Frontera News https://fronteranews.com Frontier Markets News Sun, 30 Apr 2017 20:31:06 +0000 en-US hourly 1 These African Nations Are Now Emulating the Universal Pension Scheme of Zanzibar https://fronteranews.com/news/africa/african-nations-are-emulating-the-universal-pension-scheme-of-zanzibar/ Sun, 30 Apr 2017 20:31:06 +0000 https://fronteranews.com/?p=22582 This is post 2 of 2 in the series “An Archipelago Inspires A Continent: Zanzibar’s Universal Pension Is a Model for Africa” Going beyond Zanzibar The universal pension scheme in the semi-autonomous archipelago of Zanzibar was a first-of-a-kind offering in East Africa when it was launched in April 2016. In the entire continent, there are […]

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This is post 2 of 2 in the series “An Archipelago Inspires A Continent: Zanzibar’s Universal Pension Is a Model for Africa”

Going beyond Zanzibar

The universal pension scheme in the semi-autonomous archipelago of Zanzibar was a first-of-a-kind offering in East Africa when it was launched in April 2016. In the entire continent, there are about eight other non-contributory pension schemes. However, they primarily service the southern region of Africa.

The success on Zanzibar’s experiment is likely to catch on in the rest of East Africa. Tanzania is likely to introduce a similar system on its mainland. HelpAge International’s partner firm, HelpAge Tanzania, is working with the country’s government to develop a pension scheme for seniors there. Meanwhile, Uganda is structuring a senior citizens’ grant.

Kenya has also announced a universal pension scheme.

Kenya’s universal pension scheme

Zanzibar’s success with universal pension has inspired Kenya to launch a similar scheme for its senior citizens. The nation’s Cabinet Secretary of Finance Henry Rotich, during his budget speech on March 30, informed that a universal pension scheme will come in effect from January 2018.

The scheme will guarantee a monthly income to citizens over 70. He clarified that this new initiative will co-exist along with a pre-existing offering which serves nationals over 65 with a disability. However, no amount has been disclosed yet.

Kenya already has an Older Persons Cash Transfer program which was launched back in 2007. The scheme serves poor, vulnerable, and unemployed individuals over 65 by paying them 2,000 Kenyan shillings (~$19) every two months. However, it is not available to those who are receiving any other kind of cash transfers. The pilot phase of the program was made available in three districts and currently serves 203,011 households.

According to Rotich, experience from the aforementioned program served as a building block for the universal pension scheme.

Though this would not be an innovation for Kenya, it would certainly add to its repertoire of interesting, sometimes pioneering, and beneficial offerings of mobile payment systems (M-Pesa) to serve the unbanked and M-Akiba – government bonds sold over mobile phones.

Depending on the pressure this scheme puts on government finances, it could count as a positive for the country’s image and investor interest because of its intention to alleviate poverty and improve the quality of life of its citizens.

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Zanzibar Sets An Example For Entire African Continent https://fronteranews.com/news/africa/one-year-on-the-revolutionary-pension-system-of-zanzibar-is-an-example-for-africa/ Sun, 30 Apr 2017 20:17:01 +0000 https://fronteranews.com/?p=22579 This is post 1 of 2 in the series “An Archipelago Inspires A Continent: Zanzibar’s Universal Pension Is a Model for Africa” Located 16 miles off the East coast of Africa, Zanzibar is a semi-autonomous archipelago of Tanzania. Best known for its spices, Zanzibar became a trailblazer for East Africa last year when it launched […]

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This is post 1 of 2 in the series “An Archipelago Inspires A Continent: Zanzibar’s Universal Pension Is a Model for Africa”

Located 16 miles off the East coast of Africa, Zanzibar is a semi-autonomous archipelago of Tanzania. Best known for its spices, Zanzibar became a trailblazer for East Africa last year when it launched the region’s first government-funded universal pension in April 2016.

One year later, the success of the scheme has set an example for the entire continent in terms of the impact it has had.

