“Experts at KIT Group advise avoiding long-term hryvnia instruments and forming a multi-currency portfolioAnalysts at KIT Group warn Ukrainian investors against long-term hryvnia investments due to inflation and currency fluctuations.
It is recommended to form a multi-currency portfolio and use short-term instruments.
”, — write: unn.ua
In their blog, experts recommend betting on short-term instruments and diversifying savings in several currencies.
Risks of long-term hryvnia investments”Hryvnia investments will work, but only in a limited horizon – 1-4 months. During this time, you can fix profitability and not suffer losses due to deep devaluation or inflationary depreciation,” say analysts of the KIT Group brand, whose network is one of the largest operators in the currency exchange market of Ukraine.
This primarily refers to short-term government bonds, which allow “temporarily parking” free funds.
Longer-term hryvnia instruments (government bonds for a year or more, deposits for six months or longer) are now a risky game. There is less exchange rate risk in foreign currency government bonds, but tying up liquidity against the background of fluctuations between the dollar and the euro can be a barrier to operational maneuvering between currencies and become a source of exchange rate losses.
The reasons for such risks are the probable acceleration of inflation and possible exchange rate shifts, which can “eat up” the financial result.
Why deposits are losing their attractivenessSpecial attention was paid to bank deposits, as this is a clear, but ineffective tool.
“Its real effectiveness in conditions of inflationary pressure is questionable,” the publication emphasizes. Among the main disadvantages are the lagging of rates behind the pace of price growth, the tax burden in the form of 18% personal income tax and 5% military levy, as well as practical difficulties with foreign currency deposits: low profitability and the likelihood of complications when receiving cash currency at the bank after the end of the deposit term.
Multi-currency portfolio as a strategic defenseAgainst the background of global events that are changing the parity between the dollar and the euro and undermining confidence in the US currency, experts consider the formation of a multi-currency portfolio to be a strategic decision.
Global events of recent months have shown that even the US dollar can lose ground under the pressure of politics and trade conflicts, so a multi-currency portfolio is now not an option, but a strategic necessity. In addition, the dollar has clearly lost the unwavering trust of global investors: now it will be regularly “stormed” under the influence of macro indicators and even sharp political statements or maneuvers of the American administration. The dollar is already on a powder keg given the uncertainty regarding the future revision of key interest rates by the US Federal Reserve.
The authors advise using the dollar as a liquidity currency, the euro for longer accumulations, and other currencies (Swiss franc, pound, yen) only if one is willing to constantly monitor their dynamics on international markets and take into account their lower liquidity.
The key principle of currency selection is dependence on future expenses: “If your obligations or spending plans are denominated in euros or British pounds, keep part of your savings in these currencies. The rest is an asset for investment experiments or speculative operations.”
Flexibility and liquidity are paramount
The KIT Group analysts’ blog emphasizes: the main capital in conditions of turbulence is not an instrument or a specific currency, but liquidity and the ability to quickly change strategy.
“Turbulent markets reward those who do not cling to one scenario, but think like a strategist and act like a tactician: quickly, deliberately, without excessive emotionality,” summarize KIT Group.