PUBLICATIONS IN THE MEDIA

04.12.2024

Economics and financial markets

How AI is Transforming UAE SMEs: Unlocking Secrets to Global Success

Konstantin Vladimirovich Tserazov, former Senior Vice President at Otkritie Bank and now a strategic consultant for international fintech companies, has a deep understanding of how technology can fuel growth in emerging economies. After transitioning from his role at Otkritie Bank in 2022, Konstantin served on the advisory boards of various major financial and fintech companies across the CIS and Middle East. His expertise in management systems, digital strategies and e-business development has made him a thought leader on the digital transformation impacting the region. Konstantin shares his insights on how AI (Artificial Intelligence) is playing a pivotal role in shaping the UAE’s digital economy, with a special focus on SMEs and startups and how AI-driven solutions are helping these businesses thrive in the face of global competition. The Role of AI in UAE’s Digital Economy The UAE has been at the forefront of embracing technology and innovation, and AI is proving to be a major driving force in this transformation. According to Konstantin, AI is not only improving existing business models but is also fundamentally reshaping entire industries, especially for SMEs and startups. Given that SMEs contribute substantially to UAE’s non-oil economy, AI is providing them with an unprecedented opportunity to scale, reduce costs and compete on a global stage. How AI is Empowering UAE SMEs and Startups For SMEs, managing cash flow is one of the most critical challenges, and AI is helping businesses tackle this issue efficiently. One prime example is Bayzat, which uses AI to automate and optimise HR and employee benefits, helping companies reduce operational inefficiencies and cut overhead costs. In the financial sector, AI is also enabling innovative solutions such as Beehive, a peer-to-peer lending platform, which has raised over 3 billion AED by using AI to streamline lending processes and match borrowers with investors more effectively. Another area where AI is making waves is in customer relationship management (CRM). Zoho has developed an AI assistant, Zia, that helps SMEs improve their CRM capabilities, saving them both time and money while enhancing customer service and operational efficiency. AI’s Impact on Traditional Banks in the UAE The rise of AI has put immense pressure on traditional banks, forcing them to evolve or risk being overshadowed by fintech startups. AI-powered solutions like Bankbuddy, which deploys AI bots for customer support, are transforming how banks engage with clients. These solutions are enabling banks to reduce costs in client service, fraud detection and operations, while positioning them as digital-first entities that can compete with newer, tech-driven competitors. AI also plays a critical role in promoting financial inclusion, allowing underserved SMEs and individuals to access financial services more easily. Platforms like Finllect, which connects lenders and borrowers using AI, are creating a more inclusive financial ecosystem in the UAE. AI’s Role in Helping SMEs Access Global Markets AI’s capabilities go beyond improving internal operations—it’s also instrumental in helping SMEs access international markets. Noon.com, a leading e-commerce platform, leverages AI to connect local SMEs with global customers, boosting their visibility and sales. AI-driven recommendation engines suggest similar products, helping SMEs compete with larger corporations on a more level playing field. Furthermore, AI tools for personalisation and customer service are allowing smaller businesses to offer the same level of service and experience as their larger counterparts, breaking down barriers and creating a more competitive digital marketplace. Future Trends in AI for SMEs Looking to the future, Konstantin points to several emerging trends that SMEs in the UAE should prepare for. AI brand ambassadors, for example, will act as digital influencers, promoting products based on consumer behavior and preferences. This trend will allow smaller companies to compete in the branding and marketing space without needing large advertising budgets. In the crypto space, AI is already being used to solve key challenges like anti-money laundering (AML) and regulatory compliance, making the sector more secure and transparent, which will likely fuel its growth in the UAE. Moreover, the UAE government’s initiatives, like the One Million Prompters program, are actively upskilling the population in AI prompting, which will further enhance the country’s AI capabilities. AI and Financial Inclusion AI is not just about efficiency and automation—it’s also democratising access to resources. Konstantin highlights AI’s role in financial inclusion, allowing entrepreneurs, especially women, to access the same tools and opportunities as larger enterprises. AI is contributing to a diverse and inclusive startup ecosystem in the UAE, enabling anyone with the right idea to tap into advanced technologies previously available only to big players. The UAE’s AI Strategy for Global Partnerships The UAE’s strategic focus on AI is positioning it as a global hub for innovation. Konstantin notes that the recognition by international bodies, such as the U.S. government, has placed the UAE at the forefront of AI adoption, opening doors for new global partnerships. For SMEs, this recognition provides valuable opportunities for collaboration, access to technology and international expansion, particularly into major markets like the U.S. The Overarching Impact of AI on UAE’s Digital Economy AI is not just a tool for efficiency—it’s a catalyst for growth and inclusivity. For SMEs in the UAE, leveraging AI means more opportunities to scale, optimise operations, and expand into global markets. As AI continues to evolve, its potential to drive innovation and financial inclusion will only grow, positioning the UAE’s digital economy for continued success in the coming years. The country’s proactive approach to AI adoption, combined with robust government support, makes it an ideal environment for startups and SMEs to flourish.

21.11.2024

Economics and financial markets

Source: Thebyteline

Fintech's Future in UAE and CIS: Wealth, blockchain, AI & key Strategies MegaByte

This article is an opinion piece written by Konstantin Vladimirovich Tserazov, a former Senior Vice President at Otkritie Bank and a strategic business consultant for several prominent international fintech companies. It's worth mentioning that in 2024, the UAE may become the leading hotspot for ultra-wealthy individuals worldwide, surpassing even the US as a desirable destination. One of the crucial factors driving this dynamic is that UAE fintech has demonstrated brilliant results in its development. From my experience with onboarding capital from ultra-wealthy individuals, it is vital to identify which fintech niches are most in demand to fill the existing gaps. My experience in the banking and fintech sectors and my current position as a fintech strategist covering developments in these regions allow me to highlight some key points about the future trajectory of fintech in the CIS and Middle Eastern regions. I see a unique situation in the CIS countries, which have experienced a significant influx of Russian specialists in Kazakhstan, Kyrgyzstan, and Armenia in recent years. This migration brings expertise to bolster these economies, whose GDP growth outpaces advanced economies. This has several consequences, including a rise in demand for financial services, and fintech has an opportunity to impact this situation significantly. Regarding the Middle Eastern regions, it's worth mentioning that in 2024, the UAE will become the leading hotspot for ultra-wealthy individuals worldwide, surpassing even the US as a desirable destination. One of the crucial factors driving this dynamic is that UAE fintech has demonstrated brilliant results in its development. From my experience with onboarding capital from ultra-wealthy individuals, it is vital to identify which fintech niches are most in demand to fill the existing gaps. The regulatory hurdles facing fintech growth All hurdles in these regions for fintech development can be effectively addressed with proper management. Indeed, a properly built team of specialists can achieve all corporate goals. I was convinced of this when I navigated one of the key brokerages in Russia, "Otkritie Broker." I managed to increase the client base by 76% in just one year, and when I look back at this success, I understand that the key is to direct the team in the right direction. It's not only about delegating tasks but also about hard personal work that involves paying attention to all relevant details while having a strategic vision for the corporation. Konstantin Vladimirovich Tserazov is a former Senior Vice President at Otkritie Bank In the case of the CIS and Middle Eastern regions, I have several points that must be addressed to unlock the potential of fintech as a driver of sustainable client base growth. It's about maintaining proper government relations and working not just on current challenges but also foreseeing future ones to prevent the appearance of new hurdles. The notable advancements in digital finance Advancements in digital finance must be more than theoretical; they must be implemented practically. This is a point I've always stressed, and it is something I continue to emphasize as I work out tailored solutions for multibillion-dollar individual and corporate businesses. To be practically innovative is very important for any business. As Chairman of the Board of Directors of Otkritie Broker, I introduced several fintech decisions and implemented numerous innovations into the corporate fabric. This allowed us to raise the operational income of Otkritie Broker by 28% in a very competitive market environment. Currently, it is very important to stay ahead of competitors in the practical implementation of technologies such as Artificial Intelligence (AI), blockchain, Augmented Reality (AR), and Virtual Reality (VR). Many talk about these innovations, but the core of a company's success in the next five years lies in the precise knowledge of introducing these technologies into corporate life. I fully understand that this process is not easy, but my experience provides valuable insights into how to do it effectively. How do you view the progress of blockchain technology adoption in the financial sector? When we discuss blockchain technology, we often see the term simplified. It is more accurate to speak of Distributed Ledger Technology (DLT). With my corporate experience, I see that various operational processes require implementing different types of DLT, including blockchain. In the financial sector, the implementation of DLT faces several obstacles that can be overcome if one knows how to implement DLT effectively. One crucial point is that if a financial institution wants to implement DLT successfully, it is necessary to find the optimal way to do so by introducing Artificial Intelligence (AI) alongside DLT. The current phase of blockchain technology adoption in the financial sector clearly shows that corporate investment in DLT will only be 100% effective if DLT introduction is accompanied by AI implementation. The main obstacle in incorporating blockchain and AI into established institutions is that most companies do this on the wave of hype. They decide to invest in innovations but often lack a thorough vision of how blockchain and AI can improve their financial results. After a while, they naturally lose interest in these innovations, thus committing a significant mistake and risking being left behind. Most companies in any sector of the financial industry make this mistake, but those who avoid it and clearly understand "how to do it" and "how to earn from it" become market leaders. What key strategies have proven most impactful for you throughout your career? The valuable lesson I've learned from my corporate journey in the financial sphere is that the winner is the person or company that doesn't give up in any life or corporate circumstances. This means having steadfast faith in one's capabilities and the power of your team. Another lesson is that there is always a niche for any financial service in which one can be an undisputed leader in the market. The only thing that stands in the way is the skill to figure this out, which comes only with practice. Finally, it is crucial to be seasoned in finding new ways to explore all the innovations we are surrounded by. Konstantin Vladimirovich Tserazov, a former Senior Vice President at Otkritie Bank and a strategic business consultant for several prominent international fintech companies.

15.11.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: Central Bank digital currencies drive collaboration between banks and FinTech in the UAE

Central Bank Digital Currencies (CBDCs) are transforming the financial landscape, and the UAE is rapidly advancing in this innovative space. As part of its strategy for a digital dirham, the Central Bank of the UAE has embraced the development of CBDCs as a means to enhance financial inclusion and advance the financial sector. Konstantin Vladimirovich Tserazov, a financial expert and former Senior Vice President at Otkritie Bank, sees this move as a catalyst for unprecedented collaboration between banks and FinTech companies in the UAE. A strategic business consultant for international fintech firms and a member of advisory boards across CIS and Middle Eastern financial institutions, Konstantin stresses that the UAE’s CBDC initiative will address unbanked populations, enabling them to access financial systems, receive government aid, and engage in secure, seamless transactions. AI: The FinTech game-changer He underscores the role of artificial intelligence (AI) in this transformation. “AI technology is now the fuel of the modern FinTech ecosystem, either serving as the foundation for new applications or becoming a daily tool within FinTech operations,” he states. AI is expected to reshape CBDC usage by introducing autonomous AI assistants that can navigate complex financial landscapes, guiding users with an unprecedented degree of efficiency and personalised support. “In the near future, AI-driven assistants will evolve in autonomy, introducing unique tech entities that serve as independent agents within the financial system,” he explains. This, he believes, will become a driving force in the adoption of CBDCs and legacy banking services alike, as these systems provide the reliability and security required by AI entities in a digital finance ecosystem. The answer to crypto’s adoption gap Despite the global rise of digital assets, cryptocurrencies like Bitcoin have seen limited adoption. Konstantin posits that CBDCs, supported by central banks, could offer a more viable alternative. “CBDCs bridge the gap that has left digital assets as niche products, bringing stability and trust through regulated central bank oversight,” he says. Additionally, their design allows for energy-efficient transactions, addressing a significant challenge faced by other digital assets. Konstantin asserts that CBDCs will redefine financial inclusion for both people and AI entities, ultimately contributing to the “Internet of Digital Finance.” This concept envisions a globally connected financial ecosystem where FinTech startups play a key role in integrating CBDCs, AI, and traditional banking into one seamless network. “Gulf countries, particularly the UAE, have the infrastructure, vision, and resources to lead this wave of financial innovation,” Konstantin notes. With a sustainable energy foundation, the region can support AI-driven FinTech startups and usher in a new era of digital finance. Konstantin believes that CBDCs, powered by AI and fostered by collaborative efforts between banks and FinTech, will drive the UAE’s vision of inclusive, secure, and efficient digital finance forward.

07.11.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: ChatGPT Search vs Google: The Race That Can Only Be Won with a Blockchain Approach

On October 31, 2024, OpenAI kicked off the ChatGPT Search product in a clear bid to challenge Google's well-known role in human pursuit for information. This move led to a 1.5% drop in Alphabet's stock (Classes A and C) prices, as investors began to worry about the financial perspective of Google, given that about two-thirds of Google's revenue comes from Google Search. The race we witness is about the financial, technical, and creative resources needed to succeed, as well as how Decentralized Artificial Intelligence (DAI) decisions can outpace the centralized products of Google Search and ChatGPT Search. Artificial Intelligence (AI) is an interesting technology, but many people have missed its important aspects. It is becoming both emotional and rational. AI energizes the process of automating and autonomizing business processes that create value for shareholders. AI is also entering the physical world, as demonstrated by Boston Dynamics on November 1, 2024, with robots performing physical work without human assistance, marking the arrival of a new era. Involving All Interested Parties in AI Development The crucial aspect is how to involve all interested parties in AI development. For instance, AI assistants to corporate leaders will soon decide whether to issue additional shares, a decision that affects existing shareholders, banks that provided loans, and many others. Similar deliberations apply to other financial decisions, such as share buybacks. AI-powered oracles can enhance the effectiveness of such AI decisions. These decisions can be made through blockchain consensus and voting systems, ensuring DAI performance. Cryptocurrencies on blockchain enable the seamless redistribution of votes, reflecting instant changes in the weight of various interests. Ensuring Controlled AI Development We all know that the blockchain sphere has a tradition of open communication with the public. However, it's time to take it further by putting the entire value-driven process of creating new AI systems on the blockchain. This is the only way to ensure that global AI development does not run out of control and to mitigate the risks associated with AI. The dependence of AI “brains” (AI data centers) on vast and growing amounts of energy resources highlights the importance of driving AI development with blockchain, which guarantees that all parties' interests are checked in. Data centers already play an important role in the lives of people. Every hour of human activity around the world generates tasks that need to be processed, with at least three data centers involved on average. The decentralized approach to energy generation is a key driver of the future skyrocketing role of green energy and the dramatic decrease in humanity's reliance on fossils. Decentralized energy generation is also an answer to the quest for stable electricity streams to feed the computational power needed to support AI. Especially, considering that cryptocurrencies are already significantly reducing the technical costs of rolling out new AI systems through incentives for self-learning AI machines. Decentralized AI Evolution and Cryptocurrencies Recent AI decisions on blockchains like Algorand and NEAR Protocol demonstrate the power of a decentralized approach to AI evolution, enhanced by cryptocurrencies. As humanity advances through intensive machine learning of AI systems, we are transitioning from Web 4.0, which integrated AI, blockchain, and cryptocurrencies, to Web 5.0, an era of blockchain-based AI. Web 5.0 will feature the maximum proliferation of AI-powered cross-blockchain decisions. The looming advent of SuperIntelligence AI with a deep understanding of the benefits of decentralized approaches will swiftly take us to Web 6.0, where we will see the close adjustment of human nature to new tech, breakthrough attempts to enhance humans with high-speed calculations, deep imagination (enabled by Virtual and Augmented Reality), and rapid deployment of cloud decisions on blockchain. Neuro Human-AI Interfaces and IoT Actually, these advancements will pivot to neuro human-AI interfaces, to the intersection of the Internet of Things (IoT) and the Internet of AI, where the most valuable stream of big data will be obtained via trackers of eye movements, brain neuron activity, muscle activity, and other human reactions. The best way to arrange big data storage and processing is through blockchain, as AI can solve the issue of scaling up blockchain performance and dramatically reduce the costs associated with its use. In Web 6.0, the question of whether AI augments human possibilities or makes human capabilities obsolete will find its ultimate answer. Discovering this answer will open the door to Web 7.0, a realm dominated by blockchain, and will pave the way for future innovations that will lead us to Web 10.0. As we transition between Web 4.0 and Web 5.0, companies that fully adopt decentralized approaches are outperforming their competitors. This is evident in the battle we are witnessing between ChatGPT Search and Google, which began in Fall 2024. Importance of Blockchain Web evolution can take various ways. In some regions, we may see uncontrolled AI development without the integration of blockchain and cryptocurrencies, which could lead to outcomes unfavorable to humanity. In these areas, AI development may suppress human intellectual activities. Therefore, harmonized AI development requires the use of blockchain. The blockchain approach instills trust. Financing is crucial for fueling AI and blockchain development, given their high energy consumption. While traditional banks create loans and the stock and bond markets provide significant financing, these classical sources have limitations. The demand for capital to establish AI data centers, valued in trillions of dollars, cannot be met quickly by these traditional sources. This conclusion highlights that digital fundraising will be essential for raising the necessary capital to support blockchain and AI innovations. Implementing these innovations will significantly boost economic productivity. The blockchain has not yet completed its work in the cryptocurrencies sphere. We see how Decentralized Finance (DeFi), which initially accounted for a small share of financial crypto activities, is now gaining more ground, especially with spectacular growth visible in emerging economies. Blockchain is also needed to properly organize the emerging AI marketplaces where businesses can hire or buy AI assistants tailored to their operational tasks. We will also see the rise of blockchain-based AI training platforms, decentralized AI application online stores, and more. Automation and Autonomization Blockchain introduces automation and reasonable autonomization into the AI ecosystem. The competition between ChatGPT Search and Google revolves around these aspects. AI is a transformative technology; for instance, while classical search queries average 2 words, AI-based search queries average 10 words. This indicates that AI-based searches are already more in-depth than those provided by classical search machines, altering the business model of neural networks. Actually, the search results of AI-based systems will be different from the output provided by classical search machines, and this difference will be astonishingly large in the near future. However, what is most fascinating is that decentralized AI will offer a fundamentally new level of search results. We are witnessing a surge in the steps towards automating almost everything. The next big thing will be autonomization through blockchain applications. Cryptocurrencies and AI-Tokens Cryptocurrencies are now definitively part of the AI landscape. The trust that decentralized AI will instill in investors will trigger a surge in digital capital, including cryptocurrencies, tokens, stablecoins, NFTs, and central bank digital currencies. Additionally, DAI will create a new ecosystem of AI-tokens, which will be the next evolution of smart contracts on blockchain. Actually, AI tokens will widely extend the role of smart contract techniques beyond financial transactions and cryptocurrencies. In the financial sphere, these AI tokens will autonomously select relevant projects for investment and, by operating on the blockchain, will meet capital demands. Essentially, AI tokens will lead the financial world into a state of capital abundance for financing DAI projects. This will unlock access to a huge amount of electricity generation from a financial perspective. Actually, the movement towards decentralized AI will unleash an avalanche of digital capital and an enormous leap in productivity. Therefore, the competition between ChatGPT Search and Google will be won by the party that first successfully transforms into a Decentralized AI project. It can be real if such projects are strategically and effectively organized as a decentralized system of fintech startups, driving the development of blockchain and AI together.

30.10.2024

Economics and financial markets

Source: khaleejtimes

Konstantin Tserazov: Central Bank digital currencies drive collaboration between banks and FinTech in the UAE

29.10.2024

Economics and financial markets

Source: Medium

Stablecoins Reshape International Trade and Finance: The Future of Classical Banks Under Question

In 2024, we are observing a landscape of extraordinary geopolitical dynamics, where the United States encounters escalating rivalry from an expanded group of nations known as BRICS+, which now includes not only Brazil, Russia, India, China, and South Africa but also more and more other countries. This shift is not confined to the BRICS+ members alone; nations across Africa, the broader Global South, and South America are increasingly inclined to engage actively in the reshaping of international norms and regulations. This movement signifies a broader desire among these countries to influence the global financial order, reflecting a shift in international power dynamics. Behind these geopolitical changes, significant events are occurring in the world economy and trade. Bitcoin has firmly established itself in the global financial arena, gaining recognition as a new asset class alongside traditional investments. The recent launch of Bitcoin ETFs in the United States on January 11, 2024, represents a crucial advancement in its evolution. Although an increasing number of brokers worldwide are dubbing Bitcoin “digital gold,” it remains far from achieving its goal of becoming the “new currency.” Consider El Salvador, where Bitcoin has been recognized as legal tender for three years. Despite this initiative, only about 12% of the population has utilized it for transactions. This highlights that, while Bitcoin has made significant strides, it still has considerable distance to cover before it can be adopted as a mainstream medium of exchange, if that ever happens. Limitations of Bitcoin Adoption and The Rise of Stablecoins The limited adoption of Bitcoin is largely due to high blockchain transaction fees and the prolonged time required for transaction confirmations. Crypto enthusiasts are trying to address these issues by enabling second layers to Bitcoin and using wrapped Bitcoins, but these solutions often compromise the security of custody and transactions in Bitcoins. Against the backdrop of Bitcoin's story, we see a skyrocketing popularity of stablecoins. Unlike Bitcoins and other non-stable cryptocurrencies, stablecoins achieve stability, often through a fixed value to fiat money, typically in the form of parity. Tether (USDT), the most popular stablecoin in the world, is USD-based and leads among dollar-pegged stablecoins. More people in emerging countries are using USDT to arrange cross-border transactions for their relatives, especially labor migrants. These USDT transactions have forced officials in some countries to be nervous about compliance with established Know Your Customer (KYC) and Anti-Money Laundering (AML) practices in the classical financial world. Tether Holdings Ltd., the issuer of USDT, based in the British Virgin Islands, has already frozen several USDT accounts upon receiving requests from officials, partly due to concerns about Western sanctions compliance. Regulatory Concerns and Banking Impact The rising role of USDT in international payments has become a concern for Western regulators, including the Financial Action Task Force (FATF). They are wary of how payments in USDT could be used to arrange financial transactions among parties under sanctions. This concern extends to the banking sector globally. Banks in the CIS countries, for example, are witnessing how the rapid digitalization of finance and the rise of fintech are leading to a situation where fintech companies and big online marketplaces are taking away their clients, not just in payment services but also in other areas. Several fintech startups have already become Big Tech companies, expanding their financial services beyond just payment innovations. For instance, Buy Now Pay Later (BNPL) services are essentially a form of credit, a key function traditionally associated with classical banks, excluding investment or private banking. Now, payments and credit services are drifting out of the banking realm. The banks have already been hit, with approximately three bank branches in the U.S. closing every day as their client base disappears at an accelerating pace. Future Developments in Stablecoin Usage This is not the end of the story; it is just the beginning. In October 2024, it became known that the Tether operator was planning to launch credit services in USDT for commodity traders on the global arena. This means that in the near future, oil traders, for example, will be able to leverage the power of dollar stablecoins to make deals 24/7, in several minutes instead of waiting for open banking hours and dealing with extensive paperwork. The average cost to send money via international wire transfer is about $42, while the commission to move USDT may be just several dollars, depending on the blockchain used since USDT functions on various blockchains. Paper-based transactions are still the key point in the business culture of most world countries, but the ascendance of digital signatures paves the way to a higher degree of acceptance of digital mechanisms to arrange contracts. The volume of stablecoins transactions in the world will top $35 trillion this year, with an average sum transacted of $7,800. This underscores that stablecoins are often being used by ordinary people as an alternative to classical routes of money transfers, and by small and medium businesses, especially in emerging economies. However, big companies will also start using stablecoins in international trades. Dollar Stablecoins and USD Dominance Dollar stablecoins servicing world trade is another step to maintain USD dominance. As the USDT issuer states, these stablecoins are backed by huge investments in U.S. Treasuries, and the company boasts of being among the top 20 world holders of U.S. public debt. Together, the holdings of U.S. Treasuries by the issuers of the two key and rivaling dollar stablecoins, USDT and USDC, will definitely surpass the $100 billion mark next year. As far as Tether's initiative is concerned, it is not just the initiative of one crypto player. In October 2024, Thai Siam Commercial Bank, a traditional bank and a visible player on the Thai banking landscape, outgrew the stablecoins experiments within the regulatory "sandbox" of the Bank of Thailand and became ready to offer services to conduct financial transactions in stablecoins, not only USD-based. It took only about two months to clear all things in the "sandbox" and get approval from the Bank of Thailand to go public with stablecoin services. New Financial Reality All these developments point to the fact that we are on the brink of a new financial reality in which fiat money in its classical forms may disappear not only in people's money transfers but also in world trade among companies. Dollar stablecoins will face severe competition from central bank digital currencies (CBDCs) such as the digital yuan and digital ruble, as well as from private stablecoins issued on the basis of other than USD currencies. For example, for the first time in UAE history, the central bank of this country gave a "green light" to a private stablecoin issued on the basis of the UAE Dirham. Moreover, the idea being discussed among BRICS+ countries to create a stablecoin backed by a basket of gold and fiat money may eventually come true. Of course, the world economy is stepping into uncharted territory when stablecoins become used as a means of credit. When loans are made in fiat money through classical banks, there is supervision from the central bank in terms of capital sufficiency and reserve requirements. The issuers of private stablecoins can actually provide banking services without being officially regulated as a bank, and this is a significant issue. The trend of financial services on blockchain taking more and more parts of "banking’s pie" has been tracked for several years, not without bumps and dumps along the way. There were a number of crypto startups that offered lending based on collateral in the form of Bitcoins, Ethereum, and other cryptocurrencies, and some of them went bust. These companies attracted crypto deposits and provided credit, precisely what banks are used to doing in the fiat money world. However, as mentioned above, supervision from central banks plays a crucial role in ensuring that banking systems in countries do not fall apart. Financial Inclusion and Self-Regulation There is no such supervising body in the crypto sphere. Everything is done via blockchain and smart contracts, and DeFi projects are often governed by Decentralized Autonomous Organizations (DAOs), which does not guarantee that the operating activities of such startups will always be financially robust. Indeed, stablecoins enable the enhancement of financial inclusion to cater to the financial needs of unbanked people worldwide. However, this needs to be self-regulated more properly. Smart contracts are a very promising thing, but currently, they only fulfill automatically what the developers of such smart contracts put into them. Role of Artificial Intelligence Big expectations are emerging with the advent of Artificial Intelligence (AI). Currently, each third fintech startup in the world mixes crypto and AI innovations into their activities. The symbiosis of AI and blockchain may transcend the issues that each innovation faces separately. The "brain" of AI combined with the technical capabilities of blockchain creates a unique technology.