The structure and history of the scheme

Zanzibar’s pension scheme is universal in nature, i.e. it applies to all citizens who are 70 or older without any pre-conditions. It is non-contributory, thus not requiring the pensioner to make any contribution during his or her working age or later, and is funded completely by the government. Each individual gets a monthly pension of 20,000 Tanzanian shillings (~$9).

In 2009, HelpAge had collaborated with the Government of Zanzibar to undertake a study on social protection and health in the region. The idea of the universal pension was hatched when the study found that a majority of old citizens were living in poverty and some had the responsibility of caring for their grandchildren as well.

Though a Zanzibar Social Security Fund was already functioning, its target was only those individuals who were employed in the formal sector in their working age. Hence, there seemed a need for a much wider ranging pension system.

Scope and impact

According to the latest available demographic data, 16.5% of homes in Zanzibar are either headed by or house old people aged 60 and over. Several of them don’t have any individual of a working age group because the AIDS epidemic has wiped that segment of the family off. Thus, a seemingly small pension would go a long way in helping such families.

And it does. As far as the impact of the pension goes, The Market Mogul reported that “Over 200,000 families are headed by a pensioner, meaning almost 80% of all private households in Zanzibar benefit from the pension funds.”

A feature published by The Guardian showed how the universal pension scheme has helped some senior pay for the grandchildren’s education, open small businesses and shops, get access to healthcare and better quality food.

Senior women affected by divorce – a not so rare occurrence in the archipelago – have also been benefited, who otherwise would not have any means to make a living.

Zanzibar is already having a positive effect on other geographies from the region. Let’s look at that in the next article.

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Answer For African Country’s Trying to Fix the Investment Gap May Be On The Homefront https://fronteranews.com/news/africa/looking-at-home-to-fulfill-the-investment-growth-gap-in-sub-saharan-africa/ Fri, 28 Apr 2017 12:20:56 +0000 https://fronteranews.com/?p=22487 This is post 5 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report” Declining investment growth Investment growth in sub-Saharan Africa has been going downhill. In its ‘Africa’s Pulse’ report for April 2017, the World Bank noted that investment growth in the region nosedived from an 8% pace […]

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This is post 5 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report”

Declining investment growth

Investment growth in sub-Saharan Africa has been going downhill. In its ‘Africa’s Pulse’ report for April 2017, the World Bank noted that investment growth in the region nosedived from an 8% pace in 2014 to just 0.6% in 2015. While the long-term average investment growth has been 6%, it had peaked at 11.6% during 2003-08. This slowdown is visible in both public and private investment.

Generally, high public investment growth fuels private investment growth. But given the fiscal state of most of the countries in the region, represented by the high debt-to-GDP (gross domestic product) ratios, higher public investment looks difficult.

So how do these countries encourage investment?

The World Bank has identified four key areas to address investment needs and ensure sustainable financing:

  • Sustaining public investments
  • Encouraging greater private sector participation in infrastructure
  • Strengthening public investment management systems
  • Promoting regional integration of infrastructure

Given the acute need of building and maintaining infrastructure in sub-Saharan Africa, all four areas above relate to it. But with our focus on investments, let’s look closer at the first key area.

Sustaining public investments

Even though they are constrained, domestic resources could potentially be the dominant source of infrastructure financing for sub-Saharan Africa.

Though some countries have been successful in tapping international bond markets since 2016, pressure on government finances is likely to make external financing in the medium-term expensive. Thus, the countries from the region need to look at increasing resources at home.

The World Bank holds that, “Increasing domestic revenue may provide the most sustainable way to finance infrastructure investment.” Increasing domestic borrowing and improving tax collections are vital to increasing resources at home.

Improving tax collections would require structural changes and may not provide an immediate solution. Hence, increasing domestic borrowing looks like the speediest answer to the region’s investment problems.

Some countries have been finding novel ways to increase borrowing. Countries like Nigeria and Kenya have been issuing retail bonds to raise money. Nigeria has found its scheme to be successful, while Kenya has taken the innovative approach of selling bonds to retail investors via mobile phones to cater to a large segment of the population who do not have bank accounts.

