Investments and finances: fears and hopes of May
May, 2011
Cyprus turns into the international business center
The Government of Cyprus looks for the strategic location of the island at the junction of three continents, and intends to turn the country into an international, financial, modern and business center, as Antonis Pashalidis, the Minister for Trade, Industry and Tourism of Cyprus announced in May.
Speaking in Nicosia at the annual economic congress, the Minister of Economic Affairs of Cyprus stressed that in the year 2011 were carried out and would be hold a series of seminars and conferences in Europe, the Middle East, Asia and the United States with the purpose to promote Cyprus as an international business center and a center that provides services for development of business cooperation.
As the Minister of Economic Affairs stressed, this year were scheduled over 20 such seminars in 14 countries at that some of them will be attended by President of the Republic of Cyprus, Minister of Trade, Industry and Tourism, as well as by several well-known Cypriot businessmen.
As minister said, such activity is yielding positive results, and it is reflected in the increase of the number of registered international companies in Cyprus, as well as in the growth of foreign depositories and investments in the Cyprus economy.
Dark days are expecting the U.S. currency
Goldman Sachs analysts downgraded the forecast for the dollar and expect it to fall against the euro to $ 1.55 during a year.
The American currency is threatened by the «complete disaster » in the long run, as experts believe and point out that the U.S. economy lags behind the rate of growth of other countries.
According to the experts, the dollar will fall to $ 1.45 against the euro over three months (the previous forecast estimated this figure at $ 1,4).
Over the next six months, the U.S. currency may fall in price to $ 1,5, and within a year — to $ 1.55, as analysts predict.
«In order to stabilize the dollar, investors need to be confident in the presence of the arguments for additional long-term investments in the U.S. — said in a statement Goldman. - Given the high unemployment rate in the U.S., as well as very remote prospects for fiscal consolidation and the continued weakness in the housing market, the growth forecast for the U.S. economy seems less convincing in comparison to many other regions and countries.»
«The dollar is likely to become even cheaper — said a senior currency analyst at Goldman Sachs Group, Thomas Stolper. — The outlook for economic growth in the U.S. over the next few months does not look particularly good.»
According to him, the weakening American economy was temporary in the first quarter of this year and reflected a decline in consumer spending against the backdrop of rising of energy prices and food.
Meanwhile, another analyst Jim Rogers believes that the «a complete disaster» is waiting for a dollar. This will be promoted by the U.S. position as the world’s largest debtor and the policies pursued by the head of Federal Reserve Service, Ben Bernanke.
«The situation is getting worse and I predict serious problems in the U.S. Dr. Bernanke does not understand economics and finances, he only knows how to print money, but we can not afford to increase the amount of money four times during the next recession»- quoted the Bloomberg agency the investor’s statement made ??at a conference in Edinburgh. U.S. national debt now stands at 93% of GDP, compared with 60% before the financial crisis. «I expect some shocks for the currency this fall and in 2013» — Jim Rogers said. In his view, the yuan is the «safe» currency, although its acquisition is difficult for investors.
Ministry of Finance will raise the prices on alcohol, tobacco and petrol
Ministry of Finance has developed amendments to the Tax Code on indexation of excise taxes on alcohol, tobacco and petrol in 2012, 2014. The Ministry of Finance proposes to establish the rate of excise duty on alcohol products with a volume ratio of alcohol over 9% from 1 January of 2012 at a rate of 254 rubles per liter, with a consequent increase in each period of 6 months prior to the rate of 500 rubles per liter from January 1, 2014.
Thus, the Ministry of Finance proposes to increase the excise rates on hard liquor 25-30% per year. By the bill from January 1, 2012 is provided the increase of excise duties on cigarettes up to 360 rubles for a thousand pieces, plus 7.5% of estimated cost. It is further proposed to increase the excise tax to 800 rubles. + 8,5% in 2014. It is planned to increase the excise taxes on gasoline in 2012, 2013 by the previously scheduled rate.And by the year 2014, the excise tax on gasoline will be about 10,000 rubles per ton.
Germans are disappointed in the Euro
The Germans are losing confidence in the European currency. According to a survey, more than half (58%) of Germans are skeptical about the stability of the euro. At the same during the past six months, the number of «skeptics» increased by 4%. Only 5% of the Germans experience big trust to the European currency, while 37% are likely just to trust to th common European currency. Almost half of Germans (49%) express concern about the stability of the euro. About 48% of Germans support the European financial aid to Greece. Approximately 41% believe that this measure is wrong.