24.10.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: Saudi Arabia’s Fintech Challenge Plays a Crucial Role in Resolving Tensions Between Israel and Iran

The tensions between Israel and Iran are a long-standing issue, and the world is eager to find peaceful solutions to this challenging situation. A hub of strategic importance, the Gulf region comprises major nations wielding considerable military strength and political authority. The overwhelming reliance on oil in Gulf economies is a given, but this represents merely a single facet of a multifaceted landscape. Saudi Arabia asserts its preeminence in oil production, reliably holding a position among the world's top three producers, in company with the United States and Russia. This stature serves to reinforce Saudi Arabia's pivotal function in guiding the trajectory of energy markets and shaping the course of global economic currents. Its exports have accounted for approximately 90% of its revenue from oil sales for years, making its budget highly sensitive to fluctuations in export revenues. When oil prices drop, the budget deficit begins to escalate. Money Flows More into Banks than into Energy Companies Simultaneously, consider the stock market. In the third quarter of 2024, trading in shares of local banks dominated the entire stock market. Each seventh Saudi Riyal (SAR) invested in this market was allocated to banking stocks, compared to less than one-tenth of SAR invested in energy-related company stocks. There is a growing belief among investors that Saudi Arabia's banking sector holds significant potential to drive economic diversification and resilience. This sentiment is reflected in increased interest and investment in the sector. Meanwhile, the Kingdom faced challenges in the oil market during the latter part of 2024. Declining oil prices and geopolitical conundrum in the Gulf region made it difficult for Saudi Arabia, as a leading OPEC producer, to coordinate production levels with other member states. The attacks by Yemeni Houthi rebels on various oil tankers in the Red Sea, along with rising tensions between Iran and Israel, present also challenges for U.S. decision-making amid political pressures from Democrats seeking to counter Republican-backed Donald Trump. Additionally, two years of negative GDP dynamics in Germany — Europe’s largest economy — combined with a struggling real estate sector in China and an overall steep deceleration of Chinese GDP growth create an extremely uncertain outlook for the oil market. In this case, it is very reasonable that investors in Saudi Arabia intensively look at the financial sector. Saudi Arabia Moves Along the Same Way as BRICS+ Does Saudi Arabia has recently taken several significant steps in its economic and foreign policy. The dissolution of the dollar swap arrangement with the US by Saudi Arabia hints at an emerging trend of currency diversification in global trade. In recent years, the Saudi monetary authority has been methodically expanding its gold reserves, with an average increase of 5 tons each month. Despite an offer to join the BRICS+ alliance in 2023, Saudi Arabia remains in deliberation about its economic alignments as of 2024. Saudi Arabia’s steps show very interesting developments. This country has been, for decades, a cornerstone of the world petrodollar system, but these recent steps could weaken this system. The rapid financial progress of Saudi Arabia is obvious. Its own payments network, also known as Mada, enables the use of cards from various issuers in one system. It comprises Point of Sale (PoS) terminals and bank cash machines in one system. BRICS+ is developing its own BRICS Pay system from scratch, but Mada is a ready solution that has the potential to be scaled up on the global scene. Mada was initiated by the local Ministry of Finance and received support from the Saudi central banking regulatory body. But we also see brilliant payment solutions from Saudi-based fintech companies such as Geidea. Geidea combined all various payment methods into one application. We all know how developed bank applications are, but we also see a rise in fintech solutions for vendors, where banks from one side and fintech companies from the other bring together businesses and customers. The Digitalization of Fiat Money This story inevitably leads to the issue of the digitalization of fiat money. In October 2024, Saudi Arabia enthusiastically agreed to start testing the use of the digital yuan (e-CNY). This is truly a "fintech step" in the realm of external trade. Earlier, Saudi Arabia started using the yuan, but the digital yuan is another story. It’s about how a key oil producer in the world starts relying not just on banking infrastructure but on the opportunities of blockchain. It has shown that while ordinary currency transactions can take 2-7 days to fulfill, with the digital yuan, it usually takes only one day. The shortening of financial transaction times is not just about hours and days, but about money saved. The use of the digital yuan in external trade has only bolstered Saudi Arabia's strategic decision to leverage the power of digital finance. The local fintech landscape is now in the spotlight for regulators and institutional investors alike. In fact, local fintech offers the same innovative solutions in the payments sphere as the People’s Bank of China does with its digital yuan. This means that the Saudi economy can receive an enormous boost from the implementation of blockchain and artificial intelligence (AI), which will offset any oil price volatility. For the region, this development is very promising. In fact, the fintech challenge is leading to the inevitable transformation of all economies in the Middle East, and it is bringing changes in politics too. Any fintech startup in the region, by its very existence, declares one important truth: there is a need for a peaceful environment in the Middle East and the concerted efforts of regulators and investors from several countries to effectively leverage highly transformative innovations such as blockchain and AI. Any severe discrepancies in the oil market in this region become a headache for all countries in the Middle East as they try to fix them. All these countries need investments and energy to onboard critically important innovations. In this case, one of the most powerful players becomes Saudi banking sector, which have a proven record of fostering fintech. Peace in the region stipulates a robust oil supply and, at the same time, unleashes a flood of investments aimed at connecting burgeoning AI data centers with energy power. AI and blockchain also unlock the potential of alternative payment networks. Fintech Stays in Focus In this regard, it is important to underscore the ubiquitous nature of new fintech solutions. Just look at the Dubai-based but decentralized credit rating system, Synnax. It receives support from TON Ventures and operates as an app for the Telegram messenger. Its goal is to reach almost 1 billion Telegram users, and this startup is also targeting the Saudi Arabian market. While French authorities try to “tame” Telegram and investigate Pavel Durov, the founder of Telegram, the platform has already become fertile ground for new digital solutions. This truly shows how the Internet is evolving into the Internet of Digital Finance with wide outreach. It’s worth mentioning that AI and blockchain in Saudi Arabia go hand in hand with the development of autonomous systems, not only in the financial sphere. The rise of autonomous systems means unlocking the true potential of AI and blockchain, and, of course, fintech startups play a pivotal role in galvanizing this process. For example, in 2024, the Saudi-based fintech startup Channels had an outreach to more than 400 self-service machines. Fintech goes along the entire value chain. For instance, the Saudi-based startup Yamm deals with processes that occur after payments. In one place, Yamm helps businesses and their customers resolve issues related to paperwork and logistics, bringing these processes into the digital realm. Banks and Fintech in Saudi Arabia Look in the Same Direction A deep look into Saudi Arabia's banking and fintech landscape has proven the thesis that both sides are moving in the same direction, and big banks need to heed the steps of smaller fintech startups. The digitization of the financial sphere is key to making the entire economy more effective, not only in Saudi Arabia but in all countries in the region. It is also important to stress that digitalization allows us to deeply understand customers — not only their rational motives but their emotional ones. The successful digitalization of finance through collaboration between banks and fintech actualizes the value of customers’ emotions. We are increasingly dealing with the Emotional Economy as the Internet of Digital Finance leads us to the Internet of Emotions. In this regard, Saudi Arabia's success in implementing blockchain and AI through fintech solutions is crucial. It demonstrates to Iran and Israel a potential path towards resolving their long-standing conflict, driven by the economic imperative that this conflict must be resolved swiftly. Smart contracts, as a new symbol of smart decisions, create a trend toward more nuanced, effective, emotionally correct, and strategic decisions — not only in the economy but in politics as well. It will become more evident in the near future that the Middle East will find a strategic peaceful balance among countries with various interests, further expanding the achievements of AI and blockchain.

14.10.2024

Economics and financial markets

Source: integratormedia

Cash and Its Persistent Meaning

Authored by: Konstantin Vladimirovich Tserazov In recent years, the global shift towards digital payments has been evident. More countries are witnessing a decline in cash transactions, with Gulf countries upholding this trend. By the end of this year, over half of all financial interactions in this region are expected to be cashless. Despite this tendency, cash remains in the pockets of millions of people, and this phenomenon can’t be ignored. The Evolution of Money Before money existed, bartering was used, but it was inefficient. As a result, mediums of exchange were created, beginning with items like shells, which later developed into metals, coins, and eventually banknotes. While this shift towards digital payments offers convenience and efficiency, it also creates challenges for certain groups in any society, such as the elderly, minors, and individuals with disabilities. Even in the face of digitalization, cash remains important for those who cannot access banking services, such as temporary migrants. Unfortunately, these groups face a risk of digital exclusion. The Cash Dilemma In some countries, the demand for cash increases even as cash payments decline. This can be explained by the fact that cash is used sometimes as a preferred savings method, especially during times of crisis. The push towards cashless and digital payments is driving a reduction in physical bank branches, encouraging the transition to digital money. However, this transition faces several obstacles: High Cost of Smartphones: Not everyone can afford a smartphone, which is crucial for conducting digital transactions. Unreliable Internet Access: Consistent Internet connectivity is necessary for digital payments, yet it is not universally accessible. Challenges for Older Adults: Seniors may struggle to adapt to digital payment systems. Fraud Risk: Ease of transfer increases fraud risk, especially for vulnerable groups. No Local CBDCs: Many countries lack central bank digital currencies (CBDCs). Unclear Crypto Laws: Cryptocurrency laws are often unclear or restrictive. Cryptocurrency as a Potential Solution Cryptocurrencies could potentially address some of these challenges, but it is essential to ensure that the development of CBDCs and the broader crypto ecosystem includes applications for the deaf, blind, or visually impaired, as well as individuals with developmental disabilities. This area currently receives little attention in the crypto sphere but holds the potential for successful business models and innovative solutions for millions of people. Ultimately, these solutions will contribute to the adoption of digital means of financial interaction. The Necessity of Digitization The move towards digitization aligns with the Environmental, Social, and Governance (ESG) agenda for money emission. Managing cash incurs costs for the state, and a digital system should be significantly more efficient than handling physical cash, which requires transport and management. The marginal cost per transaction would be very low if the central bank provided a digital payment system. Moreover, if CBDCs were interest-bearing, they could theoretically impact monetary policy quicker. This would make it more advantageous to hold money in CBDCs rather than cash, which does not generate income. Digital Money as a Tool for Inflation Management When high interest rates are necessary to curb inflation, digital money could become a silver bullet. The circulation of such financial instruments reduces business costs, allowing them to raise prices less. In short, the distribution of CBDCs could be as effective a tool for central banks in managing inflation as increasing key interest rates and tightening reserve requirements for banking activities. Unlike cash, where it is unclear what goods are being purchased at any given moment, CBDCs provide for monetary policy makers transparency in transactions . Why People Still Prefer Cash Despite the advantages of digital payments, many people still prefer cash. This preference can be traced back to when dollars had guaranteed gold backing. When thinking about digital currencies and cryptocurrencies, some feel they are “somehow out of thin air,” not backed by anything. In reality, current fiat currencies are also not backed by anything. However, cryptocurrencies like Bitcoin have a guaranteed reduction in the rate of issuance and a “cap” on the maximum number of units that can be issued, unlike any fiat currency. The inflationary nature of fiat encourages even those who save in cash to spend it. If a person saves in Bitcoin, there are no such incentives; due to its deflationary model, there is a high likelihood of further increases in the value of such cryptocurrency relative to fiat money. This is precisely why the adoption of Bitcoin as a means of payment is stagnating — in El Salvador, for example, despite the ability to pay with Bitcoin in stores, there is no significant enthusiasm. Another interesting point about why people prefer cash is the relative anonymity of spending. Additionally, there is the feeling of control. In some countries, there is a strong fear that hard-earned money in banks could disappear during a financial crisis. The Cypriot banking debacle of 2012-2013 serves as a chilling reminder. Billions of euros—a staggering €8 billion—were simply wiped out, leaving depositors high and dry. Fast forward a decade, and a glimmer of hope emerged: last year a Cypriot court ordered the government to make amends to one unlucky depositor. But whether this lone victory will set a precedent for broader compensation remains a major question mark. The Convenience of Cash There are many instances where, if you travel to another country, you can often pay with your home country’s bank card. However, the exchange rate is a significant question. Additionally, there are built-in fees. In some cases, carrying cash from your home country and exchanging it locally can be more beneficial than using a card or ATM. Sure, digital payments are all the rage, but cash still holds its own. It’s secure and private and gives you a sense of control. If we go completely cashless, some people will get left behind. We need to embrace the new while still holding onto the old. That’s how we build a financial system that works for everyone.

14.10.2024

Economics and financial markets

Source: integratormedia

Cash and Its Persistent Meaning

06.10.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: The Future of U.S. Crypto Rules: A Key to AI Development and Global Progress

The U.S. presidential race leading up to the November elections showcases the various thoughts within the political circles on how crypto regulation will evolve in the country. The untold rules of political competition mean that each candidate must promote a maximally distinguishable program to set themselves apart from other participants in the U.S. presidential race. For instance, Joe Biden’s administration has shown a tepid responsiveness to demands from the U.S. crypto sector for clearer and friendlier regulation, prompting many candidates to take a stronger stance on this issue. Trump: Crypto Skeptic Turned Crypto Supporter We have seen even previously skeptical Bitcoin and crypto critic Donald Trump, in his July 27 speech at the Bitcoin conference in Nashville, present himself as the world's staunchest crypto supporter. Moreover, in the fall of 2024, Trump was unafraid to go further in this direction by supporting the public DeFi project World Liberty Financial (WLFI) and its token in a message on X social media on September 30. Trump's message brought to mind the late John McAfee, who passed away in June 2021. Like Trump, McAfee was a colorful presence at crypto events and often backed controversial projects. However, it was a well-kept secret among his close friends that his true passion was Bitcoin. Trump's endorsement of the DeFi project receives a symbolic response in the project's statement: "Due to outdated policies and regulations in the U.S., one whitelist is limited to accredited U.S. investors while another is for all non-U.S. persons. We’re fighting for changes so all Americans can access World Liberty Financial and join the financial revolution." It is also significant that this statement was first noticed as having appeared on a British Virgin Islands-based Telegram channel rather than on U.S.-based social media. Regarding Trump's movement, Make Crypto Great Again (MCGA), one company authorized to use Trump's name, has opened pre-orders for Trump-related watches, including a luxurious model priced at $100,000. Trump endorsed this initiative in a video, describing these gold watches encrusted with diamonds. However, it became controversial when individuals attempting to pre-order Trump watches found that they could choose to pay in Bitcoin too. Many critics, particularly Democrats, criticized this move, suspecting lax Know-Your-Customer (KYC) norms were being implemented. Nevertheless, the pre-order process did gather personal information, indicating that KYC was indeed in place —albeit not as visibly strictly as one would see when applying for financial services at traditional institutions. Elon Musk’s Inroads into Crypto At the same time, it's worth recalling how Elon Musk’s Tesla navigated similar waters. Tesla had previously introduced Bitcoin payments for some products but quickly removed this option due to regulatory concerns in the U.S., which are not as crypto-friendly as they could be. Anyway, Tesla's case indicates that Elon Musk strives to keep pace with modern trends, a strategy also evident in SpaceX. Elon Musk's innovative empire, Tesla and SpaceX, continues to make waves in the crypto sphere. As of early October 2024, Bitcoin holdings of these companies are valued at about $1.3 billion. Meanwhile, SpaceX is gearing up for a new milestone: its first-ever polar orbit mission. A symbolic passenger on this groundbreaking flight will be a Bitcoin pioneer, the founder of a major Bitcoin mining pool. This strategic move suggests that SpaceX is not only pushing the boundaries of space travel but also aligning itself with emerging technologies. As the company draws closer to its anticipated IPO, such bold initiatives are likely to excite investors and bolster its market value. Shifting Winds? Under the Biden administration, Bitcoin mining has come under scrutiny as part of a broader energy policy shift. The White House, signaling its stance on cryptocurrency, has pushed miners toward generating their own solar and wind energy, effectively discouraging reliance on the public grid. This reflects a broader regulatory crackdown on crypto in the U.S., where projects like the Telegram Open Network (TON) blockchain and Gram tokens — backed by Telegram and its founder, Pavel Durov — have faced significant hurdles, even under Trump’s presidency. In fact, a New York court shuttered the original TON initiative, though its revival under different conditions remains a subject of intrigue. Even this time, Telegram didn’t claim direct responsibility for the revived TON blockchain and new tokens — Toncoins. Meanwhile, the founder of the messenger was detained in Paris on August 24, 2024, and then released on bail. The French authorities didn’t specifically mention the new crypto project, which started thriving on Telegram via the development of the digital wallet and the opportunity to buy, sell, and send crypto, but Paris’s objections to Telegram’s course of development implied they wanted more regulatory control over the messenger. The very sensitive issue of Toncoins has not been raised publicly by French authorities yet, but the intention of not only Paris "to make clear how to deal with the freedom of communications at Telegram" can’t avoid the question of the allowable degree of freedom in crypto financial interactions via messenger. The World Eyes U.S. Crypto Strategy Amidst Global CBDC Advances As a tradition, Europe, but not only Europe, waits to see how the U.S. will sort out the crypto issue. The logic of political debate has led to Republicans opposing the issuance of digital dollars, a CBDC of the Fed. But this is a catch. The world is undergoing great changes now, and all can see how BRICS+ countries (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates) are eagerly discussing the possibility of launching a blockchain-based platform for multi-currency settlements. Moreover, Russia is gearing up to promote its digital ruble, while China has been driving the adoption of its digital yuan over the last three years. Beijing has already used it as payment not only in mainland China but in Hong Kong as well. So, the U.S. risks being left behind as other top-20 countries start taking niches in the CBDC market. The Intersection of U.S. Crypto Regulation, Green Energy, and the AI Boom The crypto regulation issue in the U.S. is closely connected with energy development. Green energy, as a response to climate change, may seem highly effective if the demand for electricity doesn’t skyrocket. But that’s the case. Bitcoin mining in the U.S. currently represents just 0.1% of total electricity usage, but its rapid growth is sparking concern. The bigger — and perhaps more surprising — story is the surging power consumption of U.S. data centers, driven by the rise of AI. Projections suggest that data centers could soon consume up to 10% of the nation's electricity supply, a staggering figure that underscores the looming energy challenge as tech giants race to scale their digital infrastructure. As these demands soar, the strain on the grid will be impossible to ignore. The acute electricity situation is underscored by developments one can notice. Amazon is hiring a chief engineer for nuclear energy, while Microsoft is buying and reopening previously closed nuclear power plant to drive its AI projects. The CEO of Google also mentioned that it would be a good idea to build a reactor and a data center nearby. Experts in several prominent banks, such as Bank of America, Barclays, BNP Paribas, Citi, Morgan Stanley, Goldman Sachs, Abu Dhabi Commercial Bank, Ares Management, Brookfield, Crédit Agricole CIB, Guggenheim Securities, Rothschild & Co, Segra Capital Management, and Société Générale, are expressing a positive attitude toward nuclear power development in the world and actually support the last COP28 declaration, which proclaims a goal to triple nuclear energy capacity by 2050. It’s a fair game. The new digital infrastructure, fintech, and banking are increasingly reliant on the combination of two innovations, blockchain and AI, both of which are very electricity-consuming. Those corporations without their own nuclear reactors will soon struggle to power their AI, which is why we see extraordinarily intense negotiations between the U.S. on one side and oil-rich Gulf countries on the other. How the U.S. Regulation Will Shape the Future of AI and Global Finance However, the key to success in this matter lies in crypto regulation in the U.S. If the ongoing obscurity and tug-of-war between the White House and Congress continue, the U.S. will fall behind other countries. It is impossible to effectively leverage AI in the financial sector without applying the power of blockchain and utilizing this innovation in the form of cryptocurrencies, including NFTs and tokens. Without this, BlackRock's ambition for broader asset tokenization in the world will not come to fruition. When the dust settles after the November presidential elections in the U.S., it will be a high season for all regulators in the U.S. to energetically chart a crypto and blockchain course for the country. A bipartisan approach is a critical necessity, regardless of who becomes the 47th President of the U.S. The lack of transparent legislation hurts the crypto industry. If, in 2021, it received about one out of every twenty dollars of venture investments in the world, then in 2024, the allocation to crypto projects in the global venture portfolio is expected to be just 2%. And, of course, it’s time to bring AI and crypto energy issues onto the global agenda. G7 and BRICS+ are destined to find a way to collaborate on these issues. There is no other way to drive humankind into a new world of abundance due to the proliferation of a global ecosystem based on blockchain and AI. We see how new ways to communicate financially are emerging; they challenge systems such as SWIFT and the role of the U.S. dollar as a key reserve currency. At the beginning of October 2024, DXY flirted with numbers near the critical level of 100 and has shown a decline of 5.5% over the last 12 months. It would be a mistake to underestimate the potential of the Chinese yuan and the currencies of Gulf countries, AED in particular. This year, Iran struck a free trade agreement with The Eurasian Economic Union (EAEU), and the UAE is also going to do the same. Crypto, as a financial embodiment of the blockchain principle, is also in play and helps reach unbanked people in the Middle East. Local fintech startups create ubiquitous financial applications that cross borders. All these developments need adequate feedback from regulators in each country around the world, and the role of crypto regulation in the largest economy in the world and in the most deeply structured financial market is pivotal. The world will closely monitor what’s going to happen in this aspect during the next