These methods can be examples for other nations from the region. Though the amount of public debt needs to be checked, given the fact that at least for now, international investors can’t have enough of emerging and frontier market bonds, the financing needs of sub-Saharan Africa will likely be fulfilled if countries continue improving domestic systems and to keep indicators reassuringly positive.

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The New Magnificent Seven Nations Of Sub-Saharan Africa https://fronteranews.com/news/africa/is-the-new-resilient-seven-of-sub-saharan-africa-investment-worthy/ Fri, 28 Apr 2017 12:19:44 +0000 https://fronteranews.com/?p=22484 This is post 4 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report” The resilient seven Sub-Saharan Africa has found the past two years to be challenging. However, there are a few countries from the region which the World Bank describes as exceptionally resilient; they are Côte d’Ivoire, […]

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This is post 4 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report”

The resilient seven

Sub-Saharan Africa has found the past two years to be challenging. However, there are a few countries from the region which the World Bank describes as exceptionally resilient; they are Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania.

These seven were identified by the Bank in the April edition of its semi-annual ‘Africa’s Pulse’ report. It categorized 45 countries from the region in four groups based on a comparison of their average annual gross domestic product (GDP) growth rates during 1995-2008 and 2015-17.

The aforementioned seven nations were the only ones which saw growth rates over 5.4% in 2015-17 – the top threshold. The report asserted that these countries corner 27% of the region’s population and account for 13% of its GDP.

They have replaced the following five which had emerged as the most resilient in the October edition of the report: Benin, Cameroon, the Democratic Republic of Congo, Mozambique, and Togo.

Characteristics of resilient countries

The World Bank’s model classifies countries into the following five groups:

  • Established (>5.4% both periods)
  • Improved (>5.4% in latest period and <5.4% in the previous period)
  • Stuck in the middle (All remaining countries)
  • Slipping; and (<3.5% in latest period and >3.5% in the previous period)
  • Falling behind (<3.5% both periods)

5.4% and 3.5% are the two thresholds of economic growth rates. Those in the first two categories are known as resilient economies.

The World Bank observed that these economies generally witness robust and broad-based growth, have lower debt-to-GDP ratios, and have lower inflation rates than their peers. For instance, the debt-to-GDP ratio of the resilient seven was 40% in 2016 compared to 54% for other countries. Also, inflation was 4% in 2015-16 compared to 5.8% in others.

Investment worthiness

The model shown above takes into account only the economic growth rates across the two periods for which the World Bank has conducted its study.

But for investors, monitoring the fiscal state of these countries is also quite important, as discussed in the second article of this series. For instance, though Kenya is solidly placed, there are worries regarding a slowdown of its economy and on its rising debt burden. Further, Bloomberg’s sovereign credit risk model had identified Senegal – a resilient nation – as one of four countries which had the highest probability of default. Senegal was the most at risk among the four.

Hence, though this model can provide a shortlist of countries experiencing consistent growth across a given period, an overlay of other factors is necessary in order to safeguard one’s investment.

In the next article, let’s look at the challenges on investment faced by the sub-Saharan Africa region.

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Will Sub-Saharan Africa’s Big Three Sink or Swim? https://fronteranews.com/news/africa/growth-in-sub-saharan-africa-and-the-big-three-strong-rebound-or-persistent-weakness/ Fri, 28 Apr 2017 12:12:32 +0000 https://fronteranews.com/?p=22481 This is post 3 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report” Counting on commodities prices Sub-Saharan Africa is banking on the rise in commodities prices for a brighter economic future. In the April edition of its ‘Africa’s Pulse’ report, the World Bank projected economic growth in […]

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This is post 3 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report”

Counting on commodities prices

Sub-Saharan Africa is banking on the rise in commodities prices for a brighter economic future. In the April edition of its ‘Africa’s Pulse’ report, the World Bank projected economic growth in the region to pick up to 2.6% this year and to rise by 3.2% in 2018 and by 3.5% in 2019.

In what can be a positive for oil exporting countries from the region like Nigeria, the World Bank expects crude oil prices to average $55 per barrel in 2017, an increase of 28% from a year ago. These are expected to rise further to $60 per barrel next year.

