With any conflict, there are multiple and complex reasons for how and why they start, but it is without doubt that this has the ability to cause disruption to the global markets. At the heart of the current Ukraine conflict is the desire by a large percentage of the population to be more closely integrated with Europe, and this sentiment is evident across social media.
Started with the Europmaidan protests
In November 2013, the Euromaidan protests started due to a Facebook post by TV journalist Mustafa Nayeam. He called people to go to Maidan Square. Social media was used to organise protests and exchange information. Due to the authorities controlling the majority of media in the Ukraine, social media was the place to learn the truth about President Yanukovych. In just six months, Ukranian Twitter users went from 100,000 to about a million.
￼The social and political context
Envisioning a much-needed kickstart to an economy that has been floundering for some time, public anger against the Yanukovych government’s ties to Russia, and perceived political interference by their neighbour and former ruler, erupted into widespread protests late last year, which prompted a violent crackdown coinciding with the Sochi Olympics. As the crisis deepened Yanukovych fled, leaving a disparate coalition of opposition leaders and protesters to form an interim government, and a tense stand-off between Russia, the EU and NATO which has recently spilled over into a violent occupation of the Crimea.
The impact on the world’s stock markets
Political instability is always a source of market volatility. When Russian troops moved into the Crimea the Moscow Stock Exchange dropped a tenth of its value in just one day, and it plummeted around $60 billion over one weekend in March, more than the cost of the Sochi Games. The FTSE 100 has also been affected, though not so dramatically. Western governments have imposed economic sanctions that affect prominent Russian businessmen and politicians, and with both the Ukraine and Europe’s reliance on imports of Russian gas, the situation could still get a lot worse.
Switched-on traders and investors will have been alerted very early on by the flurry of activity on social media. Protesters were rallied to the Independence Square by Twitter, and they were joined soon after by European politicians lending support and condemning Russian interference. Modern protests are characterised by a close reliance on social media, and the Euromaidan movement shared news, imagery and video broadcasts throughout the unrest.
For investors, in instability there is always opportunity – a good example is Greece, where some investors are glowing after spotting potential in the country’s economic ruins and bet on government bonds which are now seeing a historic rise. The Ukrainian crisis is no exception – there has been continuous debate on what the conflict means for both local and global economies, and many commentators speculated that this was a good time for risk-takers to take a position.
￼The Russian economy experienced a noticeable deterioration, leading many to suggest that bargains were available – with the country rich in natural resources such as gas and oil, which much of Europe is eying warily. While Ukraine’s soil makes it a big agricultural producer. Both commodities are perennially seen as attractive investments and could potentially have spiked in value due to the disruption. Yet some analysts point to Russia’s history of taking control over key assets during periods of political turmoil, warning that the risks were too great.
Role of social media
In unstable situations like this, it’s unsurprising that analysis of social sentiment is seen as a good way to understand issues surrounding an event, providing a leading point of reference when analysing future decisions.
There have been millions of tweets sent from all sides – politicians, protesters, commentators and inhabitants of the Crimea witnessing Russian troops move into their neighbourhoods. Rampant speculation about what will happen next is everywhere, so the ability to analyse the sentiment using keywords including occupation, independence, war and intervention can help bring clarity from within the noise.
However, the flaws in this form of analysis are all too evident in this instance – current technology has difficulty comprehending the intricacies of human language – for example when a user is expressing positive sentiment with ironic or sarcastic intent, or when negative sentiment is overblown for dramatic effect. This can skew the results, meaning investors are wise to treat any data derived from sentiment analysis with caution. That’s not to say it shouldn’t play a role of course – the volumes of information being passed around social platforms on an hourly basis mean there is certain to be valuable insight to be gleaned.
How data analysis can help
These kind of guessing games have high stakes and there’s no way as yet of knowing which way the cards will fall, so investors are sensible to utilise all the tools at their disposal, including sentiment analysis to balance risk. Trend analysis tools and algorithms can be specifically designed to pick out patterns as well as peaks and troughs, leading to increasingly more accurate early warning of major shifts in local, national or international situations. The tools that provide the ability to connect the dots and associate relevant data streams across a variety of channels will quickly become invaluable when predicting future events.