Is there a Promise Land for the investors?

November 03, 2009 | 12:13
www.darikfinance.bg

Alongside of the crisis in Greece, triggered by excessive deficit and high public debt of the country, the financial markets were again shaken and the analysts started talking again about the dangers and “underwater stones” that threaten politicians and investors

Similar to the US, the European Union took actions to save its currency by preparing 500 billion Euros to prevent destabilization of other economies in the monetary union.  The International monetary fund (IMF) gave for the cause another 250 billion Euros while the US opened up a currency swaps mechanism (known as ‘wolf pact’ or ‘wolf trap’), the total amount reached 1 trillion Euros.

As the world highlights the dangers, little is said about the secure “investment destinations”, the safe investments and relatively calm and quite economic sectors.

Where can we look for safety in the conditions of crisis beyond the traditional “safe heavens” such as cash, precious metals and some currencies? Comments on this topic come from Teodor Georgiev from MBAcademy who has experience in investor relations, investment banking and business development.

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Q: The crisis in Greece hit the financial markets around the world.  Is there, however, a country that could be considered as secure and safe “investment destination”?

There is no safe investment that has 0% risk.  As such are considered the government bonds and treasuries but they are associated with the country’s specific risk (like Greece for example).

There is a perception that the developed markets of North America, Western Europe and Asia have much lower risk compared to developing markets.  The level of investment risk is reflected in the government bonds yield – higher interest rate means higher risk and vice versa.  But we must not forget that assuming a higher risk means potentially higher return on investment.


Q: In view of the debt crisis in the euro zone, what is most advisable to invest in?


Each investor has a personal “risk appetite” according to the individual risk profile.  In this sense, it is difficult to generalize what would be the best investment choice.  Some would prefer bank deposits; others would invest in equities of companies from developing markets.  My choice would be a combination of different types financial assets in EU, Asia and USA.


In any case, I would recommend investors to be well informed and prepared before making any choice, either by participating in training courses, reading financial books, following business and financial news, and reading views and opinions of analysts.


Q: Recently Serbian economists urged the Serbs to use US dollars for their savings.  Is this advice reasonable? What currencies should the Bulgarians use?


Traditionally, the Bulgarians’ savings are in Bulgarian lev, US dollar and Euro.  Whether to use one currency or another is a matter of personal choice – for example when you will need the money, what currency will be used for the purchase or for the investment, etc.  I personally expect appreciation of the US dollar against the Euro, but I do not believe that the EU currency is threatened with extinction; as such opinions were expressed recently.


Q: Which sectors of the economy are considered “safe” in times of crisis?


As such are considered the non-cycle sectors, i.e.  those that provide goods and services of main necessity for the people – supply of food, utilities (electricity, heating, water) and others.

Q: Which are the sectors in Bulgaria that have the highest potential for return on investment?


The choice again comes down to the level of risk the investor is willing to accept.  In my opinion, the greatest potential is in:


1) Service providers – especially companies that deal with foreign clients and offer high quality services but at far lower price than their Western peers;


2) IT, communications and software – traditionally strong sector for Bulgaria;


3) Trade.

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