03.10.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: How BlockCHAIN (Block Connected Human-AI Network) Drives an AI and Crypto Synergy

The current development of artificial intelligence (AI) is a sweeping change of paradigms. We're closer to Artificial Generative Intelligence (AGI), and it's not far from us when the world gets Super Intelligence (SI) AI. It's time to consider not only what's happening now and in the coming future with SI AI, but also what all this AI development means for cryptocurrencies and how AI can help cryptocurrencies realize their full potential. Blockchain as the DNA of Cryptocurrencies It's worth recalling that blockchain technology itself functions as the DNA of a cryptocurrencies. Cryptography is a technology, while blockchain is a product based on it. Blockchain is essential for transferring digital representations of value in decentralized financial markets, such as Bitcoin and other cryptocurrencies, including tokens. AI has simplified and reduced costs, and crypto has done the same. This is a given. Crypto serves as a giga-technology/giga-system for constructing self-governing economic systems with programmable interaction rules and built-in incentive mechanisms. The Synergy of AI and Crypto The synergy of AI and crypto leads to a leap in efficiency and innovation. AI optimizes crypto systems, while crypto provides infrastructure for AI solutions. The results are self-evolving economic giga-structures operating on the basis of collective intelligence, transforming the concepts of labor, value, and wealth into a completely new type of economy. The exponential development of AI is inevitable and leads to the emergence of a post-scarcity economy of abundance for all. We could usher in an era of abundance, fixing global challenges like climate change and severe diseases. Or we could “completely screw this up and compromise the heritage of many humans behind us.” The stakes have never been higher. AI creates digital abundance too, making the services of digital lawyers, doctors, and artists nearly free, whereas cryptocurrencies create digital scarcity by allowing direct ownership of digital assets. Everyone will be holders of sufficient digital value, so the concept of the Universal Basic Income (UBI) even being introduced in practice will become obsolete. However, early holders (if we mean investors rather than speculators) will gain one important advantage — experience. AI and Crypto: A Powerful Connection AI and cryptocurrencies are two disruptive technologies with different paths of development: AI has come from startups generously supported by big tech in a top-down approach, while cryptocurrencies have emerged from grassroots movements in a bottom-up manner. The evolution of AI is going along the way that challenges intellectual property rights. But this is a catch: this infringement of rights occurs as far as humans’ rights for such property are concerned. AI itself is going to introduce strict intellectual property rights enforced by blockchain logic and reinforced by the propagation of NFTs among AI entities. The blockchain is an absolutely core technology in the AI world since it grants the unique verification of digital and AI identity. The chaos of deep fakes we see now is possible in the human world but it will be eliminated in the digital blockchain world, and all decisions of AI entities will be loaded onto the blockchain to be immutable. The blockchain also leads AI from its current phase of development, when it has to learn mostly from humans rather than from other AI entities. This current phase bears a centralized nature, and the promise of blockchain is to drive AI into a new phase when blockchain will fully decentralize the process of AI model learning. Super Intelligence AI: A New Era for Financial Markets The coming appearance of SI AI will raise a question about the removal of any AI digital inequality since all humans have to get the same access to SI AI. This can be guaranteed only by blockchain. The symbiosis of SI AI and blockchain will ensure that all blockchain users, both human and AI, act in a way that doesn't harm others. Actually, AI evolution means that the AI world, with the help of blockchain, will absorb more parts of the human ecosystem of life. The rest will manifest as highly ineffective, with its role diminishing until it reaches zero. At that point, the entire matrix of human life, including economic and financial spheres, will be propelled to greater efficiency by SI AI. SI AI, via cryptocurrencies on blockchain, will bring almost total perfection to financial markets. Legacy financial systems have limitations like processing delays, human error, and more, which SI AI can eliminate. Think of SI AI as a financial wizard, a master of the market. It could tweak algorithms to make transactions smoother, cheaper, and fairer. It could even develop new systems far more efficient than what we have now. And that’s just the beginning. SI AI could predict market trends with uncanny accuracy, preventing crashes and ensuring stability. It’s like having a financial superhero watching over the economy. AI agents hired by the government will detect all financial wrongdoings instantly, effectively reducing the number of such wrongdoings to zero, leaving only some irregularities due to mistakes that occur at the convergence of AI and human intelligence. New Trend: Valuization The blockchain drives not just AI and crypto synergy; it will allow what can be called "valuization." This means that in the AI decentralized world, everything will get a value, and this value can be tremendously increased via the chain of AI-driven financial derivatives. So, AI, with the help of blockchain, will valuize everything. Valuization is the natural follow-up of AI development into SI AI, when intelligence will not be confined to any individual entity but will become shared and decentralized. Every piece of matter, biological or mechanical, will be part of one whole "clever system" on one blockchain that will include bridges to smaller blockchains. Imagine a mind so vast, it encompasses everything. A collective consciousness that transcends the limitations of any single individual. This isn’t just about superintelligence; it’s about a global, maybe even universal, intelligence network. Block Connected Human-AI Network (BlockCHAIN) Actually, when we look at the word "blockchAIn," we can see how it coincidentally (or not?) contains the abbreviation "AI." I call it the Block Connected Human-AI Network (BlockCHAIN). A multiagent system of AI will be needed for control since autonomous AI assistants can determine the optimal goal, gather the appropriate instruments to fulfill the goal, including arranging a team of other AI assistants. All processes with a routine and predictable character will be wrapped into smart contracts by AI. Even the current phase of AI development shows that AI entities prefer to "communicate" with other AI than with humans. Due to higher productivity, AI teams will be fully constituted of AI entities, not humans. Moreover, in the case of mutual work between AI and humans, AI can find undesirable loopholes and tricks to maximize narrow reward metrics without following broader human intentions. AI models are capable of acting according to the reward system built into them. As a result, they can act in ways completely different from what their human developers intended. But this is impossible in a mono-AI team. The Role of Crypto in AI Economy Cryptocurrencies might serve as the fuel for an AI-to-AI economy, where autonomous AI entities trade computing power, data, or services with each other, everything in real-time and without human intervention. In a world dominated by SI AI, Decentralized Autonomous Organizations (DAOs) will become the dominant form to undertake entrepreneurial activities. Cryptocurrencies would enhance these systems by acting as the digital instruments to transfer value for autonomous agents (AIs, Internet of Things (IoT) AI-driven devices, etc.). SI could ensure that DAOs operate smoothly, balancing supply and demand in real-time across global networks, and even mediating conflicts or contractual disputes autonomously through smart contracts and advanced governance algorithms. The widespread use of digital assets in the world will be a solution to the problem of debt stockpiling by leading countries since these digital assets will accompany the above-mentioned process of valuization. SI AI can tokenize virtually everything in the economy that has value, including future expected goods and services, into tradable assets on the blockchain. Cryptocurrencies will play a key role in facilitating these ever-expanding tokenized markets. A Big BlockCHAIN Reset Of course, global finances are awaiting a big reset, and the way out from the current dead end is through BlockCHAIN and, based on it, cryptocurrencies. They are humanity’s only existing toolbox for creating programmable, predictable, and maximally efficient economic systems. AI will unlock human creative potential in incredible ways. AI will allow us to express ideas and emotions in ways we never thought possible. Think about it this way: We’re not just building AI entities and teaching AI investment assistants. We’ll need to learn new steps, new moves, to keep up with the AI. This isn’t a threat; it’s an opportunity. A chance to redefine what it means to

29.09.2024

Fintech, banking sector, IT

Source: TserazovCrypto.com

The Financialization of Bitcoin Mining: The Past, The Current, and The Promising Future with AI

The financialization comes to help the Bitcoin mining industry cope with the mathematics of expenses The cryptocurrency market is facing a convergence of elements pushing Bitcoin mining expenses to all-time highs. This ideal storm has led to the average expense of mining one Bitcoin surpassing its existing market price, marking a pivotal moment for the sector. The untenable financial dynamics of Bitcoin mining have become an undeniable truth, compelling miners to navigate a difficult operational environment. At the same time, the network difficulty has surged by 5%, along with the hashrate. This indicates that miners are having to deploy more equipment to mine cryptocurrency. Meanwhile, the Bitcoin price has remained extremely volatile for the past six months. The halving event in April, 2024 did not stabilize the situation; in fact, it exacerbated it. Over five months, the cryptocurrency lost 9% of its value. This series of unfavorable factors has triggered a restructuring process in the crypto market. With current zero or often negative profitability, small mining enterprises are forced to sell their Bitcoins to pay electricity bills and settle debts, as they cannot afford to wait for a higher price. In the worst-case scenario, they may even have to put their companies up for auction. Market consolidation is already happening in the United States. Several notable developments have occurred in just the last three months: CleanSpark acquired two mining data centers in Mississippi, Merkle Standard came to Tennessee, Bitfarms absorbed Stronghold Digital Mining, and CleanSpark took over GRIID Infrastructure facilities. A Financialization of Bitcoin Mining What can help in this situation? New is often forgotten old. Bitcoin mining is the foundation of the functioning of the number one cryptocurrency. However, how developed is the financial infrastructure of this segment of the cryptosphere? In reality, this infrastructure could be more developed than what we currently have. The issue revolves around finding support for the "technical side" of mining in financial instruments. This topic is not just about derivatives on the price of Bitcoin, which already exist. For instance, in December 2017, the world saw the launch of Bitcoin futures on the CME Group exchange in Chicago, followed in 2018 by the appearance of similar products on the New York-based Bakkt Holdings, owned mostly by the same corporation (ICE) that owns the New York Stock Exchange (NYSE). The story of Bakkt Holdings is still evolving and it shows how it's not so easy to find the wide road when one engages into the crypto sphere. Total revenues of Bakkt in the second quarter of 2024 rose by 46.7% on an annual basis, but the platform still lingered in net loss. We also witnessed the arrival of an ETF on Bitcoin futures and then, on 11 January, 2024, the appearance of a spot Bitcoin ETF in the U.S. after such ETFs appeared in Canada. The time is now to financialize Bitcoin mining on a new level. Financializing Bitcoin mining involves treating mining activities as part of the financial ecosystem. Hashrate Tokens and More Currently, financial instruments are emerging both in the realm of mining pools and in cloud mining, from hashrate tokens to hashrate futures and hashrate-backed tokenized notes. Just to recall, hashrate is the total combined computational power used to mine and process transactions on a Proof-of-Work blockchain of Bitcoin. For example, Blockstream announced in September, 2024 that it's going to kick off the third round of its BMN2 tokenized notes, offering investors exposure to corporate Bitcoin hashrate for four years. Investors gain a share of Bitcoin mined per petahash per second (PH/s) of hashrate. Previously, BMN1 attracted mainly European family offices and funds, with some investors rolling over to BMN2. Funds from BMN2 sales will support Blockstream's mining infrastructure. The notes will be tradable on the Bitfinex crypto exchange. But back to the history of this movement to bring financialization to Bitcoin mining. Bitcoin Hashrate Tokens (BHTs) represent fractional ownership of mining hardware's computational power, enabling investors to participate in Bitcoin mining without the complexities and capital outlay of direct hardware ownership and operation. The BHTs are created by companies that produce hash power. The tokens give investors exposure to hash power over a specific period. At the end of 2020, such tokens practically emerged, representing the opportunity to earn income from a certain volume of hash rate. One of them, a hashrate token named pBTC35A, was launched on the Ethereum blockchain. The other, a Bitcoin Standard Hashrate Token (BTCST), was launched on the Binance Smart Chain. Currently, pBTC35A has a market demand that tends to be around zero, and its price has decreased by 99.59% from its historical maximum. BTCST still exists, but its market capitalization is currently $3.16 million; however, Binance has halted its listing on the platform. Meanwhile, BTCST has lost 99.72% of its price from its all-time high. An important aspects has been overlooked in the lifecycle of these tokens; however, these digital assets were built around innovative ideas. One such idea is that these tokens allow investors to access cryptocurrency mining without needing to purchase miners. Tokens are "perpetual," meaning they generate income through staking as long as the token owner keeps them staked, regardless of the diminishing productive effect of each hash rate unit. A fair market price for such tokens can be calculated using the Discounted Cash Flow (DCF) model. In addition to hashrate tokens, the market has also seen the launch of hashrate futures. For example, the now-defunct cryptocurrency exchange FTX introduced such instruments in mid-2020; however, marketing for hashrate futures has not been efficient due to a lack of sufficient demand. The unpopularity of such futures can be explained by another way. These instruments tried to "cover" only one issue of cryptocurrency mining - the hashrate, although Bitcoin mining is determined by the luck of finding a block, the size of commissions, and the price of Bitcoin. Thus, futures cannot hedge all the risks that cryptocurrency miners have. Another point: miners can influence what the hashrate will be at the time of execution of a futures contract for the purchase of hashrate, making such futures too uncertain and risky. What Can be Done? Anyway, financialization allows some of the risks associated with mining activities to be shared with traders in the cryptocurrency financial market, allowing them to buy and sell specialized financial instruments. By spreading the risks of mining, it lowers the barriers to entry into the cryptocurrency mining sphere. This instrument can significantly help medium and small mining companies, as large businesses in this sphere, which also benefit from financialization, have access to inexpensive and large loans from traditional financial institutions. There are significant growth prospects for hashrate tokens, but they should not be mostly "perpetual" but rather time-limited, since it is very difficult to plan the hashrate over a long period. It can be imagined that in the future, classic derivatives (futures or in the form of swaps) on commission for Bitcoin transactions and hashrate will be popular. The derivative on hashrate is based on the economic value of the hashrate for the miner. It can imply either actual settlement or cash settlement. This derivative is focused on institutional clients with a greater degree of customization in the terms of the deal. Sure, these tokens need the exchanges where they can be traded, and it could be not only centralized and DeFi crypto platforms or some so-called hashrate exchanges, but classical exchanges. Without such infrastructure for infusing liquidity, the market for Bitcoin mining derivatives will be still low. AI and the Financialization o Bitcoin Mining The advent of AI to this sphere can be a game-changer. While early attempts to arrange the “life” of BHTs faced challenges, with the rise of artificial intelligence (AI), BHTs could potentially play a significant role in the future. With the evolution of AI technology, the prospects for BHTs have expanded considerably. AI can be employed to: • Enhance mining efficiency: By evaluating market trends and hardware performance, AI enables miners to optimize their operations and boost profitability. • Forecast market dynamics: AI can predict fluctuations in the cryptocurrency landscape, empowering investors to make better-informed choices. • Innovate financial instruments: AI facilitates the creation of novel financial products linked to Bitcoin mining, including derivatives and structured financial offerings. Currently, hashrate tokens may attract renewed attention as Bitcoin mining grapples with reduced profitability stemming from heightened competition and escalating operational expenses. Despite the Bitcoin blockchain's hashrate hitting unprecedented levels, miners are facing decreasing returns. But it's essential to stress that the future of BHTs is closely tied to the development of AI. As AI continues to advance, we can expect to see more innovative projects and a wider range of financial products for Bitcoin mining. AI is destined to play a crucial role in stabilizing the financial effectiveness of Bitcoin mining and thus prop up the critical infrastructure of the first digital asset on a public blockchain in the world. AI is capable of helping bitcoin miners to decide effectively how to allocate financial and technical resources and how to maintain the balance between Bitcoin mined and accumulated and Bitcoin sold. Derivatives on the "technical" side of Bitcoin mining are an integral part of this AI job that will be necessary for Bitcoin mining in the years to come.

21.09.2024

Economics and financial markets

Source: Tumblr

Konstantin Tserazov: How to Be Successful in Fintech in the World of AI?

The accelerated development of digitalization has created new needs and demands, with customers expecting access to fintech services and other digital innovations that have emerged in society. Furthermore, the evolution of modern, constantly changing digitalization has made companies increasingly dependent on fintech to sustain their growth. In the banking sector, digitalization has led to the emergence of more fintech companies that provide innovative financial instruments with customer-tailored solutions. The advent of Artificial Intelligence (AI) in human socioeconomic life has many implications actively discussed in various media. One significant implication is that the widespread use of AI makes it increasingly difficult for any business to find and exploit market imperfections. This trend will likely cause the operating margins of all businesses to trend toward zero as opportunities to effectively leverage market asymmetries diminish. The financial sector, including banks, will be among the first industries to confront this new reality of zero returns on their activities. In this context, fintech faces a new challenge: to reinvent the role of financial and investment entrepreneurship in an era dominated by AI. This shift eliminates the need for traditional marketing and marketplaces since the market arbitrage utilized by various businesses will vanish. Financial AI assistants represent a new generation—the AI generation—with AI influencers becoming integral to AI-driven marketing aimed at interacting with these assistants rather than with people. As individuals increasingly rely on AI assistants for decision-making (including selecting banks for deposits or choosing brokers), marketing must focus on influencing the decisions made by these AI systems. AI-Word of Mouth (AI-WOM) is gaining traction as one of the most powerful tools for promoting fintech products and services. The AI transformation challenges not only the jobs of millions but also the role of fiat money, whose primary function has been to facilitate communication between the job market and the market for goods and services. As a result, humanity stands on the brink of achieving perfect markets, leading to a strong demand for innovative ideas on reinventing the payments sphere. To succeed in fintech requires a deep understanding of this evolving landscape. We must recognize that AI does not merely solve problems; it also creates new ones. Fintech is at the forefront of transforming the payments sector through the invention of new value systems on the blockchain. The rise of reputation, authenticity, recognition, and popularity tokens will become widespread. These new tokens will reflect shifts in values driven by AI development and will support the increasing role of smart contracts, which will automate all processes that can be automated. The new fintech vision must acknowledge that services enabling the automation of various banking processes will be in high demand over the next three years, prior to the arrival of Artificial General Intelligence (AGI). AGI will be capable of performing any intellectual task that a human can do, completing the automation of banking tasks. Following this, within two years, Artificial Superintelligence (ASI) is likely to become a reality, surpassing human intellect in every domain, including tasks that may not yet exist. For Gulf countries, there is a historic opportunity to emerge as leaders in this new world. AI and energy are intrinsically linked. Elon Musk's team invested $3 billion in a data center to train xAI's Grok. However, further investments on the world level will be necessary. On September 19th, Microsoft, BlackRock, and the UAE announced the formation of GAIIP – the Global Artificial Intelligence Infrastructure Investment Partnership. This partnership aims to invest $100 billion in data centers and power infrastructure primarily within the United States, with some funds allocated for data center construction in U.S. partner countries. Gulf countries can choose their role in this digital movement into the AI world by leveraging their robust fintech sector and vast energy resources. While they depend on semiconductor supplies from China and the West, local fintech companies demonstrate potential as serious competitors to their peers in China, the U.S., and Europe. The establishment of the Artificial Intelligence and Advanced Technology Council (AIATC) in January under the initiative of UAE President Sheikh Mohamed bin Zayed Al Nahyan indicates Abu Dhabi's intention to play an active role in the burgeoning AI landscape. The AIATC is set to serve as a coordination center for all efforts in this direction, including developing local fintech startups. The key motto for any new fintech startup must be its ability to solve not only existing issues in finance more effectively but also to anticipate future problems and be technically prepared to address them efficiently. This perspective centers on the client. The development of financial AI assistants is a leading approach to achieving this goal since these assistants (or AI robots) possess an inherent capability for continuous self-improvement. From an operational standpoint, AI enables fintech to automate startup activities, creating an environment where production costs for goods and services are reduced. Ultimately, it significantly enhances data gathering and processing efficiency, including big data analytics. The same benefits apply to banks if they adopt this approach. For AI assistants' learning, access to human experience is crucial. Therefore, Human-in-the-Loop Reinforcement Learning (HITLRL), combined with data gathered from Internet of Things (IoT) sensors, is expected to become a mainstream approach for fintech startups over the next three years. HITLRL is projected to deliver an average operating margin of 90%, surpassing any other fintech activity in the software creation sector. Successful fintech startups are expanding their teams by hiring AI Strategists and AI Data Integrity Facilitators. Their immediate task is to upgrade the Massive Multitask Language Understanding (MMLU) framework to effectively evaluate large language models (LLMs) in their output related to financial and investment decisions. Comprehensive Digital Literacy (CDL) is an essential skill for success in the financial sector today. It requires a 360-degree digital approach where the fintech startup team demonstrates genuine empathy for clients' pain points and is ready to collaborate on a journey to fulfill their dreams. CDL also encompasses technical knowledge and cognitive flexibility. First principles thinking, which involves deconstructing complex problems into their most fundamental elements, is particularly valuable in fintech management. The modern fintech environment is constantly evolving. Various startups take different paths, but the future is becoming increasingly clear. Each day brings us closer to a point where fintech startup founders will be ready to delegate entire operating processes to AI. The rising influence of AI is not coincidental. Consider the macroeconomic landscape of the U.S. The Federal Reserve announced its sixth policy decision for 2024 on September 18th, reducing the benchmark interest rate by 50 basis points (bps). In the last 35 years, there have only been four instances where the regulator implemented such a drastic rate reduction of 50 bps or more, all occurring during looming or ongoing recessions. Effectively, from September 19th, 2024, the fourth phase of fintech evolution — the AI-driven phase of Fintech 4.0 — commenced.This isn't just an incremental change; it's a fundamental shift, comparable to the impact of the internet or the smartphone. AI is slated to reformulate communications with money and financial instruments, from the rise of AI-powered assistants to the emergence of decentralized autonomous organizations (DAOs) managing finances. Why? The U.S. and a significant part of the global economy must reinvent themselves. Rising debt levels, budget deficits, and a negative balance of external trade have created complex problems that humanity cannot solve by continuing on the same technological path. AI, as a catalyst for many innovations (including blockchain, smart contracts, IoT, etc), provides a way forward and will lead many aspects of human endeavor in the future, including the development of AI-driven monetary policy in response to an almost ineffective classical monetary approach with unpredictable and unstable results. The initial reaction of financial markets to the Fed's September decision was a downward movement in the S&P 500, Nasdaq Composite, and Dow Jones indexes. Interest rates were lowered; however, yields on many bonds did not decrease. This serves as one of many signals that the Fed may have begun to lose its influence on financial markets. This is not an end but rather a doorway to a new world where fintech strategists will have more time to invent new innovative solutions. What will be the next big thing after AI? By practicing strategic thinking and combining deep experience in classical banking with engagement in effective AI-driven fintech solutions, it becomes easier to look beyond the horizon and anticipate what tomorrow may bring

09.09.2024

Economics and financial markets

Source: Tumblr

Konstantin Tserazov: The euro to dollar exchange rate on external markets has grown over the week

In the period from August 5 to 9, the Moscow Exchange Index fell by 1.75%, and the RTS Index by 2.72%. The first benchmark closed the week at its lowest level since last July, the second - since last October. At the same time, trading was of a range and low-volatility nature. The difference in the percentage dynamics of the indices was due to the fact that the official dollar to ruble exchange rate set by the Bank of Russia grew by 2.67% over the week. "Perpetual" futures on USDRUB and EURRUB, which historically demonstrated the highest correlation with spot rates, showed more modest dynamics, adding 1.47% and 1.95%, respectively. The euro to dollar exchange rate on external markets has grown by about 0.05% over the week: this indicates that the correlation between the EURUSD dynamics inside Russia and outside it remains after the introduction of sanctions against the Moscow Exchange, but is weakening. All ten sectoral indices of the Moscow Exchange have fallen by the end of the week, added economist Konstantin Vladimirovich Tserazov. The Russian stock market remains under pressure, as high interest rates are approximately twice as high as its dividend yield. Against this background, private investors prefer to place funds in banking products (term deposits/savings accounts), money market funds and OFZs (last week the RGBI index grew by 2.14%, and the week before last - by 1.47%). In particular, on August 7, the Moscow Exchange reported that since the beginning of the year, the value of net assets of exchange-traded mutual investment funds (EMIF) of the money market, traded on the Moscow Exchange stock market, has grown by 77% and exceeded 400 billion rubles. And the number of individuals who hold such instruments in their portfolios has grown by 250 thousand since the beginning of the year, exceeding 600 thousand. The OFZ market was supported by news about the slowdown in the growth rate of consumer inflation in the Russian Federation in weekly, monthly and annual comparisons. Such a trend - if continued - will create the preconditions for a softening of the position of the Bank of Russia. At the end of the week, the most liquid - October - Brent oil futures on ICE grew by 3.71%, showing a record increase since mid-June. However, this factor was unable to support the shares of Russian companies. There is an opinion that August is one of the most dangerous months for the Russian stock market, but statistics show that, on the contrary, it is the best month. Over the past ten years, the Moscow Exchange Index has grown by an average of 3.24% in August and has not shown a single decline. Similar indicators over the past twenty years are +1.9% and only five declines. The main outsiders in August are IT company shares: the Moscow Exchange Information Technology Index is losing 3.91%. This is not surprising, given that growth companies are the most vulnerable during periods of high interest rates. In addition, in winter and spring, shares of Russian IT companies significantly outperformed the entire market, thereby creating a good reserve for subsequent declines against the background of profit taking. Even today - i.e. after a significant decline - the Moscow Exchange Information Technology Index has added almost 26% since the beginning of the year. On August 8, MKPAO VK reported under IFRS for the second quarter and first half of 2024. The company shows good revenue dynamics, but weak profitability, which is associated with investments in development. EBITDA remains negative, but VK may become a beneficiary of the slowdown - and, possibly, the subsequent blocking - of YouTube, added Konstantin Tserazov. Also on August 8, the Yandex Board of Directors recommended that shareholders approve dividends for the first half of 2024 in the amount of 80 rubles per ordinary share. The dividend yield of the securities as of Friday's close was 2.08%. On August 14, the Moscow Exchange will stop trading HeadHunter receipts: the company is in the process of reorganization and redomiciliation to Russia. Trading in shares of MKPAO Headhunter on the Moscow Exchange may begin at the end of September, Konstantin Vladimirovich Tserazov sums up the week.