Billions are flowing from Russia
As it was estimated by economists, migrant workers are transferring from Russia to their homes about 18 billion dollars. The money supply increased by half for five years. According to the experts, the official figures represent only one-fifth of the real numbers.
Russia remains the largest employer and source of state budget for a number of former Soviet republics such as Tajikistan, Moldova, Kyrgyzstan, etc. 18 billion dollars — are only the official figures of remittances, not taking into account the export of cash. In 2006, the migrant workers transferred from Russia $ 13 billion. There is no reason to believe that with all the sums earned were paid taxes. However, as the experts note, the foreign labor gives a good profit to Russia — in the regions where the foreign work, the economic growth averaged 4%, and the cost of building of roads and buildings would be higher in two or three without the migrants. Many of the migrants enter without a visa.
According to the experts, the number of illegal migrant workers in Russia may reach ten million people, though, as it was calculated by the Federal Migration Service, this number wouldn’t reach no more than four million. As for other types of capital outflow, it is estimated by the Bank of Russia, the net capital outflow from Russia in the last month amounted to 7.8 billion dollars. This means that, contrary to forecasts, the outflow of capital from the country last month sped up. According to the Central Bank, net capital outflows in the first quarter totaled 21.3 billion dollars (compared with 14.7 billion during the same period last year).
According to the Central Bank chairman Sergei Ignatiev, the reason is in not a very good investment climate in Russia. He said that the capital of Russia, is perhaps leaving because some investors do not believe in the strengthening of the ruble.
Significant outflow of capital is held for six months, in the fourth quarter of 2010 it amounted to 21.5 billion dollars, and in general for the 2010 capital outflows reached 35.3 billion dollars. In subsequent years, according to forecasts of the Russian Ministry of Finance will go to the inflow of capital of approximately $ 10 billion per year, which will reach 30 billion in 2014.
But the capital outflow continues. In addition, increased the recent efforts to withdraw of foreign investors who invest money in Russia. According to the recent figures, for the week from 12 to 18 of May outflows from funds investing in shares of the Russian Federation and CIS countries reached a record 353 million dollars (a week earlier this outflow amounted to $ 71 million).
China is getting rid of the securities of USA
In May, China, the fifth straight month, is reducing his stake of U.S. securities, but still leads the list of the largest lenders of Washington. As it was reported by the U.S. Treasury, China at the end of the first quarter owned the bonds of the U.S. government amounting to 1.14 trillion dollars by cutting its stake from the previous month to 9.2 billion dollars. A large package of U.S. securities holds Tokyo. Their total cost is around 908 billion dollars. Considerable package of U.S. bonds is owned by London-up to 325.2 billion dollars. In general, foreign nations had at the hands of American securities to 4.48 trillion dollars. Russia remained on the same eighth position, albeit reduced investments in U.S. Treasury securities at 2.7 billion dollars compared to February — up to 127.8 billion dollars.
China increases its investments
China plans to increase investments in Brazil. This was reported by Minister of Commerce, that was in May with a visit to this South American country. He noted that we are talking about agriculture, infrastructure and biotechnology. China invests big sums in the Brazilian economy. Beijing has spent $ 17 billion in direct investment for this purpose last year.
Chinese investment are embedded in Europe. In particular, according to the Asian mass media, the flow of investment in London real estate both in private and in business has recently increased. And the leaders in this process are millionaires from Asia, the Middle East and Africa. For the first time in 2013 Asia will surpass USA with its billion-dollar investment in London real estate.
Nowadays only in China today is leaving 477,000 people who are willing to invest in real estate over $ 1 million. But apart from China there are such people in India and Indonesia. According to testimony of Swiss bankers in the next few years the Asian millionaires would significantly increase its European savings, that will increase to $ 16 billion by the year 2015. And a significant portion of this amount will come from the China, where will be no less than a million rich people. By this time in India will be 240 thousand millionaires, in Korea, 175 000. The Chinese could became the world leaders in buying gold, in particular, in purchasing of gold bullion, coins and jewelry.
During the first quarter of this year, they bought almost 91 tonne of gold, overcoming India on this indicator.Chinese, are insuring their assets against inflation, experts say. This figure exceeds the results of the previous quarter by 55%, and the results of last year -more than twice. Now China accounts for a quarter of the world market of precious metals, the share of India — 23%.