The Bank sees downside risks to these projections in the form of “resilience of the U.S. shale oil industry.” Upside risks, which are not as prominent as downside ones, include an extension of crude oil production cuts into 2018, which will put an upward pressure on prices.

Increasing demand from China has led to a rise in metals prices, which is a boon to metals and minerals exporters from the sub-Saharan Africa region. The World Bank expects average annual prices of metals and minerals to increase by 11% this year, after having declined by 6% in 2016.

Growth prospects of the Big Three

The World Bank has a subdued outlook on economic growth in the big three of Sub-Saharan Africa – Angola, Nigeria, and South Africa.

Both Angola and Nigeria are expected to rise by 1.2% in 2017, though the projections indicate a sharper rebound for Nigeria leading up to 2019. Though crude oil prices are expected to benefit both countries, high inflation and restriction on foreign exchange and liquidity will cap further growth.

Meanwhile, South Africa is expected to grow by just 0.6% this year, but the Bank expects it to outpace Angola’s growth by 2019. Though net exports will help the country, lower domestic consumption and investment will offset that benefit.

Thus, though the big three are expected to rebound in 2017 and strengthen further over the next two years, they are quite prone to domestic constraints.

There are, however, seven African nations which the World Bank has found to be the most resilient from the region. Let’s look at them in the next article.

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The Two Indicators That Could Predict Sub-Saharan Africa Fate For This Year https://fronteranews.com/news/africa/these-indicators-are-crucial-to-judge-investment-attractiveness-of-sub-saharan-africa/ Fri, 28 Apr 2017 12:01:57 +0000 https://fronteranews.com/?p=22477 This is post 2 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report” A rise in commodity prices have given a recent leg up to countries in sub-Saharan Africa. In order to make use of this rise, countries such as Nigeria, Kenya and others have either already approached […]

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This is post 2 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report”

A rise in commodity prices have given a recent leg up to countries in sub-Saharan Africa. In order to make use of this rise, countries such as Nigeria, Kenya and others have either already approached domestic and international investors with bonds or intend to do so.

The state of the economy, its prospects, and the government’s ability to repay the bonds are crucial aspects for present and potential investors.

In the previous article, we looked at growth drivers and individual prospects of some sub-Saharan Africa countries. Let’s now look at major deficit indicators.

Current account balance

Given the rise in crude oil prices, the current account balances of oil exporters like Nigeria are expected to improve drastically, as shown in the graph above provided by the World Bank in the April edition of its ‘Africa’s Pulse’ report. Though rising metals prices should have the same impact on the current account deficits of metals and mineral exporters, the Bank expects that to be offset by rising investment-related imports.

Cross-border capital flows are also expected to improve the deficit situation. The World Bank provides the example of Nigeria, which has seen increased foreign direct investment and was able to approach international bond investors twice this year already.

South Africa and Ghana are the only countries from sub-Saharan Africa whose sovereign bond spreads have widened on worries over fiscal policy and credit rating downgrades respectively. South Africa’s wider spreads are only a recent phenomenon though.

Fiscal balance

The negative impact of low oil prices can be seen on the fiscal positions of the governments in oil exporting countries. Given the rise in oil prices, the fiscal deficit in these countries is expected to witness a marked improvement this year.

On the other hand, the World Bank also noted the worsening fiscal deficit situation in non-resource-rich countries, and expects deficits to remains broadly unchanged this year.

Impact on attractiveness

These two indicators can have a sizable impact on investor attractiveness, especially in case of a credit rating change. A rating downgrade or increase in fiscal and current account deficits can result into higher borrowing costs for a country seeking to raise money from investors.

Though broadly speaking, the World Bank stated that although “the region’s rating outlook in 2017 remains negative,” investors have still been lapping up sovereign bonds from sub-Saharan Africa because of their brighter economic prospects and infrastructure spending goals. But keeping a tab on the aforementioned indicators is necessary to ensure that the deficit situation does not go out of hand.