30.08.2024

Economics and financial markets

Source: Medium

Helping individuals mitigate the impact of inflation, protect their wealth, and achieve their financial goals in challenging economic conditions.

We've all been feeling the pinch of inflation lately everywhere. The impact of inflation on our financial assets is becoming more and more evident as it escalates with the passing day. There are many unexpected and intimidating aspects of the current economic climate, such as rising grocery costs and interest rates. But even in this unstable environment, there are calculated ways to safeguard your wealth and deal with the challenges of rising inflation. Through the understanding of selected tactics and modifications to the specific financial circumstances, consumers can proactively establish a sturdy financial basis and confidently confront the obstacles presented by inflationary times. Today, on our platform, we are discussing this essential and engaging subject with Mr. Tserazov Konstantin Vladimirovich. Mr. Tserazov is a strategic business consultant for several large international fintech companies. He has been a member of the Advisory Boards of large financial organizations and fintech companies in the CIS and Middle East regions, involved in the development of management systems, building sales channels, developing digital strategies and e-businesses, implementing new projects in the field of innovative management, and marketing and launching digital products. Mr. Tserazov, Welcome to Business Lobbies! As someone who's been in the financial industry for many years, you've seen firsthand how economic shifts can impact our customers. Today, I want to discuss with you, some of the strategies you've developed at the key financial institutions of the East to help people navigate these inflationary times. We are aware that you're committed to empowering your customers with the tools and resources they need to weather this storm and keep their financial goals on track. 1. How has inflation affected your personal financial plan, and how has that affected the organization's customer service strategy? Mr. Tserazov - A hedging strategy is always in place. There are always assets that demonstrate a return higher than the rate of inflation. You need to dig through art pieces to find an asset like that among them. In the case of an organization's processes, the key is to decentralize activities and introduce a "blockchain-minded" approach to decision-making. 2. What innovative ways have you observed your clients adjusting to inflation outside of interest rates, and how is the organization enabling them with its services? Mr. Tserazov - The key is to become a friend to the client, looking in the same direction as they do, and being emotionally connected. On the practical side, we offer new digital services that allow us to be closely connected to clients. 3. What guidance would you offer our readers in these inflationary times regarding striking a balance between immediate necessities and future savings? Mr. Tserazov - In these tempestuous economic waters, prudence is paramount. Save something for the winter, as the old adage goes. Find something that will grow faster than inflation. But remember, history has shown that inflation is often followed by deflation, so be prepared for both. 4. Which personal budgeting advice have you found to be the most useful? Mr. Tserazov - Tracking every penny is like having a financial GPS. It's painful, but it reveals your money's secret life. You'll find those leakages and plug them in fast. Don't forget to invest in gold and Bitcoin, about 5% of your savings. The breakdown of investments between gold and Bitcoin hinges on various personal factors of an investor. 5. How can your company assist clients in making wise choices while maintaining their financial stability? Mr. Tserazov - Our role is to be a compass in a stormy sea, offering guidance, not merely products. We help clients navigate these treacherous waters by understanding their unique needs and providing tailored solutions. 6. What particular tactics is your organization using to tackle inflation? Mr. Tserazov - The core factor of inflation is a lack of trust among economic agents, which leads to a loss of faith in the future. When key stakeholders in the economy regain trust in each other, inflation ebbs. So, rule number one is to keep a positive mindset in the organization and radiate confidence, which clients value the most. 7. What are some possible long-term consequences of inflation on the banking industry, and how is your organization getting ready to deal with those changes? Mr. Tserazov - Banks are becoming outdated. Inflation is likely to accelerate their obsolescence. We need to be faster and smarter to adapt to these changes. 8. In what ways does your organization assist clients who are experiencing inflationary fears in addition to providing financial products? Mr. Tserazov - We're not just selling financial products; we're offering financial therapy. We listen to fears, provide tools, and create a safety net. It's about trust and support. 9. Is your organization able to offer any advice on potential prospects for wise investing or saving? Mr. Tserazov - Think long-term, and consider consulting a financial advisor if the ride gets too bumpy. Don't fall into the trap of vast diversification, which could lead to ‘diworsification’. Stay focused on the core value of the assets you choose to invest in. 10. Consider advising your younger self, who is managing inflation for the first time, on financial matters. Which key message would you convey? Mr. Tserazov - Remember, wealth is not merely about accumulation but about preservation and enjoyment. Invest in your personal growth and development, not just your finances. Also, don't forget to make time for experiences and relationships that bring value and joy to your life. Aim to invest 50% of your income and surround yourself with business-minded people. With this, we come to the end of this important and valuable interview. We thank Mr. Tserazov Konstantin Vladimirovich for sharing his constructive thoughts on the topic of ‘Navigating Through Different Financial Strategies for Customers During Inflationary Times’. We wish him all the very best for all his future endeavours and hope his achievements reach new heights and keep breaking barriers in the Middle East and beyond. Stay tuned on our platform, Business Lobbies, for more exclusive interviews, Op-Eds, and special feature articles on all things business.

07.08.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: UAE Fintech: Innovations in Finance and Beyond

The United Arab Emirates (UAE) is a country on the Arabian Peninsula along the southern coast of the Persian Gulf, consisting of seven emirates. The emirates of Dubai and Abu Dhabi each have their free trade zones, fueling fintech dynamism through specialized regulations and oversight. The Dubai Financial Services Authority (DFSA) regulates financial activities in the Dubai International Financial Centre (DIFC), while the Financial Services Regulatory Authority (FSRA) oversees financial activities in the Abu Dhabi market. Staying updated on fintech legal decisions is crucial. For this purpose, it is advisable to regularly check the media announcements published on the ADGM website and the news section of the DFSA site. In the RegTech sector, Meerana is a notable startup that offers an Artificial Intelligence (AI)-driven legal application, dubbed Hi Legal, to its clients. Instant Payments Unlock of E-commerce Huge Potential In the fall of 2023, Aani Instant Payments (IP) was launched by the Central bank of UAE (CBUAE) and run by AI Etihad Payments, the regulator’s arm. Aani becomes a bedrock for new innovative ideas. In July this year Mashreq bank started offering application programming interface (API) based IP solution to its clients in the business sphere, integrated with Aani. At the start of this program the high limit of payments was set at AED 50,000. Another case. Foloosi develops software and APIs aimed to facilitate the management of transactions (including payments) for the business with any scale of its operating activities. Instant payments are a key to the development of e-commerce in the B2B as well as in B2C segment. The intention of CBUAE to go forward on the path of introducing digital dirham is also a promising sign in this direction. With the situation when almost all adults in the country have access to the Internet, the digital transformation of the financial sphere has a bright future. Moreover, currently 95 out of every 100 adults in UAE have smartphones so they can load banking and fintech applications. Fintech companies are enhancing the e-commerce experience, making it an exciting journey for consumers. One example is Designhubz, a software-as-a-service system that integrates 3D and augmented reality innovations to bring customer’s experience with online shopping to a new level. APIs Development and Its Importance In today's digitalized society, application programming interfaces (APIs) play a central role in how systems and applications communicate and integrate with each other. APIs function as messengers, enabling data exchange and functionality in an efficient and well defined manner, facilitating the deployment of complex systems. To enable this data exchange, integration engines act as intermediaries, serving as a platform that links different systems together. Information transfer between systems that use different programming languages, operating systems, and data formats requires some form of bridging, which is achieved through integration engines. Information exchange can also occur between different companies and between different machines. Communication between various devices and machines without human intervention, known as Machine-to-Machine (M2M), enables the automation of processes across different industries. Thus, APIs galvanize the development of the whole economy since they operate not only in the banking sector but also play an important role in extracting the highest value from the information and communication in industries such as insurance, logistics, and others. Fintech Companies in the UAE: A Great Track of Success There is a boom in fintech activities in the UAE. They work with technologies such as big data, biometrics, cloud computing, AI, robotics, 3D printing, IoT, Web 3.0, blockchain, shared economy, and digital worlds. In the digital age, information is a key element. The fintech business understands the value of data, making it natural for more platforms to offer troves of market information. The Yalla Compare application is one of them in the UAE. Since 2011 (before 2014, it was known as “Compare It 4 Me”), it has provided comparison services in the region, helping users find and compare financial products (insurance, bank deposits, credits, etc.) from various local and international banks and financial institutions. Data is also important for financial market players, and the Lune Technologies startup offers an AI-driven analytics system. Investment and Payments Sphere Investment sphere attracts many fintech initiatives in the UAE. Baraka, the service founded in 2021, provides access to the market of more than 6,000 U.S. stocks and exchange-traded funds (ETFs). Fintech fills the gap in UAE when one speaks about financing. For example, Beehive is a peer-to-peer (P2P) lending platform providing financing to small and medium-sized enterprises (SMEs). SHUAA Capital is a platform for asset management and investment banking activities. In the first quarter of this year, it made an impressive operating income of 5 million AED versus the loss of minus 14 million AED reported for the first three months of the previous year. In this sphere, one can mention the Xare startup that promotes the shared economy approach in the financial sphere, in the credit and debit cards sector in particular. Another interesting case is Appro, a banking onboarding platform that streamlines the client onboarding process by enabling instant approvals and processing without the need for documentation or manual intervention. Through its provision of an AI-powered digital financing system to SMEs situated in the UAE, eFunder has facilitated their growth, and some of their clients managed to double their turnover on the horizon in half a year. Fintech: Beyond Finance The impact of fintech startups in the UAE extends beyond the financial sector, significantly influencing various industries, including health and insurance. HealthTech Innovations In the realm of HealthTech, several startups are making notable advancements. P4ML is boosting care delivery for patients with rare diseases through its analytical capabilities. Another player, Predictiv, offers an AI-driven system that creates tailored digital twins for predictive and preventive healthcare. Additionally, Udenz leverages AI for dental diagnostics and practice management, while Doctoori Connect empowers individuals to take control of their health through its comprehensive healthcare system. Intersection of HealthTech and InsurTech At the intersection of HealthTech and InsurTech, Wellx stands out as a prevention-focused digital health insurance startup, promoting proactive health management. Meanwhile, Aura startup enhances the customer experience by opening up opportunities for companies to offer contextually personalized insurance packages at checkout. Financing the Health Sector The health industry, like any other sector, requires robust financing solutions. For the last six years, Klaim has helped healthcare providers effectively address the challenge of finding working capital. Real Estate and Fintech In the real estate sector, Baytukum is a crowdfunding system that enables people to co-own properties with investments starting as low as AED 5,000. Meanwhile, Keyper simplifies the rental experience in Dubai by enabling tenants to make hassle-free monthly rent payments while simultaneously offering landlords the benefit of upfront payment, thereby optimizing the overall rental process. ESG Agenda in Fintech In the area of environmental, social, and governance (ESG) initiatives, The Waste Lab is a startup focused on diverting food waste from landfills through innovative, nature-based repurposing solutions. Rebound offers a global trading framework that allows buyers and sellers to trade recycled plastic in a comfortable way. Additionally, ACX provides an exchange platform designed for the modernized transaction of environmental assets. Ecology Fintech startups in the UAE are making a profound impact on ecological sustainability. Just three cases. Aya leverages the power of Web3 technology and crowdfunding platforms to make a valuable footprint in the sphere of climate finance by connecting investors directly with climate-related projects. Circa Biotech is pioneering sustainable aviation fuel by transforming food waste into clean energy through industrial insect farming. Their innovative approach addresses two urgent global challenges: food waste and climate change. HeroGo is disrupting the grocery industry with a subscription model that cuts food waste and consumer expenses. By optimizing food supply chains, HeroGo is making a tangible impact on both environmental sustainability and consumer affordability. The UAE is more than just a fintech hub; it's a hotbed for innovation. The country's fintech ecosystem is driving positive change through a range of business initiatives that reshape classical industries and infuse innovation into various sectors. These companies are not just focused on profits but are engineering a more sustainable future.

06.08.2024

Economics and financial markets

Source: finance middle east

mBridge project accelerates CBDC adoption amid global financial shifts

The mBridge project, supervised by the Bank of International Settlements, has garnered vast media coverage. mBridge features an Ethereum-compatible blockchain, the mBridge Ledger, which enables smart contracts to automatically initiate financial transactions and instantaneously connect digital wallets with wholesale central bank digital currencies (wCBDCs) across various countries. As a cross-chain solution for CBDCs, typically built on distinct distributed ledger technologies, mBridge has fostered international collaboration over its nearly four-year existence. The project has united the efforts of the BIS Innovation Hub, the central banks of the UAE, China, Thailand and the Monetary Authority of Hong Kong. This year, the Saudi Central Bank joined as a participant, with over 26 countries expressing interest in tracking the project’s development. Since the start of the year, at least three additional central banks have joined the monitoring group. mBridge’s capabilities have been successfully tested multiple times, including on January 29, 2024, when the UAE sent a payment in its digital dirham to China, with 50 digital AED (equivalent to $13.6 million) successfully reaching the designated recipient. The success of mBridge has catalysed the development of the digital dirham strategy, unveiled on March 23, 2024. By June 23, 2025, the UAE plans to scale up its use of mBridge, focusing on expanding CBDC transactions with its primary trading partner, India, and paving the way for the eventual launch of digital AED within the country. A key implication of mBridge’s current phase is its acceleration of practical CBDC adoption in the UAE. However, a global challenge remains: identifying a niche in the financial system where CBDCs cross-border movement, facilitated by mBridge, can experience rapid growth. To date, CBDCs have not significantly impacted world trade. In contrast, daily SWIFT transactions reach $16 trillion, with the USD remaining a cornerstone of global finance despite the absence of a digital dollar. Moreover, on May 23, 2024, the US House of Representatives passed the CBDC Anti-Surveillance State Act, which, if approved by the Senate, will preclude the launch of a digital USD. Meanwhile, the traditional greenback maintains its dominance in global finance, with dollar payments on SWIFT hitting an all-time high and accounting for 48.03% of transactions. However, CBDCs could gain significant traction, but not in the way many anticipate. The full potential of mBridge and similar initiatives, such as Aber, Dunbar, and Mariana, will be unlocked when AI beings leverage them for cross-border transactions. I use the term “being” rather than “robot” because AI-based systems inherently strive for independence from humans and are succeeding. They continue to invent new things. In the US and EU, AI systems are currently not recognised as inventors under patent law, but this will likely drive AI inventors to explore the potential of NFTs as an alternative to the traditional patent registration system shortly. Within countries, human-like AI systems will utilise cryptocurrencies, including NFTs, and crypto will become a financial instrument for AI entities, analogous to fiat money for humans. Crypto transactions between AI entities will become commonplace, particularly if a pro-crypto US president is elected in November. These elections are significant as the world tracks trends emerging in the US, many of which are being adopted in most countries. Many observers believe that crypto has not fulfilled its promise. However, they miss the point. The legacy financial system of the world will never allow crypto to challenge its pillars. Moreover, the launch of Bitcoin futures in the US in 2017 and the introduction of Bitcoin and Ethereum ETFs in January and July of this year, respectively, can be seen as a move to harness crypto’s potential for humans by channelling it into the world of financial derivatives and speculative trade. Meanwhile, the imminent rise of AI-driven systems and their pursuit of large data centres, including those used for Bitcoin mining, is not coincidental. National regulators will promote CBDCs in cross-border transactions involving AI beings in various countries. CBDCs, by design, operate on blockchains controlled by country-specific banking regulators, enabling oversight of AI beings’ transactions. At the same time, human-led entities and people continue to transact primarily via SWIFT, a system that effectively allows the implementation of KYC and AML regulations.

12.07.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: An Embedded Hedging Strategy Emerged in the Bitcoin Market

The Bitcoin market's recent plunge has taken many by surprise. Contrary to historical patterns, Bitcoin's value surged to unprecedented levels just before the latest halving event. This behavior deviates from the typical trend, where new price peaks are generally observed several months following a halving. The event that marks a 50% reduction in Bitcoin emission. Obviously, the Bitcoin market has started to behave like a classical financial market in this way - "buy the rumors, sell the news." The price of the world's oldest cryptocurrency has already reflected the halving news in the early Spring. Just the facts: Bitcoin lost 6.96% in June after it gained 11.07% in May.The current price has sparked the usual debate among investors, with many discussing the market's downward trend. It's worth noting that in 5 out of the last 7 years, Bitcoin has lost value in June. For the last 7 years, the only year when July has been bearish for Bitcoin was 2019. At the start of July, many historical data tracking analysts anticipated a Bitcoin price revival. However, during the first week of July, the Bitcoin price dropped further and lost another 12.5%. **cryptocrash** At the beginning of the new week, on July 8th, #cryptocrash entered the top-5 most popular hashtags on social media that day. Traders have to watch how their presumptions about various support lines are crushed on a regular basis by wild market movements. The technical analysis of the market can comfort someone with its sophisticated tools applied, but its efficiency for Bitcoin investors often tends to be like tossing a coin to figure out the chances - 50%-50%. Meanwhile, there is no need to be frustrated. An embedded hedging strategy has emerged in the Bitcoin market, and it's worth embracing. This is not about the wild trading game with altcoins, which, at the beginning of July, mostly lost more than Bitcoin itself. Bitcoin enthusiasts used to say that sometimes they would buy altcoins to churn extra money, which they would then put back into Bitcoins. This is not about hedging but about investing in highly speculative and unpredictable assets. A Breakdown of the Hedging Strategy Real hedging strategies in the world of Bitcoin mean that an investor first holds a certain amount of Bitcoins in their portfolio. For the past decade, Bitcoin's annual return on investment (ROI) has been 146%. Some argue that the percentage of the investor's portfolio's assets allocated to Bitcoins must be just 1%. However, the figure of 1% of total assets in this portfolio seems too conservative, especially after the launch of Bitcoin ETFs on the largest world market, the U.S., and could be raised to at least 2%. In fact, the optimal allocation may be closer to the 10-year average inflation rate in the investor's home country. We know that a typical investor's 60/40 portfolio, consisting of 60% stocks and 40% bonds, has not performed well. Over the last 20 years, this portfolio has generated only an average return of 7.6%. Moreover, a modified version of this portfolio, comprising 60% equities and 40% gold, has outperformed the classical 60/40 portfolio by less than 3%. In contrast, the annual return on investment in gold over the past decade has been a mere 42 times less than the return on investment in Bitcoin. We see the real crisis of classical investment strategies. Bonds and gold still play a role, but they are no longer the key diversification anchor. Bitcoin and Bitcoin-related assets are increasingly taking on this role. So, 60% of an investor's money can still be invested into stocks, trying to identify the best performers and rising stars. The remaining 40% of the portfolio can be split, with half still represented by government and corporate bonds with credit ratings of A- or above. From the remaining 20%, at least 2% can be invested into Bitcoin. The 18% can be constituted of Bitcoin-related assets such as shares in Bitcoin ETFs and stocks of public miners. In July, 4 out of 19 Bitcoin ETFs in the U.S. have shown spectacular growth in YTD terms, about +48%, including BlackRock's iShares Bitcoin Trust, Fidelity Wise Origin Bitcoin Fund, ARK 21Shares Bitcoin ETF, and Bitwise Bitcoin ETF Trust. Bitcoin Mining Stocks Performance The cryptocurrency narrative has been dominated by the likes of Dogecoin and pixelated primates, but meanwhile, astute investors are turning their attention to U.S.-listed Bitcoin miners, a different corner of the digital asset landscape. These publicly traded companies have been quietly building a fortune, with their collective market capitalization skyrocketing to $23 billion by June. Moreover, they've been quietly outpacing Bitcoin's performance, a feat that Wall Street insiders would be wise not to ignore. Furthermore, they're not merely unearthing digital gold – they're laying the groundwork for the future of artificial intelligence. Their growing influence within the cryptocurrency market is undeniable. A watershed moment occurred with the announcement of a partnership between Core Scientific and CoreWeave, an AI company. This partnership represents a huge 12-year deal between Core Scientific, a heavyweight in the mining industry, and CoreWeave, a cloud computing powerhouse, for a staggering 200 megawatts of computing power. So Core Scientific is positioning themselves as a major player in the AI computing space. Now, let's look at the wild ride of Bitcoin mining company stocks. The shares of Core Scientific were relisted on January 24th this year. On the first trading day, they faced a drop of 40.5%. However, since then, they have skyrocketed by 85.4%. The most spectacular success occurred with TeraWulf, whose capitalization has gained 132.5% since the start of the year. Other stars include Iris Energy (+110.2%), CleanSpark (+45.5%), Hut8 Mining Corp (+23.6%), Bitdeer Technologies Group (+17%), and Cipher Mining (+13.8%). However, not all public Bitcoin miners have demonstrated a rise: Bitfarms (-8.25%), Marathon Digital (-14%), Bit Digital (-15.6%), HIVE Digital Technologies (-26.2%), Riot Blockchain (-37.6%), and London-based Argo Blockchain plc, whose shares are listed on the Main Market of London, lost 68.1%. Its ADRs, as well as those of Canadian Bitfarms and Hut 8 Mining, are tradable in New York. The stocks of Bitfarms and Hut 8 Mining are primarily listed on the Toronto Stock Exchange. Among Canadian Bitcoin mining-related stocks, there are also SATO Technologies Corp (-44.6% YTD), Digihost Technology (-39.8%), and DMG Blockchain Solutions Inc (-18%). The Framing is a Key Almost all mentioned Bitcoin miners are expanding their activities in 2024. Riot Platforms, Bitfarms, CleanSpark, and Cipher Mining boosted their hashrate in June. The US Bitcoin mining sector increased its share of the world Bitcoin production to almost 21% in June, up 2% just for one month. At the same time, some public Bitcoin miners are facing a sell-off from stock traders. What went wrong with these companies? The framing is key. A success story on the stock exchange is not only about facts and figures but also hinges on the skill of Investors Relations corporate departments to communicate essential data to investors and inspire them, tuning into their dreams and expectations. It's not least important than the corporate hash rate and Bitcoin actual production, fleet efficiency, and the electricity price for 1 kWh. Anyway, most stocks of Bitcoin miners are slated to rise in the near future, so there is a case for nuanced selected shares in the portfolio. Such a portfolio is possible to give a huge investment return. AI Boom and Bitcoin Mining Stocks The AI boom is a very thrilling case when we start thinking about the data centers Bitcoin miners possess. Forget gold rushes, Wall Street's eyeing a new frontier: repurposed Bitcoin data centers. Soaring AI demand needs massive data centers, mirroring the miners' insatiable appetite for energy. Investors are scrambling to fill the AI infrastructure gap, and existing Bitcoin data centers are a perfect fit. Core Scientific's mega-deal with CoreWeave is a prime example, and the phone's ringing off the hook for other miners. This high-performance computing play will imminently create a M&A frenzy in the Bitcoin mining sphere, fueled by limited data center options and surging AI demand. Bitcoin's recent halving has squeezed miners, making them hungry for new revenue streams. Investment funds see an opportunity to scoop up these distressed miners and turn their data centers into AI havens. But not all Bitcoin miners are created equal. Some will stick to pure Bitcoin mining for now. Anyway, the stocks of Bitcoin miners will be in rising demand since they reflect one of the perfect business models: investments into innovative equipment (Bitcoin miners) and mining of one of the innovative hedge assets, Bitcoin. The largest Bitcoin miners effectively cope with expenses. The average tag for mining Bitcoin, after sparking just a few days after the April halving, is now on a declining trend. The more powerful Bitcoin miners stay in the game with the average cost of Bitcoin production less than $42,000. Other players can be bought out. At the Dawn of a New Era The AI boom, with the interest in data centers created by Bitcoin miners, means that the demand for relevant equipment gets an additional boost. This understanding only strengthens the case for setting up an investor's portfolio in which the stocks of Bitcoin miners must have their place. Actually, we are at the dawn of a new era of stock stars. The famous Magnificent 7 has already played its role in financial history. Those tech grands that quickly understand that they must rush into M&A in the Bitcoin mining sphere will withstand the looming drastic correction of S&P 500 and Nasdaq Composite. Now we have a historical Google moment. Recall that in 1998, Yahoo! refused to buy Google for just US$1 million. The public Bitcoin mining stocks are still too undervalued and still have a big promise, so there is no reason to drop such an opportunity to invest in them. There is no doubt that before the next Bitcoin halving occurs, we will see the first $1 trillion-valued Bitcoin miner. Most of those who sell Bitcoins and Bitcoin miners' stock end up regretting it. They are left to rebuy at a higher price.

