DAX at new all-time high –

The US Federal Reserve is raising hopes of an interest rate cut in September and the DAX has already jumped to a new all-time high. Shares from Eastern Europe clearly outperformed again, with the Budapest Stock Exchange and the Kazakhstan Stock Exchange in particular rising sharply recently. In the USA, however, Republic First Bankcorp, a small regional bank from Philadelphia, also went bankrupt, which did not worry investors but shows how vulnerable the US banking market still is despite superficially good economic data. Banks from Eastern Europe with higher equity ratios and returns appear to be much more crisis-resistant.

Risk-averse investors can buy shares from Kazakhstan directly online via the broker Freedom Finance (Freedom Broker) from Cyprus if they open an account there first, which is easy to do at the following link:

https://freedom24.com/invite_from/2952896 . Although Russian ADRs or original shares are still not tradable due to the sanctions, new opportunities may now arise again with some Russian ADRs/GDRs, which you can now buy over the counter on the OTC market at discount prices via the brokers Zerich Securities Ltd or Freedom Finance from Cyprus. However, you also need to open an account beforehand, which is easy to do at this link: https://trade.mind-money.eu

Andreas Männicke also gives his assessment of the new opportunities in Eastern Europe in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 231 at www.YouTube.com.

First bank failure this year without USA without impact on the stock markets

FED Chairman Gerome Powell recently hinted that the first interest rate cut of 0.25 basis points could take place in September, to which the stock markets initially reacted with leaps of joy. However, the banking problems at some US regional banks were completely ignored, as were the increasing geopolitical risks. The bankruptcy of the small US regional bank Republic First Bancorp from Philadelphia has had no impact to date. It was the first bank failure in the USA this year. Although the damage to the Deposit Insurance Fund was not too great at ‘only’ USD 667 million, it demonstrates the fragility of the US banking sector. First Silicon Valley Bank, then Signature Bank, First Republic and now Republic First. Are these almost unnoticed foreshadowings of another banking crisis in the US in the summer/autumn?

Record US debt could be a burden in the future

It is important to bear in mind that both US corporate debt and US government debt are at an all-time high and that the interest burden has become ever greater as interest rates have risen. The US budget deficit is likely to remain at 7 per cent this year, while Germany is being denied new debt due to the debt brake. However, this in turn is bringing more liquidity to the US stock market, which is still supporting the US equity market, as are the mega share buyback programmes. However, US equities are now relatively expensive, especially if interest rates rise.

Will a US commercial property crisis turn into a new banking crisis at US regional banks?

The yield on 10-year US government bonds recently rose again to 4.7 per cent and yet the stock markets only reacted temporarily in April with a slight correction of 5 per cent, although the DAX has already more than made up for the price losses in May. Long-dated US government bonds have lost 11 per cent in value since the beginning of the year, which is now leading to high book losses at US regional banks, which predominantly invest in US government bonds. US mortgage interest rates have already risen again to almost 7 per cent, which is now affecting all those who are either building new homes in the US or have to roll over old loans. There are still many vacancies in US commercial property. The property crisis in China has not yet been fully overcome. Will there be a new property crisis in the USA this year, leading to a new banking and financial crisis in the USA? Banks from Eastern Europe with higher equity ratios and returns on equity appear to be much more crisis-resistant. The CECE Bank Index is already up 16 per cent since the beginning of the year. The Bank of Georgia from Georgia, for example, has risen from all-time high to all-time high and remains inexpensive.

Will the next interest rate cut in the USA be more of a warning signal

In the year of the US presidential elections, US President Joe Biden and Federal Reserve Chairman Powell do not want anything to go wrong. However, it is also possible that the Fed will feel compelled to cut interest rates in September. On the one hand, because the US economy will then weaken significantly in the summer and, on the other, because otherwise there is a risk of further bank failures. However, major investors on the world’s stock markets do not yet see any major risks. The increasing geopolitical dangers with the ongoing wars in Ukraine and Israel are also not worrying investors in any way.