Eurogroups give Greece new Aid
Eurogroup can provide a new aid to Greece. This opinion expressed the chairman of the Eurogroop, Prime Minister of Luxembourg Jean-Claude Juncker in May after a meeting of the Eurogroup. Greece became the first country in the euro zone, when for its salvation from a default Eurogroup and the International Monetary Fund last year created a special program of assistance with a volume of 110 billion euros. Several members of the Eurogroup are increasing the pressure on Greece. They want that Athens accelerated the process of privatization, but the Greek authorities are afraid of social protest. However, if the country fails to meet the requirements of the Eurogroup, the program of the aid will be reconsidered.
The authorities of Byelorussia devaluated the national currency
The national bank of Byelorussia devaluated the national currency for more than 50 %. According to the currency rate, in May US dollar will be equivalent to 4930 Byelorussian rubles, euro — to 6914.82, Russian ruble — to 173.95 Byelorussian rubles. Before that dollar was equivalent to 3155 Byelorussian rubles, euro — to 4516.38, Russian ruble — to 113.02 Byelorussian rubles.
On the 19th of May the prime-minister of the republic declared that in the short run Byelorussia will reach the real rate of Byelorussian ruble. In March in Byelorussia a deficit of foreign currency occurred, it was accompanied by feverish demand caused by concerns of devaluation. Authorities had to spend a significant part of gold and forex reserves to liquidate the demand for foreign currency and also to impose restrictions on exchange transactions. At currency exchange offices emerged queues, and the multiplicity of rates of ruble appeared at the market. The interesting fact is that after the devaluation of Byelorussian ruble and rates jump, there is still no foreign currency in currency exchange offices of Byelorussian banks. Currency exchange offices established practically the same rates — about 5 thousand Byelorussian rubles for dollar, about 7 thousands for euro, and about 175 Byelorussian rubles for Russian ruble. According to the instruction of the national bank exchange and interbank rates cannot overtop the official rate for more than 2 %.
The flow-in of foreign investments to Ukraine increases
Net growth of direct foreign investments to Ukraine in the 1st quarter of 2011 amounted to 829,3 million dollars, that is 8.4 times higher than the results for the same period in 2010. Such data is taken from Ukrainian Federal State Statistics Service. For the period from January to March this year foreign investors injected into the economy of Ukraine 925.7 million dollars of direct investments, that is 29.1% bigger than the result for the same period in 2010. Alongside with that they ejected 260.7 million — that is 12% less than in the 1st quarter of 2010. Total amount of direct investments to Ukraine by the 1st of April reached 45.602 billion dollars that is 1.3% higher than at the beginning of the year. As per a citizen it would come to 998.1 dollar. In 2010 foreign investors injected in the Ukrainian economy 5.986 billion dollars of direct investments (plus 6.2% to the result of 2009).
Yuan can become convertible
Bloomberg clients, which are investors, traders and analysts, to be more precise 57% out of 1263 pollees, declared that Yuan can become convertible in the course of the next 5 years. However 19% of responders believe that at that time it will join US dollar, yen and euro as reserve currency. Another 31% think that yuan will become a reserved currency in the next decade. And only 15 % doubt whether the Chinese currency will ever be able to compete with dollar, euro and yen. More than half of the pollees (51%) are sure that the authorities of the People’s Republic of China led by Hu Jintao will make everything they can to support the investors.
Transferring of yuan into a convertible currency will be one of the biggest political changes since 30 years, when China settled down to a course of market economy. This step will let fund managers invest into the second world’s biggest economy much more freely. The convertibility will let unblock personal savings at the amount of 75.6 trillion yuan (11.6 trillion dollars), that is equivalent to 80% of USA GDP, remarks Bloomberg.
For the last years Beijing has tried hard to increase the value of the national currency. Thus in 2009-2010 China made agreements on exchange swap with Argentina, Indonesia, South Korea, Malaysia, Byelorussia, Iceland, Singapore. What is more, China is trying to expand the offshore market of yuan in Hong Kong. In 2009 Beijing gave the go-ahead to exporters and importers to use yuan for selling and buying goods abroad. Some non-financial companies, including McDonald’s, received from Chinese authorities a permit to issue bonds, nominated in yuan. Yuan can quickly become a reserved currency owing to several reasons. First of all, China has vast trade connections and some of its partners started to use yuan. Second of all, Asian trade partners hold the main part of world currency reserves and they are ready to include yuan in them. Also world investors are very much concerned about the future of euro and dollar, say economists.
All mentioned reasons gave start to the decision of the authorities of Midland Consult to open its own representative office in Hong Kong. Nowadays this representative office as a part of international holding company Midland, successfully gains momentum.