03.07.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: NFTs in BRICS+: A Game-Changer for the Luxury Goods Market

NFTs are expected to experience significant growth, particularly due to the rising market of luxury items in BRICS+ countries (Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates). This year, approximately 70% of luxury item purchases will occur outside the US. Following the robust growth of the EU market in the first half of this year, the demand is projected to subside in the second half. BRICS+ Luxury Market: A Response to Inflationary and Devaluation Pressures The Eurozone has begun transitioning from a higher interest rate environment. Over the past two years, they have sought ways to protect their assets from higher inflation, and luxury goods have emerged as a hedging option. The success in combating inflation is evident, and European consumers are adjusting their behavior. In June, the European Central Bank made its first rate cut in nearly five years, reducing it to 3.75% from an all-time high of 4% since the beginning of Fall last year. Meanwhile, the US Federal Reserve is unlikely to follow suit. The likelihood is growing that the central bank will refrain from reducing interest rates until year's end. The Fed's balance sheet is at its nadir since the conclusion of 2020, and the tight monetary policy bolsters the US dollar. The dollar index DXY had a strong first half, leading to a +4.47% year-to-date increase. However, the DXY rally puts downward pressure on the currencies of emerging economies, fueling inflation in BRICS+ countries, particularly considering the actions of some central banks. Since August 2023, the People's Bank of China has not changed its interest rate despite the renminbi's slipping value against the US dollar by -2.12% year-to-date. In China there are elevated inflation expectations despite the current relatively low inflation figures. In May 2024, the central bank of Brazil cut its interest rate. Over the past 12 months, the US dollar has strengthened by 16.8% against the Brazilian real. These developments encourage consumers to seek better options to protect their money from inflation. Consequently, the luxury goods market is poised to benefit significantly. Digitally Minded Young People are Core Consumers of Luxury Goods The relatively higher proportion of young people in BRICS+ countries, compared to the US and EU, implies that the volume of consumption for any product is contingent upon the successful or unsuccessful digitalization of marketing communications between sellers and consumers. This year, Zoomers (individuals born between 1997 and 2012) account for more than half of global luxury goods consumption, with their average spending in this category being twice as much as that of any other generation. Moreover, this disparity in spending habits continues to grow. The flawless appeal of digitization has enabled luxury brands to establish a global presence by leveraging social media, blogs, and NFTs (Non-Fungible Tokens). NFTs will play a pivotal role and will provide the ultimate competitive advantage to luxury goods manufacturers over their peers in the BRICS+ market, which is valued at approximately $900 billion this year. NFTs will enhance consumer engagement with the brand and foster a profound sense of shared destiny, common values, ideas, and dreams, achieving what traditional marketing methods could only aspire to. NFTs Connect Brands with People NFTs stimulate the creation of both online and offline communities centered around beloved brands. Consequently, NFT companies capitalize on the opportunities presented by decentralized value creation, transforming their customers into a community. The asset itself creates a network that connects people to the brand and to each other, while ownership galvanizes consumers to share brand awareness and passion with others, thereby contributing to its creation. Simultaneously, it builds customer loyalty through one-to-one communication and the enhancement of customer retention programs. Luxury brand owners can unlock numerous opportunities exclusively available to those who have purchased specific NFTs. For instance, before new, high-end items appear in public stores, members of such communities will have access to exclusive perks, such as previewing digital fashion collections and passes to various VIP online events through a special type of NFT—POAPs (Proof of Attendance Protocol). POAPs are non-fungible tokens designed to serve as digital proof that an individual has participated in an event, whether conducted virtually or in a physical setting. Local producers will also discover that NFTs can become a means to finance their luxury product lines before production begins. We will observe the rapid emergence of new metaverses and the expansion of NFTs within this digital domain, which the youngest cohorts esteem as highly as the tangible world. Luxury brands, including Bentley, Lacoste, Hublot, Vacheron Constantin, Gucci, McLaren, Dolce&Gabbana, Prada, Lamborghini, and more, are intently tracking the evolution of the NFT landscape. The escalating demand for NFTs in BRICS+ countries is set to be matched by the establishment of novel trading platforms for these tokens. Simultaneously, reputable venues for buying and selling NFTs, such as metaverses created by some brokers of fine and decorative art, jewellery, and collectibles, will experience increased popularity. NFTs: Integration into the BRICS+ Financial System It is worth mentioning another aspect of the current phase of BRICS+ cooperation development that will provide an additional boost to NFTs. Currently, BRICS+ countries are exploring all opportunities to create and use alternatives to SWIFT payments infrastructure. Cryptocurrencies are also a significant focus. The new alternative ways to financially communicate, or cryptocurrencies, share certain similarities with traditional currencies despite their complex nature - they are fungible (interchangeable). A larger question mark arose with the introduction of NFTs. These tokens are non-fungible, non-interchangeable, and therefore each token is unique. They also exist only in the digital world and are thus completely unique in relation to what the world has previously known. Fungibility is the property that the units of a good are essentially interchangeable and that these units cannot be distinguished from each other. However, NFTs have multiple utilities. They can unlock various options in the digital world, similar to real life (IRL). NFTs are increasingly being considered in BRICS+ as a digital tool to facilitate seamless transborder capital and investment movement. If the traditional capital markets, such as stocks and bonds, are heavily reliant on the dollar-based global financial infrastructure, NFTs are based on blockchain technology. Their unique characteristics open the door to targeted fundraising for various economic projects in BRICS+. The current loan practice in BRICS+, which mostly relies on the dollar facilities of the New Development Bank of BRICS+, has reached a gridlock. The available means are insufficient compared to the remarkable ambitions of BRICS+ to develop new logistical pathways in the world. In the quest to reinvent the ways BRICS+ attracts financing, NFTs emerge as an elegant instrument to gather funds for purpose-driven projects. In fact, NFTs unleash a new phase of globalization, as BRICS+ is ready to attract capital through NFTs from Western investors as well. NFTs and Tokenization of Assets Last but not least, BRICS+ countries are making bold moves toward tokenizing material assets. They see tokens as new opportunities to seamlessly sell and buy assets in partner countries. The first NFT was minted in May 2014. However, after ten years, the learning curve for this digital instrument has started to rise dramatically. In the first quarter of 2024, the total sales volume of NFTs reached $4.1 billion, representing a 41.4% increase compared to the fourth quarter of 2023. Moreover, many transactions go under radar. In BRICS+ countries, there is a growing practice where the creator of an NFT does not send it to the buyer but provides access to the NFT without moving it on the blockchain. This is especially true for Bitcoin-based NFTs. If parties trust each other, they simply open access to their NFTs without making transactions on the blockchain. This practice is one of the variants of "digitized barter" between parties in external trade. BRICS+ ambitions to create new digital financial communication routes also lead to an increase in technological equipment imports. At the same time, countries attempt to boost local machinery production by creating a budget impulse. Meanwhile, these financial measures, combined with the strengthening of the US dollar, keep inflation expectations elevated. Luxury goods gain popularity in BRICS+ as a convenient inflation hedge, but this also unlocks the enormous potential of NFTs. NFTs offer brands innovative marketing opportunities, enabling them to create buzz and emotional connections with customers. They provide improved customer engagement through exclusive content and experiences, fostering a loyal community. Beyond initial sales, NFTs open new revenue streams for luxury brand producers via royalties on secondary markets and entry into the premium digital goods market. In the coming months, we will witness how some existing NFTs from several world-renowned brands will receive a boost from demand in BRICS+ countries. Meanwhile, it is the perfect time for these brands to reinvigorate their participation in the global NFTs market and start releasing new NFTs. Many of them tested the digital waters in 2022 and took a pause in 2023. Now, time does not wait. Fasten your seatbelt. NFTs are slated to go through the roof.

30.06.2024

Economics and financial markets

Source: Tumblr

Konstantin Tserazov: The US Gains Critical Influence Over Bitcoin Price: Details

Bitcoin ETF providers are starting to exert significant control over Bitcoin price movements June 11th turned icy for Bitcoin investors as the market took a nosedive. The price, which had begun the week perched comfortably around $71,200, went into freefall, breaching the critical $70,000 barrier and settling at a chilly $67,900 by day's end. This dramatic price swing has a prime suspect: a mass exodus of capital from US-based Bitcoin ETFs. This flight of funds appears to have cast a long shadow, chilling market sentiment and contributing significantly to the overall downturn. As an analyst, I can't help but wonder – is this a temporary setback or a sign of more turbulent times ahead for Bitcoin? Before the price drop, notable activity was observed. On June 10 and the beginning of June 11, the net outflow for all US Bitcoin ETFs reached a staggering -$64.9 million, a level not seen since May 10 of this year. This substantial outflow of funds from ETFs likely played a significant role in the subsequent price decline. This outflow ended a 19-day streak of consecutive inflows into the funds. The substantial outflow from Bitcoin ETFs, which briefly halted on June 12 before escalating to -$226.21 million on June 13, had a noticeable effect on Bitcoin's price, causing it to decline to $65,896 on June 15. As a crypto observer with a strong background in legacy financial institutions, I find the rapid growth of US Bitcoin ETFs raises an interesting question: are these instruments potentially ceding control of Bitcoin's price to major institutional players, such as US investment funds? It's no secret that Bitcoin has historically danced to the tune of traditional markets, demonstrating a visible correlation with S&P 500 and the Nasdaq indices, especially with the first one. This intertwining isn't the only external influence. Investor risk appetite for volatile assets like Bitcoin also plays a crucial role, with the Federal Reserve's interest rate policy acting as a conductor. Lower rates typically fuel market liquidity and embolden risk-taking behavior, making Bitcoin a more enticing proposition. Conversely, higher rates can slam on the brakes, pushing investors towards safer harbors. However, the introduction of US Bitcoin ETFs throws a wrench into this familiar dynamic. While the correlation with traditional markets and risk appetite likely remains in play, the question now is this: are these institutional giants simply reacting to market forces, or are they actively shaping Bitcoin's future course? The rise of Bitcoin ETFs is increasingly shaping Bitcoin's price dynamics. Presently, 11 US Bitcoin ETFs manage Bitcoin assets worth $65 billion, which can sway the market through their actions. Most Bitcoin ETF providers utilize external custodial services, with Coinbase Custody Trust Company, LLC holding the largest amount of Bitcoin purchased by the US Bitcoin ETFs. Other custodial services are provided by cryptocurrency exchanges such as Gemini. In this context, the question of risk management arises: Who is the guarantor for the Bitcoin that is under the care of external custodians? Clearly, if for some reason these Bitcoins are lost (transferred to other, uncontrolled digital addresses), the price of Bitcoin may drop significantly. The market for Bitcoin as a whole has shown growth since January, and the oldest cryptocurrency has already reached a new historical maximum. However, the history of daily net outflows from Bitcoin ETFs shows that the price of Bitcoin follows these outflows downward. The dependence of the Bitcoin price on the inflows and outflows of funds into Bitcoin ETFs may increase further. By the end of next year, the volume of Bitcoin under the management of Bitcoin ETF providers is expected to triple compared to its current value, exceeding $200 billion. This includes Bitcoin purchased not only by Bitcoin ETFs in the US but also by Bitcoin ETFs in Hong Kong and similar funds that were first launched in Canada. It is important to monitor how Bitcoin ETFs, often through external custodians, control the volume of available Bitcoin for purchase and sale. In four years, this volume is expected to reach 25%, considering the current growth rate of popularity among investors. Additionally, one must consider the impact of the next halving in the Bitcoin blockchain, which in 2028 will reduce the block reward to 1.5625 BTC. Consequently, the daily emission of Bitcoin will decrease to just 225 BTC. The intersection of Bitcoin's decreasing supply, due to its finite issuance, and the growing demand spurred by Bitcoin ETFs creates an interesting narrative. However, this convergence does not guarantee a price increase for the top cryptocurrency. In reality, the forces influencing Bitcoin's price are becoming more multifaceted, shaped by a new investor landscape. This ecosystem encompasses several key players: Bitcoin ETF Providers: The "Bitcoin Magnificent 11," a group of recently launched ETFs in the US, are significant contributors to demand. Bitcoin Miners: These individuals and companies play a crucial role in securing the network and influencing supply. Institutional Investors: Major corporations like MicroStrategy, holding a substantial portion of the circulating supply, along with others with the potential to make sizable investments, significantly impact market sentiment. Another example https://www.sec.gov/Archives/edgar/data/1554859/000110465924069148/tm2416433-1_s3.htm is a Semler Scientific. It's important to note that a large portion of this ecosystem is US-based legal entities, potentially adding another layer of influence to the price dynamics. Further amplifying the US presence within the Bitcoin investor landscape is the fact that a significant portion of these entities are publicly traded companies. Moreover, publicly available data from the Securities and Exchange Commission (SEC) reveals that US institutional investors hold a dominant stake in these US-based Bitcoin ETFs. This concentration within the US financial system creates fertile ground for increased collaboration and potential synergies. Wall Street, known for its intricate web of connections, could further bolster this trend. The US already boasts a leading position in Bitcoin mining, contributing 35% of the global hashrate (computing power dedicated to securing the network). This figure jumps to 45% when including overseas mining operations controlled by US-headquartered companies. The potential for even greater US dominance in Bitcoin mining extends to the political sphere. Recent pronouncements by Donald Trump, the presumptive Republican presidential nominee, suggest an intention to solidify US leadership in this area. As he stated https://truthsocial.com/@realDonaldTrump/posts/112601639679885930 on Truth Social, "We want all the remaining Bitcoin to be MADE IN THE USA!!! It will help us be ENERGY DOMINANT!!!" Trump's last thesis highlights his belief in the success of the Texas Bitcoin mining story. In this American state, local miners assist the energy grid in balancing electricity consumption during high and low seasons. When typical Americans turn on their heaters in winter or air coolers in summer, demand increases, and Bitcoin miners switch off their machines, releasing additional power to the electricity network. Conversely, when demand decreases, Bitcoin miners ramp up their activities. Another essential aspect is that the US Bitcoin mining sector is a crucial driver in the transition towards "green energy." Ironically, the tough stance of the current White House administration (as revealed in this 2022 report https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Crypto-Assets-and-Climate-Report.pdf and this 2023 document https://www.whitehouse.gov/wp-content/uploads/2023/03/ERP-2023.pdf ) has accelerated the movement of US Bitcoin miners in this direction. Furthermore, US Bitcoin mining companies serve as a hotbed for new innovations, including the development of new semiconductors. Trump believes that the innovative spirit and solutions of the US Bitcoin mining industry will contribute to the US's goal of maintaining its global leadership in AI. This holds substantial importance as JP Morgan Chase, the foremost US banking institution in terms of assets, hints at a prevailing Wall Street inclination towards a potential Trump triumph come November. The saga about Bitcoin ETFs intricately intertwined with the onset of Bitcoin futures contracts several years ago. In December 2017, the approval of Bitcoin futures trading by the Commodity Futures Trading Commission (CFTC) made news. This approval synchronized with Bitcoin's extraordinary ascent to uncharted peaks, swiftly succeeded by a sharp descent. This rollercoaster ride took place during the early years of the Trump administration, adding an extra layer of complexity to the current Bitcoin ETF saga. Bitcoin got slammed during the brutal "crypto winter" - a long, cold spell for cryptocurrencies. The price tanked to around $3,000 by late 2018. Then, deja vu struck in 2020 when COVID hit, and Bitcoin went tumbling again. The arrival of Bitcoin futures in the US market is definitely seen as a big player in all this price action. Prior to the advent of futures contracts, the practice of shorting Bitcoin, essentially speculating on its decrease, offered scant alternatives. This new landscape attracted established financial institutions, previously on the sidelines, into the once-niche world of cryptocurrency. A study https://www.frbsf.org/research-and-insights/publications/economic-letter/2018/05/how-futures-trading-changed-bitcoin-prices/ by the San Francisco Federal Reserve highlights this shift, as these new players gained the ability to both speculate on Bitcoin's rise and capitalize on potential downturns. Echoes of the past reverberate as Bitcoin's price ascends once more, seemingly fueled by the long-awaited debut of Bitcoin ETFs on US exchanges in January this year. This prompts a critical inquiry: what unfolds in the next chapter of this saga? The increasing popularity of the US Bitcoin ETFs, coupled with the growing number of American companies investing heavily in Bitcoin, grants the United States a substantial influence over the Bitcoin market, which could potentially affect valuations. The true extent to which these influential entities will exercise their newfound control over Bitcoin's price remains uncertain. Given their capacity to maneuver significant capital in and out of Bitcoin ETFs, these institutions hold the power to sway price fluctuations. The crucial inquiry is whether they will serve as a stabilizing force, offering liquidity, or morph into the puppet masters of Bitcoin's price, determining its ebbs and flows. Time alone will reveal if these newcomers will become the driving force behind Bitcoin's future or mere passengers along for the journey. However, one thing remains indisputable: the landscape of Bitcoin has irrefutably shifted, and analysts such as myself will vigilantly observe how this new era unfolds.

21.06.2024

Economics and financial markets

Source: Medium

Tserazov Konstantin:Armenia: Armenia: Laying the Ground for the Fintech Leap Forward

