The ongoing situation around Ukraine has captivated headlines and investors alike. While the resolution remains unclear, we can begin to predict how markets would react to possible outcomes.This presentation references actual or potential sanctions, which may prohibit U.S. persons from buying certain securities, making certain investments and/or engaging in other activities in or pertaining to Russia. The content of this presentation is for informational purposes and does not represent Morgan Stanley’s view as to whether or not any of the Persons, instruments or investments discussed are or will become subject to sanctions. Any references in this presentation to entities, debt or equity instruments that may be covered by such sanctions should not be read as recommending or advising as to any investment activities in relation to such entities or instruments. Audience members are solely responsible for ensuring that their investment activities in relation to any sanctioned entities and/or securities are carried out in compliance with applicable sanctions.----- Transcript -----Michael Zezas Welcome to Thoughts on the Market. I'm Michael Zezas Head of U.S. Public Policy Research and Municipal Strategy for Morgan Stanley.Marina Zavolock And I'm Marina Zavalock, Head of Emerging Europe, Middle East, and Africa Equity Strategy at Morgan Stanley.Michael Zezas And on this special edition of the podcast, we'll be discussing ongoing developments around Ukraine and how markets might react to various outcomes. It's Thursday, February 17th at 9:00 a.m. in New York.Marina Zavolock And it's 2:00 p.m. in London.Michael Zezas So, Marina, we've spent a lot of time in recent weeks tracking developments in the ongoing situation around Ukraine, on whose border Russia's amassed a substantial military presence and there are warnings of a potential invasion. This would be no small event, potentially the largest military action in Europe since World War Two, with great risk to many people. Recent news has all sides continuing to express hope for a diplomatic solution, and let's hope that can be achieved. But for this podcast, we want to focus narrowly on the market's impact because this situation has been a key driver of recent moves in many global markets. So, let's keep it simple to start, which markets are most vulnerable to a military confrontation and why?Marina Zavolock So, of course, we see Ukrainian and Russian markets as most directly vulnerable. Ukraine is directly exposed from an economic perspective, and the Ukrainian market has more downside risks due to this direct fundamental exposure and the country's reliance on external financing as well. The risk for Russian markets are more related to sanctions, given the strong economic backdrop. There are various sanctions under discussion aimed firstly at deterring a Russian invasion of Ukraine. Should Russia invade, we would expect the U.S. and Europe to act quickly to impose new sanctions, both to impact Russia’s decision making and ability to sustain any invasion, while at the same time limiting the impact on global commodities and supply chains to the extent possible.Marina Zavolock The situation is, of course, very fluid, as you described. Sanctions have not yet been finalized, but I'll mention three of the material sanctions that are reportedly under discussion. First, SDN list sanctions on a number of Russian banks and possibly other Russian companies. This would mean US persons would be prohibited from dealing with these companies, be it in business transactions or trading of securities. Second, Export controls restricting the export of technology products containing U.S. made components or software to Russia. Third, New sovereign debt sanctions on the secondary market – adding to the primary market sanctions already in place – this could mean exclusion from large fixed income indices in a worst case. Overall, from a Russian stock market perspective, we see the Russian banking sector as p