Capital migration…and “safe havens”
Amidst a global economic slowdown, increasing trade and geopolitical tensions, and the repercussions of ongoing military conflicts and wars, which began with the Russian-Ukrainian war and may not end with the Israeli war in Gaza and southern Lebanon… Amidst all this, the danger of “capital migration” that is searching for “safe havens” emerges.
French policy has reacted to these developments, knowing that the Paris Stock Exchange lost about $258 billion in market value of company shares in one week, and also lost its position as the largest stock market in Europe, to be replaced by the London Stock Exchange, which benefited from receiving some French investors.
The flight of French capital came after the loss of President Emmanuel Macron’s party in the European Parliament elections, and following his call for early parliamentary elections between June 30 and next July 7, which raised investors’ concern about the possibility of the victory of the more extreme right-wing parties. This happened contrary to Macron’s desire, which he announced at the “Choose France 2024” summit, which was held last May, to attract large projects and investments, with the aim of making Paris a major commercial center in Europe, like New York and London, on a global scale. Taking into account the small difference between the total value of stocks in France, which amounts to $3.13 trillion, and the value of stocks in the United Kingdom, which amounts to $3.18 trillion, the “European crown” that has shifted from Paris to London may not last long, especially since investors also see some reasons. Which calls for caution, as the upcoming British elections on July 4 are likely to constitute the largest political change process in the country since its exit from the European Union, and the new government will have limited scope, and will face scrutiny by observers of sovereign bonds and stocks. Knowing that the United Kingdom currently ranks as the sixth largest stock market. In this context, the Kingdom’s attractiveness to wealthy people is decreasing, and an official report indicates that more than 8,000 millionaires fled last year. According to provisional estimates contained in a recent report by immigration consultants Henley & Partners, the number of wealthy people preparing to leave during the current year is likely to exceed 9,000 millionaires. As for the dollar, which is one of the most important safe havens, investors in the world are awaiting with great interest the results of the US presidential elections expected next November, which reflect a decisive path for the political and economic future of the United States, while emphasizing their deep concern about the continued rise in the volume of its debt, which has reached about 35%. Trillion dollars. The Congressional Budget Office expects it to exceed $56 trillion in 2034. Although the yield on Treasury bonds appears stable in recent weeks, the US debt securities market does not appear to be better than its European counterpart. There are those who advise investors to buy European bonds more than American ones. It is enough for investors who buy US bonds to demand a higher risk premium, to demonstrate the decline in confidence in the economy, and the potential for higher interest rates and inflation rates. Thus, “gold” remains the most important and safest haven, so global central banks are planning to increase their own reserves of the yellow metal. Banks in emerging markets maintained their positive stance regarding the future of gold reserves, and 57 percent of central banks in developed countries joined them, up from 38 percent last year.
*Lebanese writer specializing in economic issues.
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