The dangerous balancing act of the central banks
– Invest in Kazakhstan now –
As expected, the Fed and the ECB raised interest rates again at the beginning of May by 0.25 basis points each, to 5 per cent in the USA and 3.75 per cent in Europe. Inflation rates are still too high in each case and are declining only slowly, especially in Europe. In the USA, the inflation rate fell by one percentage point to 5 per cent in March, but in the EU it remained at 8.3 per cent in March. The Central Eastern European countries have much higher inflation rates than the EU average, with Hungary at the top of the list at 25 per cent.
In principle, the central banks should continue to raise interest rates to bring inflation down. Wenn sie den Bogen aber überspannen, besteht die Gefahr von Verwerfungen am Finanzmarkt und/oder einer Rezession. Die Anleger an den Weltbörsen scheinen aber wenig beindruckt zu sein und setzen wohl darauf, dass es im Sommer zu einer Zinserhöhungspause kommt. Die meisten Indices stiegen am Freitag kräftig – der DAX sogar fast ein neues Jahres-Hoch von fast 16.000 Indexpunkten. But the Eastern European stock exchanges also made strong gains.
A good alternative for shares from Russia are now shares from Kazakhstan. Western investors can now invest directly in Kazakhstan via Freedom Broker if they open an account beforehand, which is easy to do at the following link: https://freedom24.com/invite_from/2952896
Andreas Männicke also gives his assessments of the new opportunities in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 210 at www.YouTube.com.
Bankruptcy of First Republic Bank had no consequences for the time being
The central banks continue to try to curb the still far too high inflation rates by raising interest rates. But they also run the risk of overshooting the mark and causing a new global financial and banking crisis 2.0. In recent weeks, the bankrupt First Republic Bank had to be taken over by JP Morgan Chase. The FED pumped another 90 billion into the market to avoid a conflagration. This is now the third bankruptcy of a medium-sized bank in the USA after Silicon Valley Bank and Signature Bank, which went bankrupt and were taken over due to deficiencies in the bond sector in combination with a strong withdrawal of deposits.
First, however, the Deposit Insurance Fund of the USA FDIV will become trustee of First Republic Bank. In Q1 2023, $100 billion in deposits were withdrawn from California-based First Republic Bank. The bank focused on wealthy customers. Therefore, the USD 30 billion inflow of money from the concerted action of the big banks also fizzled out. The acquisition involved $173 billion in loans, $30 billion in securities and $92 billion in deposits.
Is the USA going bankrupt?
But this does not mean that the danger has been averted. All in all, the banking sector’s deficits amount to USD 6 to 7 trillion in the USA and USD 16 trillion globally. USD in the USA and USD 16 trillion globally. USD GLOBALLY. This means that the world is now sitting on a huge powder keg that could explode at any time. Moreover, the mountain of debt of states and companies has never been as large as it is now. The debt ceiling must be raised in the USA by 1 June 2023, otherwise the state will no longer be allowed to make disbursements. It must send civil servants home. The debt ceiling of 31.8 tril. US dollars has already been reached, but now there is a grace period until 1 June, when the US Congress must raise the debt ceiling. If the Republicans get in the way here, there will be a technical, temporary default. This game is repeated every year in the US, but it has never led to a national bankruptcy, but it has temporarily caused a great deal of excitement.
Is a digital currency on the way?
Now digital currencies are to be introduced soon, increasing the control of central banks. The first trial run by the ECB will take place as early as this autumn. Direct and indirect expropriation processes are to be expected, especially in the real estate sector, whereby the Green Party will soon make real estate increasingly worthless due to an excessive climate change policy.
Germany increasingly in danger as an industrial location
Germany as an industrial location is increasingly in danger of losing its competitive strength due to excessively high energy prices. The electricity price brake planned by Economics Minister Habeck will not change this. It is wrong to blame everything on the Ukraine war. Most of the problems are home-made. Many companies will therefore soon (have to) migrate abroad. Germany is doing away with itself because of the Greens. There are also efforts by the EU and the ECB to abolish cash or at least to restrict it considerably. The central banks themselves bought more gold last year than they have in a long time. Both gold and cryptocurrencies have benefited from the uncertainties on the global financial markets since the beginning of the year.
Banking and financial crisis 2.0 ante portas
The enormous gap in the bond sector does not appear in the banks’ balance sheets, however, because the bonds can be accounted for at the purchase price. But if many investors now get the idea of withdrawing large volumes of money, there will be a major banking and financial crisis. The main danger in the future will be commercial real estate in the USA, whose prices will collapse dramatically in the event of a recession. The volume of loans for commercial real estate amounts to 3 trillion USD, whereby less of the 100 large US banks will be affected, but the 3000 small and medium-sized banks in the USA will be. In addition, the debt ceiling in the USA will have to be raised in the summer. Therefore, it is likely to be a hot summer.
World stock markets continue upward trend despite rising interest rates
At the end of last week, the world stock markets reacted surprisingly calmly to the interest rate hikes by the central banks, but also earlier to the bankruptcy of First Republic Bank in the USA. Many investors probably assume that no more interest rate hikes by the Fed will follow any time soon. The US labour market is still very robust and does not (yet) show any signs of weakening. The US unemployment rate recently fell to a historic low of 3.4 per cent (previously 3.5 per cent). This could prompt the Fed to dare to make another interest rate move, but then the US key interest rate would be above the US inflation rate, which is very dangerous.
Tech stocks remain in demand
Already, the inverse interest rate structure heralds a recession in the US in the second half of the year. Credit could be choked off and a second-half recession in the US could follow. However, the stock market (still) sees things differently at the moment. Since the beginning of the year, the DAX had already risen by over 13 percent to 15,961 index points by the end of last week. In the USA, it is above all the big tech stocks that remain in demand. The NASDAQ Composite Index rose by almost 18 percent to 12,235 index points, while the Dow Jones Industrial Index remained at about the same level as at the beginning of the year.
