The global market fallout sparked by escalating tensions in Ukraine is a "short-term phenomenon" that will blow over in a matter of days, said strategists, as Asian markets pared some of their recent losses on Tuesday.
"There has been some volatility in capital markets as a result of the political and military uncertainty in Ukraine, which have, naturally, exacerbated concerns about the country`s fundamental economic weaknesses. However, I fully expect this to be a short-term phenomenon," Nigel Green, founder and chief executive of financial advisory firm deVere Group said.
"I believe that this tumble will be judged by history as a `bump in the road` as markets will recover quickly. I`m not worried that we are about to slump into another global recession as a consequence of the deepening crisis in Ukraine," he added.
Green said as the situation regularizes, in whichever form that might take, investors are likely to classify the Ukraine-Russia stand-off as "a local issue."
Asian markets began to show signs of stability on Tuesday, with Japan`s benchmark Nikkei clawing 0.3 percent higher after Monday` 1.3 percent fall, while Hong Kong`s Hang Seng edged up 0.4 percent following losses of 1.5 percent in the previous day.
Global markets were rattled on Monday following Russia`s military advance into Ukraine that prompted world leaders to call for sanctions on Moscow, including measures targeting banks and officials. President Obama said the US was examining economic and diplomatic steps to isolate Moscow, and he called on Congress to expedite assistance for Ukraine.
Uwe Parpart, head of research at Reorient Group agreed investor panic over escalating tensions in Ukraine would soon come to pass. While political rhetoric has been heating up, the risk of military conformation with the West is low and the crisis is likely to be politically resolved, he said.
"The rhetoric out of London and Washington really is just rhetoric, they have no capability or wherewithal to do anything about it. Additionally, the likelihood of war breaking out between two armies [Russia and Ukraine] that not so long ago was the same army is not very large," Parpart said.
"This will be politically settled, and may take a while before stability returns, but I don`t see any significant longer-term impact on the global financial situation," he said.
Another reason Ukraine will have a fleeting impact on global markets is that the country accounts for just 0.2 percent of global gross domestic product (GDP), said strategists.
"Let`s keep things in perspective. Ukraine had a 2012 GDP of $176 billion. Its economy is smaller than Greece, Portugal, or Ireland. It is smaller than the Czech Republic, Algeria, or Peru. So the direct impact on the global economy, even if Ukraine descended into civil war, would be minimal," said Patrick Chovanec, managing director at Silvercrest Asset Management.
Parpart added even if Ukraine were to default on its debt, it would unlikely have a significant impact on global markets.
"Under the circumstances, that won`t be a huge surprise. You`re not talking about a very large economy," he said.
Credit ratings agency Standard and Poor`s last week lowered Ukraine`s long-term rating from `CCC ` to `CCC` saying the political crisis had put the country`s ability to service its debt at risk and raised uncertainty over Russia providing promised aid.
-By CNBC`s Ansuya Harjani. Follow her on Twitter @Ansuya_H
Copyright 2011 cnbc.com
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