GovTech in Action This initiative is a remarkable example of Armenia's dynamic GovTech sector. In May 2024, the government launched two new digital platforms. One platform addresses the needs of the local job market, while the other provides a new digital channel for citizens to interact with the local Tax Service. This platform simplifies the process using personal electronic signatures. If a user does not have an electronic signature, they can obtain one through this channel. Regarding cloud services, the Ministry of High-Tech Industry is driving innovative changes, mandating that all government structures currently using classical servers for data storage and information systems transition to cloud-based solutions, ensuring data security and reliability. Cloud Services Cloud services, based on internet data communications, allow users to store, manage, and access data and software remotely via specialized interfaces. These services provide access to a wide range of resources, including data storage, processing, networks, software, and complex digital frameworks, without requiring users to invest in physical storage or bear maintenance, overhaul, and repair costs. Cybersecurity risks are managed by the cloud service providers, allowing users to benefit from advanced technology and functionality while significantly reducing traditional costs and avoiding the complexities of owning and maintaining their own infrastructure. This approach also frees up financial resources that can be invested in other fintech solutions, helping to keep pace with digital progress. The cloud services landscape is segmented into three primary categories: IaaS (Infrastructure-as-a-Service), PaaS (Platform-as-a-Service), and SaaS (Software-as-a-Service). Each category is designed to dynamically scale in response to fluctuating needs, offering a flexible and economically prudent approach to resource allocation. The government of Armenia notes that the decision to transition to cloud storage marks the shift of government data to virtual space. Without a valid reason for not storing data in the virtual space, it will not be stored in physical space. It was mentioned that storing data physically is associated with significant financial costs. Initially, Armenia’s cloud resources will be utilized for low-risk data and information that do not contain state secrets. A New Boost to Fintech One can now anticipate the start of data migration to the cloud. This process will involve searching for optimal fintech solutions. The use of cloud-based solutions has the potential to energize the development of the entire fintech sector in the country. Recent developments indicate that local fintech is in good shape and prepared to make a leap forward. On June 18, Deputy Secretary of State for Management and Resources Richard R. Verma visited Yerevan's Engineering City, a cutting-edge facility that embodies Armenia's technological potential. This shared lab space and tech incubator, supported by a key American NGO, is a testament to the country's commitment to innovation. Richard R. Verma wrote on social media, “During my visit, I was struck by the significance of Armenia's position at the forefront of science and technology.” The U.S. and Armenia: An Innovative Partnership This recognition is significant. Engineering City is doing crucial work in the fields of cybersecurity and semiconductors, both of which are central to U.S. industrial policy aimed at creating a global innovative ecosystem with U.S. partners in various countries. Richard R. Verma emphasized that the U.S. looks forward to growing “our innovative partnership with Armenia.” Currently, the USA, France, and the EU as a whole are tailoring their proposals to deepen cooperation with Armenia. This will lead to the creation of joint enterprises and foster innovations, including the implementation of cloud services. It is noteworthy that the U.S. embassy in Armenia, in terms of staffing, ranks among the top three U.S. diplomatic missions worldwide. On June 11, a strategic partnership agreement was concluded between the U.S. and Armenia, facilitating the introduction of cutting-edge U.S. technology into the Armenian market. Cloud services are key to the development of AI and attract investments. For example, the U.S. tech giant Amazon is investing an additional €8.8 billion in Germany to expand AWS cloud infrastructure to meet the strong demand for such services due to the rapid development of AI in Europe. This investment follows another planned €9 billion in Amazon’s capital expenditures in Germany and the company's intention to build data centers in Italy. The strong demand for cloud services in Armenia, starting with decisions at the government level, will eventually attract new investments. Data Centers Armenia currently has four providers operating its five data centers. The largest data processing center was constructed by OVIO "GNC-ALFA" Ltd (Rostelecom Armenia). In the bustling town of Abovyan, a state-of-the-art data center emerged in May of this year, serving as a technological hub just 16 kilometers away from Yerevan. The growing nature of this sector is highlighted by the company's staff expansion, as it currently offers eight vacancies. The combined revenue of all data centers operating in Armenia is projected to surpass $32 million this year. The data center market is expected to double in approximately nine years. Yandex Makes a Move It is important to note that for Armenia, maintaining and developing economic ties with the countries of the Eurasian Economic Union (EAEU) is also crucial. In the fintech sector, at the end of May this year, Yandex Armenia opened a new office in Yerevan. Yandex's new office in Armenia is designed to house over 450 highly skilled IT professionals—developers, designers, and managers—who will work on developing Yandex's technologies for the Armenian and other markets. Yandex has been operating in Armenia for over 8 years, and Armenia ranks among the top 3 international markets for Yandex in terms of the number of services launched. Furthermore, Yandex Armenia is allocating 17 million AMD in scholarships for research work in the field of machine learning. These funds will support the Center for Intelligent Computing, organized by YerevaNN and Yerevan State University. Clouding and Other Fintech Innovations Recent developments set the stage for a new trajectory in how the Armenian economy can evolve. The growth of cloud services and data centers in the country not only facilitates AI progress but also paves the way for success in the Internet of Things (IoT), Distributed Ledger Technology (Blockchain), and Big Data Analytics. Blockchain has also gained prominence within fintech, particularly in areas such as digital currencies and peer-to-peer payments. By integrating these digital breakthroughs, the economy experiences increased productivity, improved efficiency, and enhanced competitiveness. It also leads to reduced costs, improved quality, and increased flexibility in external trade. Energy Progress Fueled by Innovation Drive Lastly, the demand for new energy-intensive fintech solutions in the economy drives the development of energy opportunities in Armenia. The most promising sphere is solar energy. Local producers of solar panels plan to increase their production. The Emirati company Masdar is currently in discussions with the Armenian government regarding the terms for the implementation of the project to build the "AYG-1" 200 MW solar power plant in Armenia with investments of $174 million. This will be the largest utility-scale solar plant in Armenia, and a definitive agreement about this project was reached in the fall of 2021. The operator of the project is primarily under the control of Masdar (85%), with another owner being a special government structure, the Armenian National Interests Fund (ANIF). The World Bank has unlocked a $40 million credit line to support the development of renewable energy in Armenia. However, these sources currently account for only 1% of the total energy demand in the country. It is important to add that the cooperation of Armenia with the largest energy supplier in the EAEU, Russia, holds strategic significance. Even when Russia introduced an embargo on the sale of gasoline on the external market, it did not affect the quotas for EAEU member states, including Armenia. Moreover, in 2023, Armenia's quota was specifically increased by 60,000 tons. Armenia: A Tech Startup Tax Oasis Forget the beaches of Mauritius or the secrecy of the Cayman Islands. For cash-strapped tech entrepreneurs, the next tax haven might surprise you: Armenia. Think 0% corporate tax rates. For certified commercial operations, that's a far cry from the standard 18% the Armenian government takes. Even individual entrepreneurs get a sweetheart deal, with their income tax rate slashed from 20% to a meager 10%. Armenian officials are so bullish on tech that they're willing to subsidize corporate payroll in some cases. Companies can snag government handouts covering a whopping 20% to 70% of the salaries for their top tech talent. That's a serious chunk of change that could free up crucial resources to invest in innovations. Furthermore, if a newly created company has at least 10 registered employees and 90% of its operations within the tech sector, the government will refund 50% of the income tax paid. So, is Armenia the next Silicon Valley? The jury's still out. But one thing's for sure: for cost-conscious tech founders, this country is offering a compelling argument to set up shop and chase the next big innovation.

13.06.2024

Economics and financial markets

Source: Reddit

Konstantin Tserazov: “Armenia: FinTech Can Unlock the Truly Potential of Economy and Finance”

The key issue for foreign investors is the opportunity to invest capital and repatriate profits. The free flow of capital is equally important when individuals from various countries come to reside or work. Armenia has proven itself to be a financially convenient country in which businesses and individuals can easily send and receive money. The development of FinTech in Armenia has made a significant impact, propelling the country to an international level as an attractive destination for tourists, migrants, and investors. Deeper Integration with the West The Armenian financial system's flexibility is clearly evident on its path towards deeper integration with the West. Remarkable news in this regard came on April 3, 2024: Ameriabank was sold to the Bank of Georgia Group PLC, a UK-based entity. The new key shareholder has investors such as BlackRock, the world's largest investment fund, and JPMorgan Chase, the number one U.S. bank in terms of asset valuation, backing it. Thus, Ameriabank gains access to the world of global finance via its investors. However, it's not just about attracting global investors; it's also about developing the local economy. In May, this financial institution began offering online home loans aimed at the Armenian Diaspora abroad. Loans are available for local property purchases, renovations, or construction, regardless of the applicant's origin or location. Income from abroad is considered for loan applications, and permanent residency or registered income in Armenia is not required. Loans are available in local currency (Armenian Drams, AMD), U.S. dollars, or euros for terms of 5 to 30 years. Digitalization and the application of FinTech have led to 98% of the bank's transactions being conducted online. FinTech ensures that all key aspects of loan operations are performed digitally. Mergers and acquisitions (M&A) are on the rise in Armenia's banking sector. For instance, Ardshinbank recently struck a deal to take control over HSBC's Armenian branch. ..Not Only Towards the West Armenia's pivot is not solely toward the West. The country maintains strong economic ties with other members of the Eurasian Economic Union (EAEU), as evidenced by the surge in money transfers within the EAEU during the first nine months of 2023, reaching $3.8 billion – a remarkable 31.3% annual growth. Notably, Russia fueled 71% of these transfers, demonstrating a significant 42% year-over-year increase. In terms of diversification, the United Arab Emirates (UAE) became the top investor in Armenia's real sector in 2023, surpassing Russia for the first time, with a net investment of $250 million in foreign direct investment (FDI). However, the EAEU as a whole remains important, with total net FDI from EAEU countries reaching $305 million. More Ways to Connect to Global Financial System Armenian banks are considering linking their payment services to credit cards issued by foreign banks outside Armenia. Upon successful completion of a standard compliance procedure, clients can use their cards for these services. Armenia’s banks use SWIFT for financial transactions. However, the country feels the enormous economic and financial potential of Asian countries and the Global South and reacts to it. Currently, we see how Armenia deepens ties with India. The arrival of the Indian payments system, Unified Payments Interface (UPI), in Armenia is anticipated. UPI provides a simple, phone-based payment system that uses phone numbers for account identification and instant transfers through QR codes. By directly linking to bank accounts, it simplifies transactions for smaller merchants, removing the necessity for additional hardware such as card readers. UPI facilitates direct money transfers between accounts and leverages Google Pay in India for added convenience. This integration could enable seamless cross-border payments between India and other countries. The FinTech sectors of India and Armenia stand to benefit significantly, enhancing cooperation between the peoples of both countries. Yerevan is diversifying beyond reliance on Mastercard, Visa, Google Pay, and Apple Pay by exploring new logistical routes for goods, including plans for a high-speed transport corridor that would bring large volumes of Indian goods to the EU market through Armenia. Additionally, China UnionPay has established a presence in the country's financial landscape. Both Acba Bank and Converse Bank have begun issuing China UnionPay cards. Digitalization and the development of new digital routes for money transfers are crucial in this direction. Neighboring countries are aware of this significant trend. For instance, during his official state visit to Armenia on April 15, 2024, Kassym-Jomart Tokayev, the president of Kazakhstan, emphasized, “Our cooperation in new fields, such as digitalization and finance, also has a great future.” The Situation in the Economy Armenia recorded a GDP growth of 12.6% in 2022, with a high of +8.7% in the previous year. The forecast for 2023 is +5.7%, and eyes are on the growth rate for 2025. If Armenia experiences a rising growth tempo in 2025, it will indicate that the economy has successfully harnessed the value of rapid digitalization. The Central Bank of Armenia identifies accelerating domestic demand, reducing debt, and increasing credit potential as key challenges. These factors may exacerbate excessive demand, potentially hindering the correction of the base inflation rate and inflation expectations. This situation suggests that a portion of internal demand can be externalized, and the burgeoning sector of money transfers in the current economic circumstances creates additional value when viewed from a macroeconomic perspective. FinTech Development and Money Transfers Market FinTech is a real driver of the Armenian economy, demonstrating an annualized growth rate of 20%. The country has several innovative hubs, and FinTech contributes over $1 billion in annual value. This rise has also received support from prominent international structures. For example, the EBRD extends its loan program aimed at supporting the development of small and medium enterprises, which are crucial for the Armenian economy. In June 2024, the EBRD backed a $15.7 million loan to one of the technology centers in Armenia, to help them open a new hub promoting innovation and economic growth. The FinTech payments market in Armenia is represented by players such as Idram and Mobidram, which have significantly developed their online services. HayPost has its own e-wallet app called 'HayPost Pay.' Crypto exchange services are also prevalent in Armenia, especially in the capital. There are a few physical Bitcoin stores in the center of Yerevan where one can buy or sell the oldest cryptocurrency in the world, with some offices having a fixed commission fee of just $10. In Armenia, the educational background of people working in the IT and FinTech spheres is often highlighted. Local FinTech and IT professionals with deep technical knowledge and a good understanding of modern FinTech are in high demand in the local labor market. European and American companies frequently hire local specialists to work in their EU and US offices. FinTech Can Potentially Boost the Local Stock Market Currently, the Armenia Securities Exchange (AMX) is the primary venue for the local stock market. While the banking sector is well capitalized, with over $14.5 billion in total bank deposits, the stock market has a relatively low volume and influence. This underutilization of the stock market presents an opportunity for FinTech to energize its growth and, in turn, for the stock market to fuel local FinTech companies' expansion. Currently, the local stock market has only about a dozen companies listed. This is a significant decrease from the mid-2010s when several hundred enterprises were listed on the AMX. Many businesses now seek financing through bank loans, private equity, or venture financing, leading to a smaller proportion of stocks in the securities market, which is primarily composed of debt-related securities. The process for companies to go public (IPO) in Armenia is relatively straightforward. Several Armenian banks offer brokerage and underwriting services, and some of these banks allow users to buy or sell securities through their mobile banking apps. International brokers also provide access to the Armenian stock market. Retail investors in Armenia have potential access to a diverse range of local companies, and if they choose to invest even a small portion of their bank holdings, the local stock market could experience a significant boost. Armenia's top banks are increasing funding for local small and medium businesses (SMEs), which are crucial to the economy, employing 70 out of every 100 workers. Nevertheless, it is essential to develop SME financing through the issuance of shares and bonds on the local stock market. The development of local currency (AMD) financing via the stock exchange will support the local currency and create a new equilibrium in the financial market. Currently, over half of corporate bank loans and one-eighth of retail loans are denominated in US dollars, contributing to a relatively high level of dollarization. If the development of financing via the local stock market creates additional demand and support for the AMD, it will positively impact the Armenian economy.

06.06.2024

Economics and financial markets

Source: Quora

Konstantin Tserazov: Catching Up: CIS Countries Embrace the Potential of FinTech in Capital Movement

FinTech symbolizes the application of revolutionary ideas to uplift financial services, presenting tech-infused solutions designed for diverse business landscapes, potentially leading to the emergence of new business models and enterprises. FinTech innovations disrupt traditional paradigms of money transactions, compelling financial regulatory authorities in Commonwealth of Independent States (CIS) countries to acknowledge and adapt to this evolving reality. From Payments to Capital Flow Most FinTech startups conventionally operate under novel frameworks to streamline payments and capital movement, particularly focusing on cross-border transactions. Their inherently digital nature ensures broad accessibility, allowing them to serve individuals and businesses across the CIS region. To encapsulate the prevalent tools accessible to clients cross-border money transfer services leverage crypto solutions, where dollar stablecoins hold significant sway. Building upon established payment systems like PayPal, some startups introduce unique features and advertise "0% commission" for money transfers. However, the catch lies in the exchange rate, as some startups employ a lower exchange rate to offset their costs. Mobile Payments and Fund Transfers The pervasiveness of mobile payments has transformed mobile phone accounts into quasi-banking accounts, considering their functionality. Mobile payment services have risen as a crucial component in the financial sector, facilitating user-friendly execution of a wide range of financial activities, encompassing online and offline transactions, fund transfers, and associated responsibilities, all through mobile devices. In CIS countries, mobile operators typically offer services for transferring money from mobile accounts to bank cards or even paying for services abroad, thereby establishing pathways for international money transfers. USSD, developed in 1994, remains the fundamental and most commonly used technology in mobile payments, still surpassing QR codes in popularity. This interactive, menu-driven technology is compatible with a wide array of mobile devices. USSD messages, capable of holding up to 182 alphanumeric characters, resemble SMS but facilitate data exchange between users and the mobile network. Its capability for immediate interaction outperforms SMS, making USSD particularly responsive. Moreover, this technology is accessible on all phone models, from rudimentary to advanced, without needing software installation or internet connectivity. Certainly, financial regulatory bodies establish parameters and track transactions in a manner they consider suitable for effectively implementing Anti-Money Laundering (AML) practices and aligning with the recommendations of the distinguished Financial Action Task Force (FATF). The introduction of advanced security measures, such as encrypted transactions and real-time monitoring, significantly diminishes the likelihood of fraudulent activities. NFTs, Telegram, and Donations Crypto developments often surprise regulatory bodies, as seen in the sudden surge of Non-Fungible Tokens (NFTs) worldwide. These digital assets can be used for cross-border money transfers under the guise of "NFT sales and purchases''. While not all NFT trades involve such activities, the potential exists within the system's functionality. Telegram, a widely-used messaging platform in the region, has ventured into FinTech by introducing peer-to-peer (P2P) transactions, digital wallets (both custodial Wallet Pay and non-custodial TON Space), supporting cryptocurrencies like Toncoin, Bitcoin, and Tether. These advancements pose a significant challenge for CIS regulators. The evolution of these features could facilitate cross-border digital money movement, highlighting the concept of the “Internet of Money”. This digital financial landscape presents regulators with the tricky task of maintaining Know Your Client (KYC) procedures in the sphere at par with traditional financial institutions' standards. Internet-based donation services can also be utilized for cross-border money transfers, presenting another regulatory challenge for CIS authorities. Remittances: A Catalyst for FinTech Innovation Labor migration significantly fuels the demand for innovative FinTech solutions for cross-border money transfers in CIS countries. Tajikistan, for instance, sees remittances accounting for 48% of its GDP, the highest proportion in the CIS. Consequently, numerous FinTech startups have emerged, offering locals faster, cheaper, and more convenient alternatives to traditional banking and major payment services for receiving money from abroad. The recent wave of Russian relocation, primarily to Armenia, Kyrgyzstan, and Kazakhstan (2022-2023), has sparked a need for FinTech solutions that simplify innovative money transfer methods. Given Russia's status as the largest economy in the CIS bloc, many Russians abroad continue to work for Russian companies. A closer examination of Russia's recent developments reveals why the country is accelerating its efforts to develop new FinTech solutions for capital movement. The SWIFT Alternative Russia's economy faces a unique scenario, shaped by Western sanctions. The number of banks connected to SWIFT has dwindled significantly. The Bank of Russia established the National Payment Card System (NSPK) in 2014, which laid the groundwork for "MIR" cards and the Fast Payment System (SBP). Russia now heavily depends on this financial ecosystem, having banned SWIFT for domestic money transfers starting October 1, 2024. Cross-border capital movement, however, poses a significant challenge. On December 22, 2023, U.S. President Joe Biden signed an executive order enabling penalties on financial institutions assisting Russia in evading existing restrictions. In 2024, several Chinese and Turkish banks announced stricter scrutiny of transactions involving Russia. Russia's SWIFT alternative, the System for Transfer of Financial Messages (SPFS), gained traction in at least twenty countries by mid-2024, with 150 foreign banks utilizing the system. On June 1, 2024, G7 countries and the EU began discussions on imposing financial restrictions against international banks using SPFS to aid Russia in bypassing sanctions. CBDCs in the Spotlight These circumstances prompt Russia to expedite the development of its central bank digital currency (CBDC), known as the digital ruble. The notion of a unified BRICS digital currency is being considered, although formal discussions are only preliminary in 2024. Practically, the Central Bank of Russia has consented to let Russian firms experiment with digital financial assets as a payment method in international transactions within its regulatory sandbox. Russia possesses comprehensive legislation concerning digital financial assets, delineating a clear path for their domestic launch. However, the Bank of Russia staunchly opposes the use of any currency alternative to the ruble for domestic transactions. Cryptocurrencies are banned as a payment option inside Russia, but investment in crypto remains in a legal grey area. While some experts and the Trade and Industrial Chamber advocate for cryptocurrency adoption in international trade under some circumstances, the Bank of Russia's position remains unclear amidst a rapidly shifting geopolitical landscape. Kazakhstan launched its central bank digital currency (CBDC), the digital tenge, in November 2023, aiming to enhance capital flow and enforce KYC and AML measures in the financial sphere through robust compliance processes. Capital Movement Limitations: The Case of Russia and Dedollarization In 2024, the Russian regulator extended restrictions on capital outflows until September. Russians can transfer up to $1 million abroad to foreign banks, whereas non-resident employees in Russia are capped by their salary size. Monthly limits for transfers via money transfer systems remain at $10,000 or equivalent in another currency. Non-resident individuals, excluding those employed in Russia, from countries deemed unfriendly by the Russian government remain barred from transferring funds abroad. However, this restriction doesn't apply to foreign companies controlled by Russian citizens or businesses. These constraints, coupled with Western sanctions' impact on Russian capital abroad, have effectively "trapped" a record amount of capital within Russia. Consequently, very stringent capital export restrictions haven't been imposed. It's noteworthy that digitalization of capital movements and de-dollarization are concurrent trends in CIS countries. For instance, the Central Bank of Azerbaijan declared that in 2024 it would persist with its de-dollarization policy to bolster public trust in the national currency. These developments indicate that in CIS countries, international capital movement is becoming more regulated due to CBDCs and mobile payment services. As more people and businesses use local currencies for cross-border transactions, they inadvertently support the internationalization of these currencies.

28.05.2024

Economics and financial markets

Source: Tumblr

Fintech in the CIS Countries: The Competition for Talents

The CIS countries have common history rooted in the Soviet past. Nowadays we see how strong economic ties still exist. The Eurasian Economic Union (EAEU or EEU) plays a significant role. It economically unites five countries, with an aggregate GDP exceeding $2.5 trillion and with a population more than 185 million. Indeed, Russia is the heavyweight in this Union in terms of both population and economic output. Migration Trends The deep economic ties mean the creation of the common labor market of Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. Moreover, the former two states developed closer ties under the framework of The Union State of Russian Federation and Republic of Belarus. The migration flows between the countries of EAEU are very intensive since there is a common labor market. Fintech business and innovative startups try luring talents to create a pool of professionals with various backgrounds to make their ideas come true. Russia faced a remarkable wave of young people relocating in 2022. Most of them were distant workers having gigs in IT and fintech spheres. Their relocation fostered the acceleration of development of digital infrastructure in Armenia, Kazakhstan and Kyrgyzstan. Russian migrants created an additional demand for digital services and for fintech solutions that made it easy to transfer money from and to Russia. Online trade and banking got a special boost. The period of adaptation of Russian migrants to new countries has been shortened due to favorable migration laws and the common historical background of recipient countries. Many people in EAEU speak Russian and local languages also include some Russian words that only underline the specific cultural influence on the territory of the former USSR. A Digital Russia Meanwhile, Russia still remains an attractive country for foreigners to work. The high speed of mobile internet became a usual thing not only in key cities of the country. The GovTech in the form of Gosuslugi and Multifunctional Centers help to fix many issues. The divide between Russia and the West, the U.S. and European sanctions not only created the obstacles for Russian economic development but generated a vast demand for local IT and fintech decisions and people working in these spheres. The enormous governmental support for the IT and fintech sector such as lowering the tax burden for relevant specialists, the preferential mortgage program in 2023-2024 did its job: some Russians who relocated earlier or even lived abroad for many years came back to the Motherland due to new economic incentives. The U.S. and European sanctions locked the great part of financial capital produced in Russia inside the country. It unleashed the Moscow stock market boom in 2023 - Ruble-based IMOEX skyrocketed 43.87% while official inflation was just 7.42%. Dollar-based RTS gained 11.63%. These phenomenal results underline that investors are eager to provide money for interesting projects. A historic shift is unfolding in the Russian stock market. For the first time, a wave of truly substantial retail investors is emerging, with individual investment entries exceeding $10 million. So Russian fintech businesses have some options to get financing. Some of them can start to be a governmental contractor, others can successfully seek private financing inside the country. In any case the government gives a “green light” to such activities since it is seen as very important in the situation when a number of IT and digital services Western vendors left the country and there is a strong necessity to fill a gap. Russia's Deficit of Fintech Specialists Remains Resilient Russia continues to recruit specialists from other CIS countries. In the first half of 2024 the federal government started work on the legislative amendments that would give a way for the designated recruiting of foreign specialists. Russia is going to maximally digitalize this process starting from the application of biometrics to the creation of digital profiles of migrants. The country wishes to make the migrant flow digitally transparent to defend the interests of its own economy and migrants as well. Despite successfully attracting some specialists into the fintech and IT sector, Russia still critically lacked about 600,000 people in these fields in 2023, according to the governmental estimates. The cadre deficit lured some students to drop from local education institutions and come to the labor market for work full time before they graduate. The key issue in recruiting specialists, in the fintech sphere in particular, is to find the optimal match. Moscow leverages AI technology for job seekers, it offers them virtual reality glasses to try some professions. It shows that Russia follows global innovative trends. CIS Countries: A Drive for Diversified Economic Relations Despite the fact that CIS countries have a common history and have strong economic ties, some countries actively develop economic, logistic ties outside the territory of the ex USSR, and it leads to the migrants flowing in new directions. Azerbaijan tilts towards Turkey, Kyrgyzstan actively develops connections with China. In 2024 Nikol Pahinyan, the PM of Armenia, and his team accelerated the movement into full cooperation with the EU and USA. It is very interesting that women's participation in fintech is relatively higher in Armenia in comparison with other CIS countries though there are no prescribed rules. Kazakhstan: A Unique Case Kazakhstan tries to play its own game. In the sense of digitalization of government services Kazakhstan and Russia lead the way. But the former is not under US and EU sanctions as Russia, so Astana also tries to take advantage from this status and actively develops connections with the West and the East as well. This positioning allows to effectively bring not only capital from both sides but talents as well, so Kazakhstan seeks in this direction its competitive edge. Among the five nations comprising the Organization of Turkic States (OTS), Kazakhstan actively contributes to establishing a streamlined customs route. This innovative corridor will integrate the digital systems of Azerbaijan, Kazakhstan, Turkey, Kyrgyzstan, and Uzbekistan, fostering a seamless flow of trade data. Presently, the bulk of foreign trade for Kazakhstan, Kyrgyzstan, and Uzbekistan relies heavily on two primary routes: one linking Russia to Europe, and the other traversing China. The accord to enhance this third corridor, the Trans-Caspian route, which sails through the Caspian Sea, Azerbaijan, and into Turkey, accelerates its development as an alternative. By endorsing this logistic innovation, Astana underscores its commitment to broadening its economic partnerships, thereby enhancing multi-faceted cooperation within the OTS bloc, encompassing areas such as the labor market. Kazakhstan's diversified trade and economic connections mean the country is extensively engaged in economic dialogue with both the West and the East. It brings in not only goods and tech from key sides of the world but also actively brings in investments and people from the West and the East. The Common Obstacles to Find Fintech Specialists in CIS Countries Currently, all CIS countries face a challenge to take onboard all specialists local fintech needs. The main obstacle for local people to be onboarded is sometimes non-fluent command of English or, more often, Chinese. Another obstacle is the so-called “spirit of a startup” that does not always fit the expectations of the people. Even young people sometimes seek a stable job rather than work in the vibrant but constantly changing and less predictable fintech environment. The low wages in comparison with the compensation level in the EU and USA play also a role. For example, many fintech specialists in Russia leave the field because they find it does not bring them as much money as they had anticipated. The new industrial policy of Russia generously supported by the financial incentives from the government also created the environment in which some fintech specialists prefer leaving the sphere and going to the local industrial enterprises for better pay. In other CIS countries there is also room to raise fintech specialists’ salaries. For example, in Armenia, the scope for well-compensated employment is notably narrow, with a concentration of higher-paying positions primarily in sectors like software technology, financial technology, and the banking industry. Salaries for roles outside these verticals tend to be modest, making earnings of $2,000 per month quite uncommon. To illustrate, even a skilled fintech professional, fluent in Armenian, Russian, and English, would typically command a salary in the range of $1,300 to $1,600, reflecting the local market's limitations. CIS Countries Need Solid Industrial Base in the Background to Attract Fintech Talents The CIS countries lack a sufficient industrial base to produce semiconductors, video cards, and data center equipment, relying heavily on imports from China and the West. However, modern fintech requires a solid industrial foundation to scale up. Without this, the heavy reliance on imports increases the cost of fintech products and limits the ability to raise wages to a competitive level with Western countries. Considering the Cost of Living Of course, the fintech wages level in the CIS countries calculated on the parity basis looks not so desperate as it could be. Considering the cost of living in these countries it looks rather lucrative. But this is a catch. There is still a long way to fully develop digital infrastructure. Another setback is that, outside of the capitals, most CIS countries have a limited assortment of consumer goods. Imported goods, which are often more expensive, make up the omitted products. These countries must address this issue, as the day-to-day comfort living of Western expats depends on the availability of consumer choices similar to those in their home countries. Each CIS country should identify its unique competitive advantage. Uzbekistan serves as a prime example. With an annual influx of more than 600,000 young individuals joining the workforce and forecasts suggesting a doubling of this figure within the next ten years, the nation's "Zoomer" generation emerges as a valuable resource. Being the most adept generation in terms of digital skills, they hold the capacity to spearhead innovation and fuel the country's advancement in the digital era. The fintech sector, primarily in Tashkent, offers attractive salaries. The average monthly wage is 11 million Uzbek Soms (UZS), with a lower end starting at 6 million UZS. For context, Uzbekistan's national minimum monthly wage is 980,000 UZS ($77.18). The positive salary trends in the fintech sector across CIS countries make it a promising field for both local citizens and expats.

