Despite the mega-crises and the great potential for escalation in Ukraine after the Russian annexation, there are new opportunities on the stock markets in Eastern Europe, especially now in Georgia and Kazakhstan, where many Russians are now fleeing after the partial mobilisation.
5 Balkan stock markets have clearly outperformed the DAX40 and are only just in the red. The Duma has now extended the Russian route to mid-November, so that you now have the opportunity to exchange your Russian ADRs – including those of Gazprom and LUKoil – for original shares again. However, you must first open an account online with Freedom Finance, which is very easy at the link https://freedom24.com/invite/?utm_source=referral&utm_medium=invite&utm_campaign=pfu2952896 .
Andreas Männicke gives his assessments of the monetary and geopolitical dangers, but also of the new opportunities, in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 200 at www.YouTube.com.
Ruble became the strongest currency in the world after the war
Due to the Ukraine war, high inflation in the double-digit percentage range and the FED’s interest rate hikes, most stock exchanges in Eastern Europe also came under pressure. The Russian ADR, i.e. the depositary receipts at the Bank of New York, have not been tradable at all since the beginning of the war, which is regrettable because some companies like Gazprom are currently making record profits and the rouble became the strongest currency in the world this year despite the sanctions. Thus, since the high in March, the euro to the rouble fell from 145 to 60 EUR/RUB, which led to high currency gains. Now the rouble is stabilising at this level. According to the new estimate of the Russian government, the gross national product will fall by 3 to 4 percent this year, far less than the West had hoped. Of course, the oil embargo will not come into force until next year and Russia has so far earned far more from oil exports than from gas exports.
Will the gas-oil price cap boomerang?
There is now more and more questionable state intervention. Subsidiaries of Gazprom and refineries of Rosneft have already been nationalised in Germany, which is tantamount to expropriation. It will be interesting to see whether and how the EU’s planned gas/oil price cap will work. It is quite possible that this, too, will only boomerang. It is also questionable whether the “double whammy” – Chancellor Scholz’s choice of words – of €200 billion will be enough to avoid a wave of insolvencies in Germany in the winter. In addition, debt is now rising enormously in Germany as well.
Also under the influence of Russia, OPEC has now decided to reduce oil production by 2 million barrels/day. As a result, the price of Brent oil rose by 2.2 per cent to 93.26 USD/barrel on 5 October and even to over 94 USD/barrel on 6 October, after it had previously fallen sharply from over 100 to a low of 83 USD/barrel due to global recession fears and the strong US dollar.
A new world order is emerging: G7 against “BRICS
Russia wants to set up its own new precious metals exchange next year, where primarily the “BIRICS” countries and their allies are to participate. Russia is banned from selling gold abroad – including in Switzerland – by the latest sanctions. The Ukraine war has now already led to a division of the world and a new world order, namely “G 7 against “BRICS & Co”, i.e. Brazil, Russia, India, China and South Africa and the allies, with many countries in South America, Africa and OPEC also more on Russia’s side, of course also Turkey and Iran, none of which have imposed sanctions against Russia. So Russia is nowhere near as isolated as the West would hope. “G7 versus “BRICS – where to invest now?” will also be the topic of my lecture on 8 October at 2 p.m. at the Berlin Stock Exchange Day at the invitation of Freedom Finance.
Russia’s “war chest” is filled more than ever before
Russia now has enormously high current account and trade surpluses until October 2022. Russia has earned far more from fossil fuel sales, over $150 billion in the first half of the year, than the additional war costs, estimated at $100 billion. Western sanctions have so far not only come to nothing, but have become a dangerous boomerang due to high electricity and gas prices in the EU. Through the EU sanctions, the EU is harming itself more. The election victory of the right-wing populists in Italy on 25 September will now create more headwind for the EU and possibly split the EU.
Germany as an industrial location is in danger, but the German middle class is also breaking away
In Germany, small and medium-sized businesses could disappear and Germany as an industrial location could lose its competitiveness. In this respect, a quick rethink by the federal government would be urgently needed. Moreover, it would be urgent to de-escalate now instead of pouring oil on the fire with more and more arms deliveries. In a cold winter, there is not only a risk of running out of gas despite well-filled gas storage facilities, but there is even a threat of a blackout, and hardly anyone here is really prepared for that.
