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Expat Investor : March April 2009
MARKETS Russia – a recession-proof opportunity? The current recession is a worry for all of us looking to make money. Predictions are that the EU and US economies can expect a maximum of 0% growth in 2009 and experts predict two very difficult years ahead. This is bad news for those with money in the bank as interest rates fall and inflation increases and those with money in stocks and shares are also in for a rough ride as the markets become more volatile and investments become more risky. Thankfully there is some good news. Emerging economies including China, Russia, India and Brazil are still growing despite the credit crunch and there is money to be made from their buoyant markets if you can find a secure investment that you can trust. Russia has received a lot of bad press lately and many people are suspicious of investing in this area, however their economy has been stable and growing for the last ten years. Russia’s GDP has experienced an average of 7% growth in real terms for the last 10 years, compared to the UK economy which hasn’t been above 3% since 2003. Due to Russia’s important position in the world as a supplier of crucial raw materials, it will be protected from the worst of the current economic recession. It is true that the global slowdown will have a some effect on the Russian economy as demand for raw materials lessens, but the effects felt in Russia will be nowhere near as severe as those felt by developed economies. GDP growth for Russia is predicted to continue at its current rate of just over 6% for the foreseeable future. Unfortunately, the outlook for Europe and the US is not quite as good! The performance of the Russian economy since the 1998 crisis has been impressive. Between 1998 and 2007, Russian GDP expanded by an estimated 69 per cent, real incomes of the population grew by 82 per cent and poverty rates were cut more than in half. Important reforms in areas such as taxation, budgetary institutions, and the removal of administrative barriers to business facilitated the rapid development of market institutions in many areas. (World Bank) Business is booming and the government’s focus for the future is to build and modernize infrastructure and create an environment conducive to business. As a result of Russian economic and infrastructure development, there has been a huge boom in property prices in recent years. Moscow experienced a 68% increase in house prices during 2006. This was triggered by a large increase in the middle classes from 8 million to 55 million and their demand for high quality housing. Housing demand exceeds supply and although the Moscow market has levelled to an annual increase of 10%, the development is spreading and St Petersburg is seeing a rise of 25% per year. The property boom is set to continue, as the government introduces an excellent scheme to provide affordable, quality housing for all. As the wealth of the nation increases, the population is demanding better places to live. Standard 2 bedroom, 85 square metre apartments, on the outskirts of Moscow are currently selling for about €135,000 and that is expected to grow by at least 10% in 2008. Unfortunately Russia has a bad reputation in the UK and US. Despite the regular bad press, don’t let an outdated impression of the country put you off from investing in its expanding economy. Russia has developed into a politically stable, capitalist country with a rapidly increasing standard of living for its inhabitants. Believe it or not, Moscow is now one of the world’s most expensive cities; more expensive than either London or New York. Investing in an emerging economy Investing in emerging economies doesn’t have to be risky. There are established companies with good track records that can offer good returns for even conservative investors. For example, Project 2 Invest is a Russian investment company which has been operating since 2004. It buys up new housing developments wholesale before they are constructed and sells the completed houses individually at a profit. Project 2 Invest finances its The perfect balance Choose from Alliance & Leicester International is now part of the Santander Group, which has more than 150 years’ experience in banking, and more branches worldwide than any other international bank.?Alliance & Leicester International and Santander are committed to serving our customers and helping them make the most of their money. In 2008 Santander won the Euromoney ‘Best Global Bank’ award. Ekaterina Bein, analyst with Project 2 Invest, presents a case for investing in the Russian economy. operations by attracting investors who take a share of the profit enjoyed by the company. All Project 2 Invest investments are backed up by actual properties, providing investors with a guaranteed 10% annual return. There are many other countries and companies out there open to investors. Don’t be fooled, there’s still money to be made in this credit crunch. You just need to do your research and find the right investment in a country not suffering the same recession as the US and Europe. 3.26% eSaver Offshore (Issue 2) * Gross p.a./AER (variable) Our online, easy access eSaverOffshore (Issue 2) account offers a great rate, online application and secure access to your account online. Minimum balance £15,000. Interest paid annually. 2.50% Select International (Issue 1) or * Gross p.a./AER (variable) Apply by post and manage your account by phone, post, fax or online. Minimum balance £15,000. Interest paid annually. Call +44 (0) 1624 641 888??or click www.alil.co.im/ads/3expat *Accounts must be opened with money that is not already deposited with Alliance & Leicester International Limited. Full terms and conditions available on our website. Minimum balance £15,000. Maximum balance is £1,000,000. Minimum withdrawal £5,000. Withdrawals available without notice or interest charge. Withdrawals may be made free to a UK, Channel Islands or Isle of Man bank account by BACS payment (3 to 5 working days). eSaver Offshore (Issue 2) Accounts must be applied for and operated online. No cash or cheques. Email address is compulsory. 1 free BACS withdrawal per quarter. Charges apply for other types of withdrawal. Select International (Issue I) Apply by post. Manage your account by phone, post, fax or online. No cash deposits or withdrawals. BACS available only via MyBankOffshore. Rates correct as at 20 March 2009. Interest paid annually on 31 December. Gross is before any deductions. AER - Annual Equivalent Rate illustrates the interest rate if interest was paid and compounded each year. Interest may be paid free from tax offshore depending on your country of residence for tax purposes. EU Savings Tax Directive rules apply to EU resident customers. Alliance & Leicester International Limited is a member of the Depositors’ Compensation Scheme as set out in the Compensation of Depositors Regulations 2008 (as amended). Alliance & Leicester is the registered trade mark of Alliance & Leicester plc. Alliance & Leicester International Limited, PO Box 226, 19/21 Prospect Hill, Douglas, Isle of Man, IM99 1RY, British Isles. Incorporated in the Isle of Man (No. 81918C). Licensed by the Isle of Man Financial Supervision Commission to take deposits. IOM0077 EXP INV March/April 2009 ? EXPAT INVESTOR 9
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