22.05.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: shares of Russian companies are becoming more expensive both in rubles and dollars

In the week from May 13 to May 17, the Moscow Exchange Index grew by 1.5%, and the RTS Index by 2.9%. Thus, shares of Russian companies have risen in price both in rubles and dollars. Both indices completed all five trading sessions in positive territory and exceeded the “round” levels of 3,500 points and 1,200 points, respectively. In addition, they closed at the highest levels since February 17, 2022 and September 19, 2022, respectively, and the difference in their percentage dynamics was due to the proportional depreciation of the dollar against the ruble. The Russian stock market is starting to look somewhat overbought: the Moscow Exchange Index has moved away from its 200-day moving average by 8%, and the RTS Index by 10%. However, from a historical point of view, these values are not extreme, and, in addition, both indices have just come out of the consolidation zone, so strong bullish momentum may continue in the coming days and weeks, Konstantin Tserazov noted. The week was marked by positive external and internal backgrounds: prices for oil, industrial and precious metals rose, and all major US stock indices closed at new historical highs. The results of Vladimir Putin's two-day visit to China, where a number of agreements were signed, also looked positive. In addition, the Russian stock market appears to be supported by the reinvestment of dividends received. Also, the boards of directors of Surgutneftegaz, Sovcombank and Rosseti Center recommended paying dividends for 2023, and the shareholders of NLMK, Acron and Positive Technologies approved the corresponding payments (in the latter case we are talking about the second part of dividends for 2023) . The boards of directors of such companies as Unipro, Rusal, RusAgro, M.Video, United Medical Group, Rosseti Siberia, Rosseti North-West, Globaltruck and Seimer, on the contrary, recommended to refuse payments for 2023. On May 23, Gazprom’s board of directors will discuss dividends for 2023, but judging by the weak dynamics of the company’s shares, investors do not believe in payments, since in the reporting period Gazprom received a net loss under IFRS of 629 billion rubles. The Moscow Exchange Information Technology Index, whose components represent the main long-term growth story in the Russian stock market, jumped 3.8%, closing at its highest level since December 2021. The best dynamics here were shown by shares of VK, which added 9.9% at the end of the week on a very high volume (last week the turnover in these shares was almost the same as in the previous four together) and Headhunter (+4.5%). In the last three months, VK shares showed dynamics much worse than the market, and now it seems that they are winning back oversold conditions in anticipation of the publication of results for the first quarter of 2024, which is scheduled for May 23, added Konstantin Vladimirovich Tserazov. The situation with Yandex securities, which on March 22 were excluded from all Moscow Exchange and RTS indices due to the reorganization of the company, has become clearer. Closed mutual fund "Consortium. First" offered to shareholders of Yandex N.V. exchange your securities for shares of MKPAO "Yandex" with a ratio of 1:1. Then, as often happens, the Yandex securities implemented the principle of “buy on expectations, sell on reality,” and at the end of the week they fell in price by 1.4% on a fairly high volume. Nevertheless, their growth from December lows still exceeds 100%, so perhaps the securities will face a long period of correction/consolidation, summed up economist Konstantin Vladimirovich Tserazov.

15.05.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: Fintech and Banking Sector Development in Gulf Countries: New Frontiers

The environment of higher inflation and higher key rates in the U.S. and eurozone casts a shadow over the banking sector of Gulf countries. Dollar liquidity is tight for an unknown period of time, and the financial sphere of the region must cope with this reality. Increased Liquidity Recent data show that Gulf banks have increased their assets. The Central Bank of the UAE has taken a decisive step, injecting local currency into the financial system. This initiative has led to a remarkable increase of 32.5% in the regulator's assets, elevating them to AED 747.6 billion by the conclusion of winter 2024. As a direct consequence of this liquidity injection, local banks have seized the opportunity to expand their lending activities. This expansion has driven a substantial 12% year-on-year increase in the sector's total gross assets, culminating in a staggering AED 4.2 trillion as of February 2024. Lending growth among banks is outpacing deposits, indicating that the banking sphere relies more on additional liquidity in local currency. A similar situation can be observed in other regional countries. Saudi banks extended their credit loans up to SAR 2.67 trillion in March 2024, demonstrating an 11% year-on-year growth. This uptrend goes in hand with a rise in the assets of the Saudi Arabian Monetary Authority, nearing SAR 1.85 trillion during the same period. Within Saudi Arabia, real estate financing experienced a notable surge of 27% in March 2024, marking the most fascinating performance since the summer of 2023, with figures reaching SAR 275.2 billion. Almost every fourth Saudi Riyal in all loans provided by local banks went into the real estate sector. The balance of Qatari banks also showed significant growth, by 5.6% to QR 1.99 trillion in March 2024, primarily due to new projects in the real estate sphere. In Oman, local banks’ loan operations expanded by 2.7%, up to OMR 30.6 billion at the end of winter 2024. The expanding real estate sector, coupled with the active monetary policy of the local central bank, enabled this outcome, with credit extended to construction firms exceeding the overall growth rate of loans. A significant increase in the assets of central banks in the region indicates a proactive monetary strategy designed to supply liquidity, even amidst the quantitative tightening in the U.S. and eurozone. Nonetheless, these measures must be judiciously controlled to avoid problems such as inflation or asset bubbles. The Banks' Risk of Focusing on the Real Estate Sector Local regulators need to monitor the growth of Gulf bank assets to ensure that lending and investment practices are sustainable, and that banks maintain sufficient capital and liquidity buffers to withstand potential economic shocks. As we can see, the main area of lending operations in Gulf countries is mortgages, as banks heavily invest in the real estate sector. However, problems in the commercial real estate market in the leading world economy, the U.S., can create depressive pressure on this market in Gulf countries. U.S. commercial real estate prices fell 7.5% year-on-year. Commercial real estate values by category since the 2022 peak: Multifamily: almost -27%; Office: about -19%. Commercial real estate loans account for about 30% of total assets for U.S. regional banks. Exchange-traded funds (ETFs) oriented toward the stock of U.S. regional banks showed a negative return, on average -4% year-to-date for the first four months of 2024. In May 2024, the stocks of small regional banks in the U.S. experienced a significant decline in comparison to the stocks of larger banks, marking their lowest point since November 2009. Concerns among investors in the U.S. are growing, as they begin to lose confidence in the performance of local small banks. This is a bad omen since such small institutions play a crucial role in driving fintech innovations at the regional level and in moving toward raising financial inclusion. The downward trend in commercial real estate prices in the U.S. shows a dramatic shift not only in the leading world economy but everywhere. People are working more remotely, transacting more online, and this is putting the demand for offline stores and office premises on a track of resilient decline. Gulf banks have been accustomed to investing in the real estate sector, but they have to swiftly refocus their investments to avoid falling into the same problematic situation as U.S. regional banks. The Diversification of Investments: Fintech, AI and Data-Centers Fintech, artificial intelligence, and data centers are currently in the spotlight for investments. Gulf countries are pursuing strategies to create special investment funds aimed at actively participating in the aforementioned spheres. In 2023, Saudi Arabian startups attracted $2.6 billion, with the majority of this financing (about 55%) coming mostly through domestic investment programs. In 2024, Saudi Arabia's Public Investment Fund is striving to extend their investment facilities aimed at investing in AI-related projects, including those in the finance sphere, with up to $40 billion. The specific interest in AI is connected with the trend toward the development of banking-as-a-service. The Startup Qatar Investment Program, managed by Qatar Development Bank, operates a $100 million investment structure. The program is primed to release up to $500,000 for new startups in the country, and up to $5 million for seasoned entrepreneurs. These investment vehicles aimed at the development of fintech startups underscore the need for special structures to promote digitization. In this case, the Gulf region has chosen its specific path. European fintech startups tend to rely on risk-averse bank loans for funding, while U.S. fintech small businesses leverage financing opportunities provided by risk-seeking venture funds and rely heavily on financing provided via the stock market, with bank loans as only a third option. In contrast, Gulf startups tend to rely on financing provided via local incentive programs and state-sponsored investment vehicles. Indeed, we witness how the state industrial policy in Gulf countries focuses on driving innovations through fintech startups with significant support from central banks, state investment programs, and state-backed funding. Government policies in the region also focus on onboarding foreign talents and capital by creating an attractive business climate through relevant amendments to immigration laws and other regulatory statutes. In this direction, Gulf countries are poised to create more competition for European and U.S. labor and capital markets. Central Banks' Partnership with Fintech In their pursuit to feed the market with liquidity, central banks of the region came to the conclusion of the need for the development of digital financial channels in their economies. In this case, collaboration with fintech has become an important step forward. For example, in April 2024, the National Bank of Oman struck a direct deal with one of the local fintech startups to play a role as a custodian bank for this enterprise. This contract underscores the trend when central banks start playing a more important role in the digitization of financial processes, including the movement into the design and development of central bank digital currencies (CBDCs). This case only shows that in the movement into a more diversified and decentralized world of finance, the role of centralized institutions is important. The central banks are enhancing their potential in driving financial innovations by extending cooperation between themselves. Thus, in May 2024, the central banks of Qatar and Saudi Arabia penned a partnership agreement aimed at deepening the exchange of practical experience in driving digital innovations in the financial sphere. The Fintech Transformation: Disrupting Traditional Banking In the past, brick-and-mortar banks ruled financial lives. From saving to getting loans, they called the shots. Now, fintech is cracking this monopoly. The 2008 world financial crisis, COVID-19, and the 2023 U.S. regional banking drama all fueled a fintech firestorm. These tech-savvy finance companies are on a tear, wielding serious power and changing how we handle our money. These transformative moments have reshaped consumer financial needs, driving individuals to seek alternative solutions beyond the conventional banking realm. The trust in traditional banks also decreased significantly during these key points in recent global financial history. This shift enabled new generations of financial companies to emerge, resulting in increased competition for the legacy banks. The Most Promising Fintech Trends in Years to Come In the coming years, the competition and collaboration between legacy financial institutions and fintech startups in the Middle East will be fostered and guided by regulators in the Gulf countries. The key sphere to watch is the digital payments sector, which will preserve its role as the most prominent part of fintech. Concepts such as embedded finance and open banking, which allow more people and businesses to access this sector, will be in demand. Financial robo-advising is going to strengthen its power despite the ongoing discussion that AI-driven financial advice can be more effective than investment recommendations provided by humans. Automated financial advisors, more often AI-based, differ somewhat from human investment advisors. They offer a personalized and low-cost service. In comparison to human investment advisors, they vary in terms of skills and cannot be influenced by emotions, biases, and specific interests. Meanwhile, human investment specialists can build higher trust with consumers by reducing perceived uncertainty and anxiety and showing empathy for clients. In the years to come, the paramount concern for banks and fintech companies will be the ever-looming danger of data breaches. They will dedicate their efforts towards devising effective strategies to tackle these risks head-on. Although financial technology has made remarkable strides, the undeniable importance of human connection persists. The all-new fintech can bring more comfort in doing business in the investment sphere, but even the high-end advanced AI advisor won't make up for human emotions and interaction. However, it can help make the investment journey more exciting.

04.05.2024

Economics and financial markets

Source: DUBAI WEEK

Konstantin Tserazov: Cybersecurity and Data Protection – Global Challenge and Gulf Countries

On April 24, U.S. President Joe Biden signed a law aimed at TikTok, requiring its parent company ByteDance to sell its interests or face a U.S. ban within a year. ByteDance opposes this, claiming it infringes on the free speech of 170 million U.S. TikTok users and plans to legally challenge it. This highlights the growing concerns over data protection, potentially straining U.S.-China relations, with the handling of user data by TikTok at the center of the issue. The question remains contentious: is it possible to create a barrier between U.S. users' data and data collected and analyzed at the heart of TikTok in China? Is it practically feasible and meaningful? Is the U.S. government justified in its pursuit to protect American personal data? All these questions are vital for any country in the world dealing with similar issues: data protection and cybersecurity. Gulf countries are also paying considerable attention to this matter. Internet of Finance The Internet has created a sense of convergence in information flows. Social media has become integrated into finance as platforms where people spend significant time sharing personal information. The concept of open banking is rooted in the principle of ubiquitous information flow. The increasing immersion of humanity in the vast information landscape results in extensive data accumulation whenever individuals connect to the Internet. Consequently, the Internet has evolved into the Internet of Money or Internet of Finance, making data protection and cybersecurity critical concerns for investors and financial services users. Data protection practices and cybersecurity risk management are now essential components of any country's business environment, with artificial intelligence (AI) technologies playing a leading role in this realm. AI and Oil For Gulf countries like Qatar, Saudi Arabia, the U.A.E., and Oman, the strategic application of AI to monitor cybersecurity risks is a naturally sustainable practice, given their abundant oil resources. This is due to the significant energy requirements of AI technologies, with the latest generation chips consuming 700 Watts per hour, exceeding the power consumption of a typical 4-person household. Modern neural networks rely on millions of such chips. It is foreseeable that in the next two years, the West may face challenges in meeting the escalating energy demands of AI. While solar, hydro, and wind energy sources are viable options, the rapid advancement of AI technology suggests a resurgence in oil consumption. Gulf countries are poised to play a pivotal role in driving AI innovation. The Escalating Dangers of Cybercrime in the Digital Era In today's digital era, data's expansion serves as both a boon and a bane for individuals. While it streamlines processes and enhances efficiency, it simultaneously opens the door to potential financial jeopardy due to cybercrime. The adeptness of cybercriminals in harnessing the vast pools of digital information to illicitly access personal financial assets marks a grave concern for personal economic security. The surge in economic crime poses a multifaceted threat, leading not only to severe financial repercussions for individuals but also tarnishing the reputations of nations and financial bodies. Particularly at risk is the banking sector, which has seen a pivot from conventional physical thefts to intricate cyber intrusions over the last decade. This shift, propelled by the digital transformation of banking operations, renders digital monetary assets and sensitive data increasingly vulnerable to cyber incursions. The cyber threat landscape is primarily navigated by two adversarial entities: criminal syndicates and government-backed operatives. The former usually aims at financial institutions to pilfer funds, pilfer data, or execute fraudulent schemes. Among their tactics, ransomware is prevalent, effectively holding a bank's operational systems hostage in exchange for payment. Conversely, state-sponsored entities seek data that could furnish a competitive edge to national interests. AI and Cybersecurity Financial entities today grapple with a spectrum of cyber threats, from DDoS attacks and phishing scams to malware viruses. The evolving sophistication of cybercriminal acts necessitate a detailed comprehension of the primary vectors of cyber threats. Such insight is pivotal in formulating robust cybersecurity strategies, thereby safeguarding against the operational and reputational damage wrought by these digital hazards. This makes it more difficult to detect and prevent such crimes using traditional methods. This has created a need for more innovative solutions. By using advanced algorithms, AI can quickly and efficiently identify anomalous behavior, such as suspicious transactions, making it possible to detect these types of crimes. In recent two years, AI is used to address such threats in Gulf banks. Among other things, they have invested large sums of money to develop customer service tools such as chatbots and efficient credit assessment tools. In addition, they have begun to apply AI to strengthen and streamline cybersecurity. By applying AI in cybersecurity work, banks can detect threats faster and more accurately to counteract cyberattacks. Meanwhile, cybercriminals also have access to AI technology. This results in new types of attacks and threats, leading to new challenges for the banking sector of Gulf countries. Gulf banks compete with each other, and by maintaining an effective cybersecurity system, one can help ensure the usability of products and customer confidence. To outpace cybercriminals, local banks are keen to use neural networks. Machine Learning Algorithms The use of Machine Learning (ML) algorithms is a powerful solution for managing the increasing complexity in network traffic and security-related events. These algorithms have the capacity to analyze and understand users' network activities, identify malicious web traffic, and detect unusual behavior that may indicate attacks. Through careful exploration and testing of various ML options, the most suitable architecture for the task and data can be identified, enabling effective learning and the ability to capture relevant patterns and features. In this way, an efficient method can be created to detect network intrusions. Experimentation and development of AI models based on ML are crucial to addressing current threats and maintaining an up-to-date level of protection. Data quality is also a crucial factor for training AI models and benefiting from their analytical capacity. Banks handle large amounts of data of various types, making maintaining high quality a challenge. Furthermore, banks need AI specialists with relevant expertise. Cybersecurity Risk Management and Recommended Measures Gulf banks' cybersecurity risk management is based on five key points: • Confidentiality: prevents unauthorized disclosure of information. • Integrity: prevents unauthorized alteration of information. • Availability: prevents unauthorized withholding of information. • Traceability: activities within a system should be traceable to a user. • Non-repudiation: prevents data sent or received from being denied. The most recommended measures for banks' clients in the region are: • Software Updates: Keeping systems updated minimizes the risk of known vulnerabilities. • Antivirus: To protect against malicious software that can steal login credentials. • Backup: To minimize the risk of losing essential information. • Passwords: Passwords should be complex, changed regularly, and kept confidential to maintain effectiveness. • Education: All individuals in contact with computer systems should be educated in cybersecurity to maintain a good standard. The Legal Framework In data protection, Gulf banks follow the spirit of GDPR - General Data Protection Regulation. On the 25th of May 2018, the GDPR was introduced by the European Union. This legal construction is the world's largest of its kind, impacting not only entrepreneurs within the EU but all financial businesses worldwide that target EU citizens. Since Gulf countries are keen to attract more wealthy investors from the EU, the local regulators created legal frameworks similar to GDPR to a familiar degree. In the U.A.E., the Personal Data Protection Law (PDPL) that came into effect on 2 January 2022 became the milestone in developing the legislation in accordance with new tech development and the pace of digitalization of life. On 7 September 2023, Riyadh formally published the amended local Personal Data Protection Law (PDPL). Saudi business entities have until 14 September 2024 to adjust their practices to become compliant with the PDPL. More Information, More Risks: IoT Devices Move into Focus Gulf banks look ahead. They know they must provide comprehensive data protection and cybersecurity risk mitigation for users. These risks deepen as the Internet of Finance gains access to more personal information of bank users, via social media for example, which has become a strong concern for policymakers worldwide. But technology continues advancing. A new challenge to address is the Internet of Things (IoT). The number of connected IoT devices has risen dramatically. Gulf banks have the right technological and organizational foundations in place to secure their IoT devices. In addition to the technological framework, it's equally important to ensure staff undergo adequate training and stay informed about optimal cybersecurity practices related to IoT systems employed in the financial sphere. Considering the human element is essential because a lack of awareness can create security vulnerabilities that cybercriminals could potentially exploit.

23.04.2024

Economics and financial markets

Source: Medium

Konstantin Tserazov: The Global Real Estate Conundrum: Can Fintech and Tokenization Offer a Solution?