Speaking of bright economic prospects, let’s next look at the outlook on the region for 2017.

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Will Sub-Saharan Africa Rebound From Worst Performance in 20 Years? It’s Up To The Big Three https://fronteranews.com/news/africa/the-big-three-in-sub-saharan-africa-lagged-in-2016-will-they-empower-the-region-this-year/ Fri, 28 Apr 2017 11:56:54 +0000 https://fronteranews.com/?p=22474 This is post 1 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report” A forgettable 2016 Sub-Saharan Africa is coming out of a tough 2016. According to the April edition of ‘Africa’s Pulse’ report released by the World Bank, the region’s economy grew by 1.3% – the worst […]

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This is post 1 of 5 in the series “Checking the Pulse of Africa: Insights from the World Bank Report”

A forgettable 2016

Sub-Saharan Africa is coming out of a tough 2016. According to the April edition of ‘Africa’s Pulse’ report released by the World Bank, the region’s economy grew by 1.3% – the worst showing in over 20 years. Unfavorable external developments and low commodity prices were cited as the primary reasons for the poor economic growth of the region.

Oil exporting countries from the region were hurt while metals exporting ones fared relatively better due to the decline in oil prices. Meanwhile, growth in non-resource-intensive countries was strong in 2016 due to the diversified structure of their economies.

A major reason for the depressed economic growth in sub-Saharan Africa last year was the subdued economies of the big three of the region:

  • Angola
  • Nigeria
  • South Africa

The challenges of the big three

All three aforementioned economies have been plagued by issues at home.

Angola’s economy has been hurt because of the decline in crude oil production. Nigeria, which has also been impacted by the fall in crude oil prices, witnessed its first full year contraction in a quarter of a century last year. Domestic security issues, which saw attacks on the country’s oil pipelines, were prominent reasons which held back the economy, apart from delays in government budget implementation.

Meanwhile, South Africa’s economy has been negatively impacted by drought which has pummeled its agriculture sector. A contraction in its mining and manufacturing sectors has also hurt economic growth.

The World Bank noted that excluding the big three, the remainder of sub-Saharan Africa grew by 4.1% in 2016.

Will the big three fare better in 2017?

The World Bank asserted that the sub-Saharan Africa region is recovering in 2017 on the back of an increase in commodity prices, rise in external demand, and the rebound in agriculture after the drought caused by the El Niño effect in countries like South Africa and Malawi in 2016.

The big three have their own set of challenges though. While Angola and Nigeria continue to have restrictions on access to foreign exchange with liquidity at banks remaining at the forefront, South Africa is riddled by policy and political uncertainty, which led to the country losing its investment-grade rating earlier this year.

However, the World Bank felt that “The slowdown in Angola, Nigeria, and South Africa—the region’s three largest economies— appears to have bottomed out toward the end of 2016.” It remained hopeful of a rebound in these economies which would improve economic growth in sub-Saharan Africa to 2.6% this year.

The attractiveness of these countries in many ways depends on their deficit indicators. Let’s look at those in the next article.

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Macron’s Victory May Warning Bells To the Russian Oil and Gas Industry https://fronteranews.com/news/macrons-victory-may-warning-bells-to-the-russian-oil-and-gas-industry/ Thu, 27 Apr 2017 13:55:43 +0000 https://fronteranews.com/?p=22451 This is post 3 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity” Candidates’ stance on the Paris accord The 2015 Paris climate agreement calls for all industrialized nations to transition from fossil fuels to 100 percent renewable energy by 2050. Emerging markets (EEM) (VWO) would have to transition by […]

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This is post 3 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity”

Candidates’ stance on the Paris accord

The 2015 Paris climate agreement calls for all industrialized nations to transition from fossil fuels to 100 percent renewable energy by 2050. Emerging markets (EEM) (VWO) would have to transition by 2080.

In France (EWQ), Marine Le Pen’s National Front has previously opposed pursuing international climate-change agreements, calling the Paris accord “flawed.”