Putin continues to threaten nuclear war if French ground troops are deployed in Ukraine

Putin has now ordered a manoeuvre with tactical nuclear weapons near the Ukrainian border, which raises fears for the future, as we all know how the last manoeuvre on the Ukrainian border turned out. If French President Macron really wants to send ground troops from France and Poland to Ukraine, Putin is threatening to use tactical nuclear weapons in Ukraine. So far, however, the world’s stock markets have been unimpressed by the dramatic escalation of events. The Russians are now advancing further in Ukraine and Ukraine now has its back to the wall. At least gold, as a ‘pre-crisis indicator’, has been able to hold up well near the new all-time high of 2363 US dollars/ounce. China in particular is now buying gold heavily, while the USA has not yet jumped on the gold bandwagon.

DAX reaches new all-time high and outperforms US equity indices for the first time

Last week, the DAX rose by over 4 per cent to a new all-time high of 18,845 index points, which represents a price gain of almost 12 per cent since the beginning of the year. It thus rose even more than the S&P Index in the USA, which was up 10 per cent, and even more than the NASDAQ Index, which was up 11 per cent. The US reporting season has been largely positive so far.

Shares from Eastern Europe, especially Hungary and Kazakhstan, as outperformers

‘Violets bloom in secret’: However, some stock exchanges from Eastern Europe performed even better, such as the Budapest Stock Exchange with a gain of 13 per cent in euros and even 14 per cent in forints on the HTX index. The SETX index for shares from South Eastern Europe also achieved a plus of 12 per cent, with shares from Serbia even rising by 16 per cent. The share indices from Romania and Bulgaria have also each risen by 12 per cent since the beginning of the year.

Bank stocks in Eastern Europe performed particularly well. The CECE banking index has already risen by 16 per cent since the beginning of the year. However, shares from Kazakhstan performed even better, with the KTX Index up 20 per cent and the KTX Local Index (with 7 shares) even 32 per cent. Here, too, the two major banks Kaspi.kz and Halyk Bank pleased investors with very good quarterly results, rising share prices and high dividend yields.

Freedom Broker offers market access to Kazakhstan

You can also buy shares from Kazakhstan directly online via the broker Freedom Finance from Cyprus, which also presented itself at the Invest trade fair and attracted a lot of interest, which has the advantage that you can quickly receive the sometimes very high dividends in your securities account. Halyk Bank, for example, has a dividend yield of 16% and a return on equity of 34%. At Freedom Broker you also receive interest on your savings account in USD of over 8% and in euros of over 6%. You can easily open an account online at the following link: https://freedom24.com/invite_from/2952896 If you need advice on exchanging Russian ADRs for original shares, Freedom Broker, which also has a branch in Berlin, is the best place to go.

However, investors can still buy Russian ADRs at discount prices in the OTC market via Freedom Broker. Something similar is also possible via the broker Zerich Securities Ltd from Cyprus if you open an account via the following link: https://trade.mind-money.eu A list of tradable Russian ADR is published in the stock market letter EAST STOCK TRENDS (www.eaststock.de). Both brokers also offer participation in lucrative IPOs on Wall Street as well as high returns on overnight and fixed-term deposits.

Inform first, then invest

Find out more now about the background and development of the Ukraine/Russia crisis as well as the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltic states, south-eastern Europe and the CIS republics (Kazakhstan, Georgia), with the respective share indices all up in 2023. In 2023, 12 stock exchanges from Eastern Europe were among the 30 best-performing stock markets in the world, with 5 clearly outperforming the DAX. In 2024, 10 stock exchanges from Eastern Europe outperformed again with a strong gain. It is therefore still worth looking beyond the horizon to Eastern Europe.

Order a trial subscription now (3 issues by e-mail for just €15) to the monthly stock market letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as lots of background information and new investment suggestions such as the ‘Share of the Month’ and lucrative certificates at www.eaststock.de, under Stock Market Letter. The last EST was published on 23 April 2024.

TV/radio notes: On 5 February 2024, Andreas Männicke was interviewed by Carola Ferstl on Money Talk about gold, commodities and the new opportunities in Eastern Europe. You can download all radio and TV interviews in the video archive at www.eaststock.de, including the last video in EastStockTV, episode 231. By the way: have you already subscribed to the EastStockTV YouTube channel?

If you are interested in new EastStock seminars ‘Go East’ in Frankfurt/m or other cities, please contact the EST editorial team (www.eaststock.de )

You can also subscribe to Andreas Männicke’s free newsletter with the latest news on the world and eastern stock markets at www.eaststock.de .