European bank for Reconstruction and Development increased the index of average forecast for emerging-market economies of Europe and Central Asia in May from 4.2 % to 4.6 %. Moreover, its experts warned that the risk for recovery is represented by a debt crisis of Eurozone and rising prices for raw materials. Next year, the bank predicts economic growth of the region by 4.4%.
Hong Kong leaving everyone behind in millionaire density index
In ten years the number of millionaires will grow from the current 37.9 million people up to 65.5 million, and their wealth will increase from 92 trillion dollars to 202 trillion, say world leading consulting companies in their study, dedicated to welfare of millionaires in 25 biggest economies.
As stated in the study, the rapid growth of wealth of the richest citizens will occur in developing countries. The leader among them will become India: the wealth of Indian millionaires will grow by 408% to 2.95 trillion dollars. However, out of developing countries only China can enter the top ten world leaders in private capital amount. According to forecasts, by 2015, Chinese millionaires will accumulate 3.6 trillion, and in ten years their welfare will increase by 392% to 8.24 trillion, with the number of millionaires equal to 2.5 million people. In the top 10 countries in millionaire density can enter South Korea, which now holds the 15th position in the rating.
High growth rates of well-being of rich citizens, as the study says, will also be observed in Brazil and Russia. For ten years the welfare of Brazilian millionaires will grow by 258% to 2.04 trillion dollars, and Russian — by 242% to 2.7 trillion. But, in millionaire density, Russia and Brazil will occupy the 13th and the 15th positions respectively. However, despite the growth of developing economies, over the next decade, the richest people will still be concentrated in the U.S. and Europe. By 2020, the U.S. will account for 43% of the world’s private wealth, or 87 trillion dollars, which is 48 trillion bigger than now. In addition, the number of millionaires here will grow to 20.6 million people. Today in the U.S., there are 10.5 million people, with 1 million dollars or more. According to forecasts, the second country after the United States in millionaire density, and also in their welfare will be Japan: it is expected that by 2020 the number of Japanese millionaires grow up to 8.6 million, and their welfare — up to 19.02 trillion. Germany will close this leader’s triad. Ten years later, there will be 5.8 million millionaires, whose total welfare will be equal to 10.94 trillion. Germany currently yields to Italy (5,71 trillion) and Britain (5.69 trillion), although in millionaire density it occupies the third place. With regard to population density of millionaires, by 2020 first place in the world will hold Hong Kong. Ten years later 47% of the population will be millionaires. Therefore Hong Kong is followed by Singapore (37%).
Lithuania: raise salaries, reduce officials
In May in Lithuanian Seim, the raising of the minimum wage up to one thousand litas, that is about 290 euros, was discussed. Sajudis liberals faction, which is included in the governing coalition, has publicly accepted the need to raise the minimum wage, however, it made a proposal to the Parliament to cut state officials by 5-10%. This decline, according to politicians, will save public funds that can and will be spent on raising the «minimal salary». «The minimum wage can be increased only if we find what it can be compensated by. We believe that it’s time to reduce the number of civil servants by 5-10%. This is a logical decision, since, according to the latest census, the population of Lithuania decreased significantly, and the number of taxpayers, as we expect decreased even more. The State cannot endure such a burden, »- said in May the member of the Liberal Kestutis Glaveckas, who is also chairman of the parliamentary committee on budget and finance. According to the latest population census in Lithuania permanently reside not more than 3 million people. For 20 years the population of Lithuania decreased by more than 700 thousand people.
Summit G-8: policy over the economy
In Deauville, on the north-west of France, at the end of May, the G-8 Summit took place. Leaders and heads of governments of the United States, Britain, France, Germany, Italy, Canada, Japan and Russia took part in it. According to media reports, during the Summit in Deauville, foreign policy issues were discussed to a greater extent than economic. Participants in the G8 know that by supporting the revolution in Arab countries and sending aid to Africa to promote democracy, they thereby increase the pressure on the ruling regimes in Syria and Libya. Issues of providing financial assistance to Egypt and Tunisia were also discussed. Representatives of non-governmental organization that studies the activities of the Group of Eight, noted that today, politicians would like to know how the provided financial assistance is being used. That is why in Deauville, leaders of several African countries were invited. On the summit’s agenda were such issues as — economic crisis, appointment of a new head of the International Monetary Fund, the situation in Japan 2 months after the devastating earthquake and the accident at the atomic power station. The issue of further assistance to Arab countries in post-revolutionary period remains of high priority.
Midland Consult