Centrist Emmanuel Macron, on the other hand, has said that his party “will make implementation of the Paris Agreement a priority of our international action.” Macron has also been heard calling for EU (VGK) (FEZ) sanctions against countries pulling out of the Paris accord.

Macron’s victory may ring warning bells for the Russian oil and gas industry

Now, what makes this issue relevant is that Russia, the 3rd largest emitter of greenhouse gas accounting for about 7.5% of global greenhouse gas emissions, hasn’t yet ratified the deal. Russia (RSX) (RUSL), being a huge oil and gas producer, is also a big emitter.

Russia (ERUS) (RSXJ) is one of the EU’s largest suppliers of energy. In 2014, some 29% of the EU-28’s imports of crude oil were from Russia. So, if European countries such as France decide to phase out fossil fuels, it would definitely have a noticeable impact on the energy sector in Russia which provides the Russian government with about a third of its revenue. Russian oil & gas companies such as Gazprom (OGZPY) (GZPFY), Lukoil (LUKOY), Tatneft (OAOFY), Surgutneftegaz (SGTZY) (SGTPY), and Rosneft (OJSCY) stand to be affected.

So, an Emmanuel Macron victory at the 2017 French Presidential Elections may ring warning bells for the Russian oil and gas industry.

Will history repeat itself?

On the other hand, Marine Le Pen, who normally concentrates her campaign issues on immigration, globalization and her bid to leave the EU, doesn’t hold a very strong stance towards the Paris accord. Hence, we should see Russian support tilting in her favor. We’ve already seen a similar situation in the US (SPY) last year where Putin’s support towards Donald Trump was bolstered by his anti-Paris agreement stance. This was in opposition to Hillary Clinton, whose likelihood of upholding the Paris climate agreement was very strong.

Similar to the US, will we also see heightened protectionism and populism win voter favor in France? Only time will tell.

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Face-off In France: Pro-Russia Le Pen Goes Up Against Putin-Critic Macron https://fronteranews.com/news/face-off-in-france-pro-russia-le-pen-goes-up-against-putin-critic-macron/ Thu, 27 Apr 2017 13:49:47 +0000 https://fronteranews.com/?p=22447 This is post 2 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity” Macron takes the lead, Le Pen seconds With the first round results of the French (EWQ) presidential elections now out, En Marche candidate Emmanuel Macron has taken the lead with 23.86% of the 97% votes counted on April […]

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This is post 2 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity”

Macron takes the lead, Le Pen seconds

With the first round results of the French (EWQ) presidential elections now out, En Marche candidate Emmanuel Macron has taken the lead with 23.86% of the 97% votes counted on April 23, seconded by Marine Le Pen of the National Front with 21.43% votes. Republican Francois Fillon, Jean-Luc Melenchon of the La France Insoumise, and Socialist Benoit Hamon secured 19.94%, 19.62%, and 6.35% of votes, respectively.

Putin-Critic Macron vs Pro-Russia Le Pen

Accordingly, Macron and Le Pen are through to the second round to be held on May 7. What makes it interesting is that the two candidates differ markedly on their visions for France, as well as their stance on Russia (RSX) (RUSL) (ERUS) (RSXJ), Europe (VGK) (FEZ), and immigration, among others.

Subject Emmanuel Macron Marine Le Pen
Europe
  • Pro – European Union
  • calls for closer integration between countries
  • Wants France to exit the EU
  • envisages a Frexit (France exiting EU)
Russia
  • Putin-critic
  • intends to retain pressure on Russia
  • Pro-Russia
  • Advocates closer ties with Russia
  • criticized EU sanctions on Russia
Immigration
  • Against closing borders
  • stricter controls on immigration
  • To limit immigration
  • to withdraw from the Schengen
Security
  • Believes it is “not a moment to doubt the EU”
  • emphasizes the need to protect French citizens with solidarity with the EU
  • Criticizes NATO
  • wants to take France out of its integrated military command
Economy
  • to cut corporate tax rates gradually to 25% from 33% at present
  • cut housing tax
  • reform wealth tax
  • big economic stimulus to radically transform the French economy
  • cut income taxes for the poorest workers
  • simplify tax rules and fight tax evasion
  • envisages an independent France and
  • a new, lower-value currency, the “nouveau franc”

 

A face-off between these candidates on May 7th, therefore, implies Russian equity either soars or slumps. While a Le Pen victory should bode well for Russian markets, a Macron victory could ring warning bells for the economy — especially its oil and gas industry — as discussed next.

