Rouble boats its own advantages
[b]National currency remains most attractive vehicle for savings[/b]Alexander Mukha, a financial analyst with Business-Forecast.by, notes that, over the next three to six months, while savings interest rates in Belarusian roubles remain relatively high, the public is likely to choose the national currency to hold savings.
Alexander Mukha, a financial analyst with Business-Forecast.by, notes that, over the next three to six months, while savings interest rates in Belarusian roubles remain relatively high, the public is likely to choose the national currency to hold savings. It has been enjoying a relatively stable exchange rate while interest rates on foreign currency deposits have fallen. He explains that the official ban on money emission should ensure there is no sharp drop in the value of the national currency, creating an ‘insurance’ against devaluation.
He explains, “Taking into account that the gap between interest rates on national and foreign currency deposits will gradually close, it may be wise to diversify your investment portfolio, spreading two-thirds of assets among different currencies and one third across small bars of precious metals, stocks, bonds and other such instruments.” He believes this will improve the reliability and profitability of savings.
“Speaking of stocks and bonds, these are investments in businesses, so tend to be more profitable than bank deposits,” he notes. In the medium term, a number of Belarusian firms will be issuing securities, offering higher rates of return than bank deposits. Meanwhile, he ranks buying shares in Minsk Sparkling Wines Factory as an example of a successful investment. Mr. Mukha believes that those buying shares should focus on export-oriented enterprises, including those in the creative sector: ICT, research and development, music and media.
Of course, people can only invest or save a certain percentage of their income. “If a citizen’s savings are up to $5,000, it’s easier to distribute this across savings accounts; when funds exceed $10,000-20,000, a more profitable distribution becomes relevant,” admits Mr. Mukha.
The Chairman of the Board of MTBank JSC, Andrey Zhishkevich, tells us, “The difference in rates between rouble and foreign currency deposits is still high enough to attract deposits in the national currency — especially in the short and medium term. There are no grounds to expect significant devaluation (exceeding the rate of interest on savings). At the same time, the National Bank’s strict monetary policy leads us to expect a further fall in the refinancing rate, albeit at a slower pace; interest rates on rouble deposits are often directly tied to the refinancing rate, so investors should seek products with fixed interest rates.”
According to the latest National Bank report, in the first half of 2012, the population’s deposits in national currency rose by Br7.6 trillion, reaching Br21.5 trillion by July 1st (up 40.4 percent in real terms). In addition, deposits in foreign currencies have risen sharply: in the first half of 2012, they rose by $1bn (23.8 percent) to reach $5.2bn by July 1st.
Foreign currency deposits form a major share overall but, since late 2011, their share has fallen: on January 1st, 2012, they stood at 71.7 percent but had fallen to 66.9 percent by July 1st. ‘The policy of gradually reducing the refinancing rate by slowing the inflationary rate and, consequently, interest rates on deposits, continued in June this year. We continue not only to defend rouble deposits from rising prices but to ensure their higher profitability in comparison with deposits in foreign currencies’, asserts the National Bank.
By Vitaly Mikhalev
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