There is now also a need for in-depth and objective investigations into who caused the quadruple act of sabotage on the North Stream 2 pipeline. It is quite nonsensical to assume that Russia did this itself. By annexing 4 territories in eastern Ukraine, Putin has now created dangerous facts. On the other hand, Ukraine is now reporting strong terrain gains in south-eastern Ukraine where the Russian military is fleeing. Putin is now offering negotiations and a ceasefire, but Selinskyi will not follow this proposal – also due to pressure from the USA. Germany could play a good mediating role here, but is obviously not doing so and is thus missing a historic opportunity, which Germany could still regret.
Will Putin also use nuclear weapons as a last resort?
Even if Ukraine is now advancing sporadically and regaining localities, it is unlikely that Putin will allow it to withdraw from Luhansk and Donetsk and push it back to the original border. More likely then would be even the use of tactical nuclear weapons or even a 3rd world war, under which all parties would then suffer much more. This must be avoided at all costs.
The danger of escalation increases every day
The danger of escalation increases every day anyway. In the case of a quite possible World War 3, Poland, Germany (especially Ramstein) and Great Britain would probably be the first targets and not the USA. Elon Musk’s peace proposal is certainly debatable. It is significant that the former German ambassador Melnyk responded with a “fuck off”. One also gets more and more the impression that the EU does not act independently, but is strongly under US influence, as is Ukrainian President Selenskyj himself.
The EU faces major challenges after the Italian elections
Due to the elections in Italy, a new right-wing populist government, which wants more cooperation with Russia also in the energy sector, but also rejects the euro, could divide the EU in the future. After the “Brexit” there could be an “Italexit”. The existence of the euro is also in danger. The ECB must not raise interest rates too high, otherwise it will trigger a conflagration in Southern Europe.
Near financial collapse in the UK and Switzerland
Great Britain is in great financial and economic difficulties for the first time after Brexit. The British pound has already been strongly devalued. The British central bank was able to save British pension funds with an emergency operation such as buying up “junk bonds”. A bankruptcy of pension funds would be a mega-gau that could result in a global systemic crisis. But also building societies and insurance companies, which invest most of their money in bonds, could get into trouble in the future – also in the EU. But some major banks could also get into trouble now, especially if a wave of insolvencies follows because of excessively high gas and electricity prices in winter.
The major Swiss bank Credit Suisse, one of the largest asset managers in the world, is already clearly in a predicament. The share price collapsed from 7 to 4.5 CHF in Zurich in the last 6 months, which is a first warning signal for all big banks. Five years ago, the share price was still over CHF 17. But also the premiums for credit defaults (CDS) jumped at Deutsche Bank AG. After all, Porsche AG’s mega IOP was very successful. The share price jumped by over 10 per cent from € 82.5 to € 90.7 after the IPO.
Gazprom with new record profits
Despite all the prophecies of doom, Gazprom achieved record profits of € 42 billion in the first half of the year. The share price on the Moscow stock exchange is now almost back to the level it was at before the war began, namely around €6. But Western investors have nothing at all to gain from this at the moment, because the ADRs are no longer tradable and foreigners are not allowed to trade on the Moscow Stock Exchange at the moment.
However, they can still be exchanged for original shares at brokers like Freedom Finance, and the deadline has now been extended until November. It is possible to open an account online under the link https://freedom24.com/invite/?utm_source=referral&utm_medium=invite&utm_campaign=pfu2952896 . The hope remains that after the war and the sanctions, trading in Gazprom shares will be possible again. But even that is not certain.
Now that Russian ADRs are not tradable at the moment due to the sanctions, there are other opportunities in Eastern Europe. The stock exchanges from the Balkan region and the Baltic States continue to be particularly stable. The stock exchanges from Bosnia, Serbia, Slovenia, Croatia, Bulgaria and Romania clearly outperformed the DAX. A good alternative for shares or ADR from Russia are shares from Georgia and Kazakhstan. But Poland will also make a comeback after the war.
First inform, then invest
But there are also new opportunities on the stock exchanges of Eastern Europe (with the exception of the Moscow Stock Exchange). 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 Baltic States, Romania and Ukraine.
Therefore, order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special as well as with a lot of background information and new investment suggestions such as with the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Letter. The last EST was published on 12 September 2022.
TV/radio notes: The last radio interview was on Börsen Radio Networks on 23 August 2022. The next Börsen Radio Networks interview will be in October. Please also note the last EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities of the Eastern European stock markets as well as the Stock Exchange Talk with Rainer Hahn and Bastian Stein on 3 September 2022. You can download the interviews at wwww.eaststock.de, there under the heading “Interviews” as well as the videos of EastStockTV. By the way: have you already subscribed to the EastStockTV YouTube channel? Andreas Männicke will also give a talk at Freedom Finance on 8 October at the Börsentag in Berlin.