid job subtly signalling the policy change by moving to drive the yuan lower in preparation for it that the market dutifully took the message about what to do with it once the band was wider. It will be interesting to see if downward pressure now becomes a bigger problem for Chinese authorities than the upward pressure that was entrenched in the yuan’s trading pattern for so long. (MC)
UKRAINE: More than 96% of Crimeans voted to break away from Ukraine and rejoin Russia. The European Union and the U.S. called the referendum illegal and cautioned Russia against annexing Crimea. Meanwhile, there are signs that ethnically-Russian eastern Ukraine might be looking to break away as well.
There is little anyone can do to stop Russia from annexing Crimea. Such a measure would be popular both in Russia and in Crimea, and whatever the western leaders say, they are unlikely to be very forceful in preventing it. There is little, if any, upside, while the risks would be of a serious European crisis if anything more than cosmetic sanctions– like visa restrictions on a handful of Russian plutocrats – are imposed.