Outperformance opportunities in Eastern Europe: Kiev Stock Exchange +31%!
In Eastern Europe, the Prague stock exchange from the Czech Republic was particularly convincing with a plus of 21 percent on the CTX index, but also the stock exchanges from the Balkan countries and the Baltic states, although the inflation rates here are much higher than in Western Europe. Even the UTX index for shares from Ukraine has already risen by 31 percent (!) to 59.6 index points. The market capitalisation of the 10 largest Ukrainian stocks is only € 3 billion. The Kiev stock exchange is very small and the shares are very illiquid. The agricultural companies Astarta, Kernel, Industrial Milk Company and KSG Agro have the largest share of the UTX index, with a share of over 80 percent of the UTX index. The EAST STOCK TRENDS market letter highlighted the great opportunities in this sector in time with the agricultural portfolio. Astarta and Kernel are also listed on the Warsaw Stock Exchange, with Kernel now to be bought out.
The Kiev stock exchange thus advanced to become one of the top performers among the world’s stock exchanges, although an end to the war is not yet in sight. Investors there are betting prematurely on an end to the war this year. A major offensive is now expected from the Ukrainian side. However, there is a lack of ammunition and soldiers for this, as well as the dreaded Wagner group from Chechnya, which may want to withdraw from the fight for Bachmut because of this.
Putin, too, is now coming under increasing pressure, after not being able to show any major military successes in Ukraine until 9 May – the day of the victory over the Nazis in the Second World War. But it also remains to be seen whether Ukraine’s planned major offensive this year will be crowned with success. It is to be hoped that it will remain a stalemate and that attempts will then be made to resolve the conflicts diplomatically rather than on the battlefield. Pushing back the Russians and possibly recapturing Crimea could lead to a 3rd world war. China could now play a major role in conflict resolution.
Get into Kazakhstan now via Freedom Broker
A good alternative to shares from Russia, which are still not tradable in the West due to the sanctions, are now shares from Kazakhstan, where the financial sector is developing very positively. Banks from Kazakhstan, such as the fintech bank Kaspi.kz and Halyk Savings Bank (HSB), also seem to be more crisis-resistant in the event of a banking crisis. A special on investment opportunities in Kazakhstan will be published in the next EAST STOCK TRENDS stock letter. Through the broker Freedom Broker you not only get help with Russian ADR, but also direct market access to the KASE exchange from Kazakhstan. Moreover, with Freedom Broker you get 3 percent interest on a USD trading account and 2.5 percent on a Euro trading account on the free liquidity. You can also participate in the next IPOs in the USA through Freedom Broker. It is easy to open an account via the following link: https://freedom24.com/invite_from/2952896.
Good opportunities in Eastern Europe in the Balkan region and the Baltic States
In Eastern Europe, even bank shares are a good alternative to Western bank shares. The Bank of Georgia even reached a new all-time high recently, but has now corrected somewhat. The Balkan and Baltic regions are also very stable. The CROX index for shares from Croatia even rose by 15 percent and the CTX index for shares from the Czech Republic by 21 percent since the beginning of the year. Both Eastern European indices clearly outperformed the DAX. 10 stock exchanges from Eastern Europe are again among the 30 best-performing stock market indices in the world. There will continue to be outperformance opportunities in Eastern Europe, so that it is still worthwhile for German investors to look beyond their own backyard to the East.
First inform, then invest
But there are also new opportunities in Eastern Europe in general, where there are always outperformance opportunities. Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Kazakhstan, Georgia and Ukraine.
Review: In 2018, 10 stock markets from Eastern Europe were among the best performing stock markets in the world, all clearly outperforming the DAX and also the US stock market. The Moscow Stock Exchange was the clear outperformer among all world stock markets in 2019, with a gain of over 46 per cent in euro terms. However, the Bucharest Stock Exchange (Romania) also rose by over 32 per cent in 2019. The stock markets in South-Eastern Europe and also in the Baltic countries remained very stable on the plus side (Croatia +13 per cent). In 2020, 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and last year even 11 stock exchanges from Eastern Europe. In 2021, shares in Kazakhstan rose by more than 80 per cent. Last year, 5 Eastern European stock exchanges, mainly from the Balkans, clearly outperformed the DAX, and this year there are already 10 Eastern European stock exchanges among the 30 best-performing stock markets in the world. The CTX index for shares from the Czech Republic has already risen by 21 percent this year and the CROX index for shares from Croatia by 15 percent. So even after the Ukraine war, it is still worth looking beyond the horizon to Eastern Europe.
Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend/bond special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter. The next EST will be published in May 2023 with a special on Kazakhstan and Russian ADR/Russia.
TV/radio notes: The last radio interview was on 2 March 2023 and previously on 31 October on Börsen Radio Networks. The next radio interview is on 2 October 2023 Stock Exchange Radio Networks. Also watch the latest EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities of the Eastern European stock markets. Every 14 days Mr. Männicke is also on YouTube at the “Finanzstammtisch” of Capital-Manager.com, most recently now again on 21 March 2023 at 2.00 p.m. with the topic: “The shocking truth about the banking crisis that everyone needs to know “. You can download the interviews and videos at www.eaststock.de, there under the heading “Interviews” as well as the videos from EastStockTV. By the way: have you already subscribed to the EastStockTV YouTube channel?
Order now also the free newsletter by Andreas Männicke with the latest news on the world and eastern stock exchanges at www.eaststock.de.