Lithuanian investors unperturbed by Russian threat

Artūras Milevskis of investment management company Synergy Finance tells DELFI that some entrepreneurs in the country refrain from new investments until the situation clears up.

“Since we do not have reliable statistics for this in Lithuania, it is difficult to make objective estimates. Anecdotal evidence suggests that most clients shy away from Russian stocks, some investors even refrain from any new investment until the situation is stable,” says Milevskis, head of the firm’s investment management department. “But on a broader scale, I would say that the events [in Ukraine] have not had much impact on long-term investment decisions.”

“I have spoken to people who are suspending new business investment projects and take some of their money abroad and themselves relocate to another European country for six months or longer,” he adds.

According to Milevskis, on a global scale, investors who live geographically closer to the Russian-Ukrainian conflict site are noticeably more sensitive to developments in Donbass than investors from the US or Asia.

This is evident in regional stock index changes in 2014. MSCI Europe index grew merely 1.84 percent since the beginning of the year, while MSCI USA performed five times better, with 9.9 percent growth. Meanwhile Russian stocks declined 12 percent.

“What could these index changes mean? Worse performance indicates fear and search for security. I’ve been hearing a lot that money is fleeing Russian financial markets and relocating to London, New York (liquid real estate) or government bonds,” Milevskis says.

Security in gold?

Gold has traditionally been seen as the safest investment in times of uncertainty. However, Žilvinas Marcinkėnas, deputy head of gold investment company 9999 LT, says that quite few of his clients have invested into gold specifically because of the geopolitical situation.

“We haven’t witnessed a surge, our sales remain stable. Only a few items have been bought because of unrest in the neighbourhood, more people have invested into gold because of the euro switch-over,” he tells DELFI.

He says that Lithuanians mostly buy 51-100g investment gold bars that cost LTL 5,700-11,600 (EUR 1,700-3,400).

Some Lithuanian investors invest via international institutions, according to Milevskis.

“When it comes to Lithuanians, some of them prefer gold investment funds or, say, the most popular gold fund listed on New York Stock Exchange. But there are others who buy pure gold (coins and bullions) via Lithuanian representatives of various international firms,” he says.

On the global scale, the Russian-Ukrainian conflict did not drive gold prices up, he says. On the contrary, demand for investment gold has been in decline over the last three quarters.

Attraction of real estate

Relatively few people in Lithuania keep their savings as cash at home, believes Aleksandras Izgorodinas, analyst at the Lithuanian Industrialists Confederation.

“It makes more sense to make money work rather than just lie idle. It is invested into assets that offers highest returns. At the moment, better returns are offered by safer assets like real estate. Not just in Lithuania – many countries in the EU are now experiencing a recovery [in real estate markets], like Spain, Ireland,” he says.

Lately, according to Izgorodinas, business companies have tended to invest less into expansion, concentrating rather on improving efficiency. Moreover, available resources are more often invested into secure assets like real estate.

Saulius Vagonis of real estate agency Ober-haus says he has not noticed any surge in clients looking to buy real estate in foreign countries. “There are no noticeable trends like that, only individual instances,” he tells DELFI.

Nor have there been any changes in bank depositors’ behaviour, says Stasys Kropas, head of the Lithuanian Banks Association.

“I think that the timing is perfect for adopting the euro, which will reduce geopolitical risks. Everyone has their own personal finance management strategies: some manage their risks, other not so much. From what I know, the well-off manage their investments via global financial centres. There hasn’t been any significant changes in banks, in terms of either deposits or currency exchange,” he tells DELFI.

Meanwhile rather different moods prevail in Russia. Sigitas Besagirskas, head of economy and finance department at the Lithuanian Industrialists Confederation, tells DELFI that Russian businesspeople make sure to always have liquid assets (like suitcases of cash) at hand. Russian tour agencies reportedly offer a service where, for a fixed monthly fee, the client is guaranteed a seat on the next flight out of the country.