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French Connection: Which Way Will Elections in France Swing Russian Stocks? https://fronteranews.com/news/global-macro/french-connection-which-way-will-elections-in-france-swing-russian-stocks/ Thu, 27 Apr 2017 13:45:43 +0000 https://fronteranews.com/?p=22445 This is post 1 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity” French connection The ongoing French presidential elections could bode well for Russian equity (RSX) (ERUS). Three of the four leading candidates in the race for the final run-off on May 7th have taken a pro-Russia stance in terms […]

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This is post 1 of 3 in the series “How the French Presidential Elections Could Boost Russian Equity”

French connection

The ongoing French presidential elections could bode well for Russian equity (RSX) (ERUS). Three of the four leading candidates in the race for the final run-off on May 7th have taken a pro-Russia stance in terms of foreign policy. They have criticized the West’s sanction policies over Russia’s actions in Ukraine and supported the Russian intervention in Syria.

Russia (RUSL) (RSXJ) has also had a strategic interest in encouraging momentum towards an anti-EU stance. It has stood in favor of Brexit and offered support to anti-EU parties in the Netherlands (EWN) and Germany (EWG). France (EWQ) is clearly a key country in this regard.

May 7th face-off: Down to two

With the list shortlisted to two: Centrist Emmanuel Macron from the En Marche party and extreme right-winger Marine Le Pen of the National Front; pursuant to the first round held on April 23rd, there’s now a 50% chance a pro-Russian candidate becomes the next President of France.

Accordingly, if the pro-Russia Marine Le Pen wins the majority of votes on May 7; which is when the second and final round of voting will take place to decide on the next French president; we may see Russian equities surging on the heels of the news. The Russian equity-tracking Market Vector Russia ETF (RSX) was up 2.4% on April 24th, after news of Marine Le Pen moving one step closer to becoming the next French president hit the markets. Trading volumes too were up to roughly 10.5 million from the 6 million recorded the previous day.

Here’s a brief of the four presidential candidates which participated in first round of the French elections held on April 23rd and their stances on Russia:

Marine Le Pen

Extreme right, anti-EU, anti-immigrant Front National Party candidate Marine Le Pen is one of the two candidates standing in the May 7th second round of the French elections, after bagging in 21.5% of the votes. Le Pen is a beneficiary of Russian financing and is among those who stand in favor of a warmer French relationship with Russia.

Francois Fillon

Former Prime Minister and right winged conservative, Francois Fillon, believes that cooperation with Russia will cut down in terrorism. The globalist candidate insists that “talking to Russia” is the way forward. Fillon could secure 19.9% votes during the first round elections on April 23rd.

 Jean-Luc Mélenchon

Jean-Luc Mélenchon from the Socialist Party, a hard-left populist, secured 19.6% votes on the April 23rd run-off to the elections in France. Melenchon has suggested that an international conference should be organized with Russia to “discuss Europe’s borders.” His geopolitical stance is anti-American, anti-EU, and France-first.

He stands with Russia and against the “illegal” sanctions imposed on it for the annexation of Crimea. Melenchon also had a Russia-friendly Frexit (France leaving the European Union) plan ready, if the Union doesn’t nod to his list of demands, if and once he assumes office.

Emmanuel Macron

Former economy minister, Emmanuel Macron, centrist, pro-Europe (VGK) (FEZ) and a Putin-critic remains the outlier in his stance towards Russia. Unlike the other three presidential candidates mentioned above, Macron believes that the European economy should stand firm in the face of Putin’s “dangerous” politics. Macron emerged as a winner in the first round of polls in France 23.8% votes.

Let’s take a quick look at the first round results of the French Presidential election run-offs that took place on April 23.

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