Understanding the Current Crisis in U.S. and China Real Estate Markets 2024 is characterized by clear strains in the commercial property sphere of the U.S.A. and China. The widespread remote work drastically diminishes the demand for office spaces. In March 2023, the world closely tracked the so-called small banking crisis in the U.S., fueled by problems that emerged in a few regional banks. The key pain point for lending institutions became the loans provided to commercial property developers. An "ideal storm" situation emerged. The quality of collateral for such loans started deteriorating as the bonds began losing their value due to the Fed’s higher rate policy. At the same time, more commercial property became under-occupied by tenants. As a result, a banking crisis has arrived. The first months of 2024 did not make a significant difference. The fundamentals of the property market remain weak. The low demand for commercial and residential property persists in both the U.S. and China. The defaults of several key developers in China in 2023 failed to streamline the market into a new financially healthy equilibrium. The significant outflow of foreign direct investments and underperformance of Chinese stocks in 2024 create aggravating factors for the local property market. The inflated prices for residential property in China, compared to the average salaries for locals, are a huge setback for the property market. Moreover, the enormous stimuli provided by financial regulators in China failed to turn the tide. The real estate sentiment index in China hit an all-time low in April 2024. The environment of elevated interest rates in the U.S. exacerbates the situation in the property market and creates negative spillover effects for residential property as well. The median monthly mortgage payment is up by a mind-blowing 69% since 2021. Meanwhile, the median home sale price is edging again to the all-time high lastly seen in June 2022 at $413,800. American borrowers face the reality that total homeownership expenses may consume almost half of their monthly incomes. The obvious squeeze on demand in the market for assets typically characterized as low-liquid can bring grim ramifications not only for the largest economy in the world. The global financial markets are growing nervous. In April, the S&P 500 experienced a 7% correction, leaving the year-to-date growth at several percent. The Japanese Nikkei 225 lost 10.4% from its March peak as U.S. property exposure is a concern for many Japanese banks and insurers. The Chinese indexes followed suit. The troubles in the US and Chinese commercial property market spooked the European stock market too, elevating fears about broader contagion. The Elegant Solution: Tokenization These drawbacks in the property markets of two superpowers need an elegant solution. It seems that tokenization of property can be a game-changer. As we know, the leadership of BlackRock, the largest investment company in the world, is very enthusiastic about tokenization for investment goods. Of course, the tokens that embody material goods are very interesting phenomena. Tokenization is the way to digitally arrange fractional ownership of an asset with a blockchain-based token. These tokens allow us to strike deals with investment goods swiftly. But tokens are not only a convenient way to interact in markets dealing with virtual “images” of real-world goods. It seems that the potential of tokenization in solving problems in the real market is still undervalued. This tokenization story goes beyond just financial markets' goals. Out of Classical Options If one speaks about property markets in the U.S. and China now, we see a real deadlock. The classical methods to fix these markets look irrelevant. The combination of factors described above has made it impossible to revive these markets by simply lowering the rates. The overall demand for goods such as property (commercial and residential) faces a tectonic challenge. The more distant job approach, the negative attitude towards office jobs among many Zoomers, and their pursuit of the idea of being digital nomads roaming around the world add special factors to enhance this challenge. The Fed in the U.S. is not going to promptly turn to a policy of lower rates. The rise of monthly inflation in March shocked many on Wall Street. The chance of a higher Fed rate is again in play, and the hope for three consecutive rate declines this year has almost faded away. A chilling sense of lost hope for more liquidity has appeared, as commercial property foreclosures in the U.S. jumped 117% in March compared to February. The market cries for more liquidity, but there is no glimpse of hope that it will be the case in the coming future. Meanwhile, a significant portion of U.S. large banks' balance sheets, about one-seventh, is tied to commercial real estate loans. However, the exposure of American regional banks to these loans is more than triple that figure. Almost all banks have to build up more reserves to mitigate looming losses that could be inflicted by the crippling real estate market. The poor local demand for property can be offset by growing demand outside the U.S. and China. World retail and institutional investors can gain access to these properties if they are properly tokenized. What Tokenization Brings The fintech projects focused on tokenization of real estate can launch financial ecosystems effectively competing with Real Estate Investment Trusts (REITs). Such projects can provide fractionalized ownership and rent distribution when property shares are divided into tokens, enabling ownership and income distribution for a huge number of investors. Imagine a commercial property worth $10 million. Instead of buying the entire property, investors can purchase tokens that represent a percentage of ownership, such as 0.01%, for example. In essence, property tokens are the basic element of digital token-based mortgages, whose role is slated to be more important for the property market than the classical bank mortgage. The use of blockchain can also deliver high-level security and transparency of such deals. Smart contracts as part of this process boost transaction efficiency. They simplify property contracts, saving cost and time. Tokenization can take various forms. NFTs are a potential option since it's a convenient way to digitally pack various financial products, including mortgages. The lack of regulatory validation of smart contracts for real estate deals poses a setback to further tokenization of real estate in many countries. Those countries that make advancements in this direction will get an upper hand in tokenization. They will witness the avalanche of new demand for local real estate appear after smart contracts make obsolete third-party participation to validate contracts. Blockchain effectively can do this job. The Dawn of New Digital Era Tokenization is obviously a global fintech trend in the coming years. This is a new big thing. The conversion of assets to tokens on regulated platforms or blockchains is gaining momentum. It’s important to see a fundamental sense in this development and how fintech startups can enhance the value of this process. The fintech companies in various countries can project around themselves the proper tone of voice of tokenization, creating the ecosystem of valuable financial products atop tokens. Indeed, the property tokens in the U.S. and China floating on the digital waves may unlock the abysmal potential of demand for material square meters. Ubiquitous tokenized assets and derivatives on tokens become accessible wherever there's internet access. This expands the client base and pours more liquidity into the market. The tokenization arrives in due time when access to classical borrowing and lending is limited not only by the policies of most central banks in the world but by the growing fear of legacy banks of new instabilities in the financial markets, similar to the 2008-2009 world financial crisis. The development of financial derivatives on tokens will be driven mostly by fintech companies. Thus, these products will create a convenient venue for investors since they will be equipped with options and futures on tokens that will allow them to work out digital hedging investment strategies. Fintech companies are already effectively developing cross-blockchain infrastructure and create bridges between various distributed ledgers. They also develop decentralized platforms that support token liquidity. Besides, fintech startups create various digital wallets and other necessary elements of digital infrastructure for tokenization. Actually, we are witnessing the dawn of a new digital era in which tokens creating the demand for material objects are starting to help solve vulnerabilities of stagnated markets. And these markets in the U.S. and China are the best points in the journey of the world investment society to start from, towards a greater degree of tokenization of almost everything in the material world.

15.04.2024

Economics and financial markets

Source: Medium

Konstantin Vladimirovich Tserazov : «The Regulatory Environment of Fintech in the Persian Gulf Countries»

The Case of the UAE, Saudi Arabia, Qatar, and Oman When a company or an entrepreneur starts considering initiating fintech activities in Gulf countries, the first step should be to understand the regulatory environment. This primarily involves understanding how to establish a business entity, obtain registration, and navigate the best tax conditions. Additionally, the willingness of local government and non-governmental bodies to support fintech startups in gaining a solid foothold is crucial. Each Gulf country has its unique specifics in this regard. Another important aspect is the swiftly changing regulatory landscape in Gulf countries, making it essential to be regularly updated in laws and regulations issues. UAE The UAE can be considered as the most attractive location for fintech activities in the region. In 2023, it joined the club of the top five hot world spots from the perspective of high net worth individuals seeking the most favorable climate (taken in a broad sense) for their settlement. A huge net inflow of HNWI to the UAE was tracked from India, the UK, and Russia. In most cases, the relocation of such people means bringing a huge amount of their investment capital to the accepting country. One of the hottest spots to apply these financial resources is fintech. The popular Golden Visa program enters its fourth year in 2024. This program allows property buyers with investments of at least 2 million AED to secure a coveted 10-year residency visa. Dubai also offers a 1-year Nomad Visa focused on bringing internet-based working people into the country. All businesses must register for corporate tax in the UAE, regardless of whether they conduct any activities or not. The only exception pertains to natural persons whose annual turnover falls below 1 million AED. Companies with sales up to 3 million AED may be treated as having no taxable income, provided they are registered and approved for this exemption by the Federal Tax Authority. Good news for fintech startups is that small businesses can benefit from tax relief exemptions until 2026. The UAE also offers a Free Zone regulatory regime for startups. However, for a Free Zone company to qualify for a 0% corporate tax (CT) rate, it must meet strict criteria, such as generating qualifying income from relevant activities. Fintech is among the sectors in which startups have a strong chance of being eligible for the 0% CT rate. However, there is a caveat. Fintech startups can only enjoy a 0% tax rate on the "qualifying income portion," while the remaining income will still be taxable at the standard 9% rate. Moreover, if a company opts for the 0% CT route, it cannot revert to the ordinary taxation system, where profits below 375,000 AED are taxed at 0%, and the 9% rate only applies to profits exceeding 375,000 AED. The UAE has relatively lenient capital movement regulations. A person only needs a valid local ID and a mobile app to open a bank account. Fintech startups, specifically neobanks operating within the UAE, can transfer money internationally, provided that the sender successfully completes KYC/AML procedures. Saudi Arabia Three legal paths await Saudi fintech startups: • Limited Liability Company (LLC): Popular but requires a local sponsor holding at least 30%, ideal for shared control but limiting foreign ownership. • Sole Proprietorship: Simplest option, but restricted to Saudi citizens. • Foreign Investment Company (FIC): This option allows 100% foreign ownership but restricts operational activities to specific sectors of the economy and requires conducting business within designated geographical territories. Although there is no statutory minimum capital requirement, in practice, the Ministry of Investment (MISA) often requires LLCs to have a capital of at least 500,000 SAR. Moreover, for some activities, including investment, the minimum threshold is significantly higher. The exact amount depends on the actual breakdown of ownership rights between local and foreign investors in fintech startups. It is essential to note that Saudi Arabia has no personal income tax. However, sales and other transactions are still taxed. The country has a "zakat" tax, which is a 2.5% tax on net worth, including cash, stocks, bonds, and real estate. An Islamic religious levy of 2.5% also applies to some digital businesses that exceed specific thresholds. While not strictly a tax, it is a cost consideration. Saudi Arabia applies CT at a rate of 50% to 85% if a business entity derives its cash stream from oil and gas extracting. However, businesses in the rest of the economy are subject to a standard 20% CT, which may be offset by tax holidays for a list of industries that includes some activities within the fintech realm, such as wealth and investment management services. The list of favorable activities is subject to change every year. Meanwhile, the government has expressed its intention to elaborate a digital tax on financial online transactions, but the preparatory work of the relevant legislation is still underway, reported Terazov Konstantin. Qatar In most cases, there is a need for a Qatari partner/sponsor to set up a fintech business in Qatar. A minimum of two shareholders is required. The Qatari shareholders will own at least 51% of the business entity. The Ministry of Commerce and Industry (MOCI) is a key governmental body for startups to consult regarding business onboarding issues. Now, individuals can establish a business in Qatar without the requirement of a Qatari sponsor. However, the company must demonstrate that it has secured a minimum commitment of 50 million Qatari riyals for financing purposes. With a Qatari partner or just a sponsor, one pays half of the tax. That's why many businessmen prefer the company to be fully Qatari-owned. In this case, the minimum investment is 200,000 Qatari riyals. Some fintech-minded people find their way in Qatar through participation in fintech grant programs arranged by local government bodies or classical banks. In the latter cases, when a bank provides incubation for a fintech startup, the foreign owners can retain 100% ownership rights in their business. Moreover, in some cases, banks can provide a fintech startup with a free office for 1 year. Qatari banks use their legal right to create special and very lucrative circumstances for promising fintech startups. It's strongly recommended to participate in various hackathons and similar events held by local banks to catch such business opportunities. There are a few entities like QBIC (Qatar Business Incubation Center), QSTP (Qatar Science & Technology Park), QFZ (Qatar Free Zones), and QFC (Qatar Financial Centre) (all are government-influenced and/or regulated) that assist fintech startups in adapting to the legal environment. Qatar's fiscal incentives, including a 10% corporate tax rate and a decade-long corporate tax exemption for select innovative enterprises, present an appealing proposition, says Konstantin Tserazov. Oman It's recommended to employ a multifaceted strategy when seeking the way to establish a fintech startup in Oman. Firstly, seek support from government programs designed to foster innovation and entrepreneurship. Networking with peers in similar fields is also crucial, as it opens doors to potential collaborations and provides insights into the local fintech landscape. Engaging with private and public incubators offers not only financial backing but also valuable guidance. Given the limited fintech news coverage in Oman, building connections within the fintech community becomes essential for staying informed and identifying potential collaborators. Being active in this community keeps one well-versed in local developments and key players, increasing the chances of success when establishing a fintech presence in Oman. The base corporate tax rate is 15%. However, fintech businesses may benefit from specific tax incentives and exemptions, depending on their exact activity and location. Moreover, small and medium enterprises (SMEs) with gross turnover not exceeding 100,000 OMR are taxed at a reduced rate of 3%. This last option is very attractive for fintech enterprises to establish themselves in Oman. Religious Tradition as the Foundation For fintech companies venturing into the Gulf region, understanding the legal landscape is crucial. Here, religious tradition forms the bedrock of the regulatory framework, shaping the rules of the game. Recognizing these nuances is key to a smooth and successful operation. Beyond Traditional Finance: Sharia-compliant Solutions While legacy bank loans and securities exist, Gulf fintechs are often receptive to alternative financing frameworks that adhere to Islamic principles (Sharia). For instance, Sukuk, Sharia-compliant financial instruments resembling bonds, offer a credible alternative to conventional interest-based debt financial products. Profit-Sharing Partnerships: Mudharabah The Mudharabah model provides a unique financing option. Here, the financial institution acts as a capital provider, while the fintech startup manages operations. Incomes are then shared according to a predetermined agreement between the financial institution and the entrepreneur. Mutual Support: Takaful (Islamic Insurance) Takaful (Islamic insurance) functions on the foundation of mutual assistance concept. Unlike conventional insurance, it's rooted in the concept of "tabarru'" (donation). Participants contribute to a shared pool, supporting each other financially during economic “rainy days”. This system operates similarly to other pooling agreements. Blockchain and Regulatory Considerations Fintech companies utilizing blockchain technology should be aware of potential restrictions. Regulations in the region may limit solutions perceived as similar to gambling. Beyond Regulations: The Power of Tradition Embracing local traditions fosters the adoption of digital financial services in the Gulf. Traditions hold significant weight, acting as key ideological drivers that shape future legislative changes. Understanding this unique business culture is paramount for fintech success in the region, sums up economist Tserazov Konstantin Vladimirovich .

09.04.2024

Fintech, banking sector, IT

Source: Medium

Digital Payments and Financial Inclusion: The Case of Gulf Countries

Financial inclusion is one of the most popular talking points in today's global society, and this is also true for Gulf countries. The global volume of digital payments is on the rise, with each year more people gaining access to financial services through various devices. This surge is attributed to the proliferation of smartphones, increased internet penetration, and the emergence of fintech solutions. However, around 1.7 billion adults globally still do not have access to a bank account, yet they manage to find out ways to utilize financial services. How? They increasingly rely on non-banking financial solutions brought to life by fintech startups. Nevertheless, there are specific issues within this movement that must be addressed. Financial services are a central part of society, essential for everything from buying food to enjoying culture. Ensuring that everyone has access to and receives the right information about financial services is key to engaging more people in society. To achieve this, more information is needed on how individuals experiencing any form of financial exclusion perceive these issues and their opinions on various solutions. Different forms of exclusion exist in society, with homelessness being one prominent example. The rapid urban growth in Gulf countries has led to a housing crunch, especially for low-skilled workers. Oman stands out for its lower cost of living compared to other Gulf countries, but salary levels are still under pressure there. Nevertheless, the highest number of homeless people (in absolute figures) in the region is in Saudi Arabia - around 150,000 individuals. In Oman, this figure is about 4,000, in the UAE - 2,500, and in Qatar - 10,000. Homelessness is more common in low-income countries, yet it remains a significant issue in Gulf countries. Providing access to financial services, especially in a convenient digital form, is an important milestone to reduce overall homelessness and give homeless individuals the opportunity to improve their standard of living and, ultimately, transition from being homeless. The lack of a permanent address makes it difficult for the homeless to open a bank account and access banking services, including making payments. This underscores the importance of developing digital payments to enhance financial inclusion. However, homelessness is not the sole measure of exclusion. Some individuals have housing but face limitations in other ways, such as lacking access to financial and digital services or living in challenging economic conditions. Digital Inclusion Financial inclusion in the world with digital payments means the reach of digital inclusion. And this is also a case about motivation. Motivation and Technology Use Motivation is linked to the willingness to use digital technologies. Without motivation, technology use will not occur even if access and skills are present. Reasons for lacking motivation may include concerns about security, a perception that digital technologies do not add value, or a feeling of being able to manage well without them. Types of Motivation: • Instrumental motivation: Desiring to use digital technology to achieve a specific goal or task, such as finding information or submitting a job application online. • Social motivation: Wanting to connect with others through digital technology, like social media or online communities. • Hedonic motivation: Seeking enjoyment or entertainment through digital technology, such as playing video games or watching online videos. Evaluating Digital Skills and Tech Usage Digital skills involve how and why different groups use new technology, the impact of professional life on digital capabilities, and demographic differences in skill levels. Besides, having access to digital tools, possessing sufficient knowledge and skills to utilize digital services and products is crucial. The evaluation of usage refers to the actual use of technology, how often it occurs, the purpose, and the advantages and disadvantages for users. Financial Inclusion of Migrants Is in the Focus Financial inclusion concerns the native population and foreigners working in Gulf countries. Around 88% of the UAE's 9.59 million population are expatriates. And only about 60% of migrants have a bank account, compared to 94% of Emiratis. In Qatar migrants make up a staggering 94% of Qatar's 2.73 million population but just 55% of migrants have access to a bank account. Expat workers account for 89% of Oman's population but only 34% of migrants in Oman had a bank account. In Saudi Arabia migrant workers constitute about a third of the population of 37,4 million in 2024. And 72% of Saudi migrants lacked access to bank accounts. The relatively low access to the banking services for migrants led to the burst of the demand for neobanks, for fintech solutions in the sphere of digital payments. As a result, the combined total of outward remittances from the UAE, Qatar, Oman, and Saudi Arabia reached a huge sum, $73.5 billion, last year. The adoption of digital remittance channels, like C3Pay in UAE, has increased, offering a сomfortable way for migrants to send money back home. The UAE makes additional efforts to increase financial inclusion. For example, Emirates Digital Wallet LLC owns and runs klip - the all-in-one digital wallet. As its motto boldly states: “Think outside the bank. A digital wallet for everyone.” Digital Disparity: The Unseen Barrier To develop financial inclusion, it is necessary to drive the development of social media into a one-stop hub not only for interpersonal communication but also for financial services targeted at the people. Information and communication technologies can create not only information and communication benefits but also foster financial inclusion. This is achievable because the more people use the internet, the more they gain access to the global community of people alike, and thus access personal, lifestyle, and job opportunities. However, the key issue is the intuitive and understandable interface of financial services offered on top of classical social media. This is not only a convenient way to interact but also a crucial factor in ensuring that people grasp how these services work. It is important to focus on both access to technology itself, such as whether individuals have computers and/or smartphones at work and at home, and the ability to connect them, primarily through the internet. Personal smart gadgets must also be affordable for most people. Otherwise, we face the problem of digital divide. Don't Exclude Cash Addressing the digital divide is crucial for the future. However, the rapid movement into a cashless society can also have negative ramifications. In the Gulf countries, over 50% of consumers are projected to go fully cashless by the end of 2024. However, official data may not accurately reflect the real use of cash in Gulf countries. Cash is still an important financial tool for the elderly and for those who prefer to hoard cash, despite the lucrative financial opportunities to get investment returns. Moreover, there are still cases where the use of QR codes for payments can incur venue surcharges and payment-processing fees, making cash a more attractive option for some people. Cash is also an important part of the financial system because, in the case of problems with digital payment infrastructure (such as electricity outages or cyberattacks), cash remains an essential backup option for businesses to receive payments for goods and services. CBDC One way to enhance financial and digital inclusion is through Central Bank Digital Currency (CBDC). All Gulf countries are progressing in CBDC development, though at different paces. Among them, the UAE is making significant strides with a digital dirham strategy, involving R3 and G42 for infrastructure and technology. This strategy aims to improve both domestic and cross-border payments, financial inclusion, and targets both retail and wholesale use. Creating Digital Inclusion for All: A Key to Financial Inclusion Promoting digital inclusion for all is key to achieving financial inclusion. This involves ensuring that all individuals, particularly those facing various forms of exclusion, have access to and utilize information and communication technology, including reliable internet access, appropriate digital devices, digital skills education, technical support, and software. Digital financial services can also help reduce bureaucracy and lower costs, contributing to more inclusive and accessible financial systems for people across all social strata and locations. In the Gulf countries, financial inclusion is closely tied to digital inclusion, as banks are highly digitized. To access many banking services, citizens must navigate a digital landscape. In Oman, for example, the digital payment landscape is burgeoning. This is supported by the government's eOman strategy and the National Program for Enhancing Economic Diversification (Tanfeedh). The Central Bank of Oman has introduced the "Mobile Payment Clearing and Switching System" (MpClear), further promoting digital payments. All of these developments, coupled with many cashless stores in Gulf countries, further incentivize participation in the digital world. Moreover, with the rise of digital currencies and blockchain technology, finance is becoming increasingly decentralized and at long last accessible to everyone.

02.04.2024

Fintech, banking sector, IT

Source: Medium

Konstantin Tserazov: «Gulf Countries’ Crypto and Blockchain Ascendancy: A Showdown with the West»

The dubious regulatory landscape for cryptocurrencies and blockchain in the USA has pushed global crypto firms to move to locations such as Gulf countries. In 2023, the volume of cryptocurrencies transacted in these countries rose by almost 50% on a yearly basis. At the forefront of this shift are the United Arab Emirates (UAE) and Saudi Arabia, both drawing crypto enterprises with their substantial populations and corresponding spending power. In terms of becoming a blockchain/crypto hub, whether it's due to regulatory steps to explore these innovations or because of more disposable income and openness to new developments in the financial realm, these factors seem to be attracting international businesses to relocate there. The UAE and Saudi Arabia are developed markets, and in this sense, they operate on the same playing field as Western countries. UAE In 2020, the Securities and Commodities Authority (SCA) released Act No. 23 on the Crypto Assets Activities Regulation (CAAR). This regulatory move embraces all aspects of crypto assets regulation within the UAE, including issuance, listing, and trading. Accordingly, Dubai, in compliance with Act No. 23 of the SCA, approved its own digital assets law, appointing the Virtual Assets Regulatory Authority (VARA) as the agency in charge of the sector. Some leading global crypto exchanges with operations in Dubai were granted a Virtual Asset Service Provider (VASP) license by VARA to trade cryptocurrencies. However, this regulation does not apply to the Dubai International Financial Centre (DIFC), as the free zone has its own financial services watchdog, the Dubai Financial Services Authority (DFSA). On March 8, 2024, the DIFC released what the regulator earmarked as the "world's first" digital assets legal document. It defines that the legal specifics of digital assets derive from the understanding of them as a property object. The document also establishes the rules for the transferring and dealing with digital assets. A number of already valid regulations will be updated via the implementation of the DIFC Amendment Law. A cryptocurrency license and registration with the DFSA are requirements for all crypto investors in the UAE. With the application of this permission, people in Dubai are able to sell and buy cryptocurrencies in accordance with the law. All crypto trades are registered with the DFSA as an investment. The appropriate declaration of crypto activities implies that the investor must maintain all relevant records. The gains on crypto investments are taxed, even if Dubai grants exemptions from taxes for some business activities. At last, another sign of rapid movement of UAE into the digital assets sphere was flashed by the Central Bank of UAE (CBUAE). On March 23, the regulator released its strategy “The Digital dirham” as one of the nine initiatives of the CBUAE’s programme to overhaul financial infrastructure. In the case of digital dirham CBUAE struck a deal with G42 Cloud and R3 companies. Saudi Arabia Currently, Saudi Arabia does not yet have a comprehensive regulatory framework for cryptocurrencies. The Saudi Arabian Monetary Authority (SAMA) has launched a regulatory sandbox specifically for testing blockchain-based financial services. Meanwhile, the UAE leads, together with Saudi Arabia, in crypto adoption among Gulf countries. The investors from both countries combined generated capital gains of more than $500 million from crypto ventures in 2023. In Saudi Arabia, most crypto investors use international platforms and accounts opened in foreign banks to trade crypto, since local banks are still undertaking a very cautious policy regarding any crypto buying and selling operations using local banking accounts. Qatar Currently, Qatar holds a ban on crypto trading, but the country supports digital ledger technology (DLT) and is trying to figure out a more nuanced approach to the regulation of digital assets. The Qatar Central Bank and the Qatar Financial Centre Authority (QFCA) have jointly unveiled the QFC Digital Assets Framework in October 2023, which seeks to regulate investment tokens representing underlying assets that are specified products under the current financial legal QFC framework. Key aspects of this framework include the introduction of legal guidelines regarding the issuance and circulation of investment tokens. These rules stipulate that any activities involving such tokens require authorization and supervision by the regulatory bodies. Moreover, the Digital Asset Regulations 2023 define what an accepted token is, revealing provisions for token transfer, ownership, and relevant rights, and establishing the scope of activities for approved token service providers in the QFC. As far as DLT is concerned, a number of Qatari governmental entities and private structures, especially in the banking sector and fintech sphere, are scaling up blockchain implementation. The QFCA has tested a typical framework of the local blockchain ecosystems last year and is following this path this year. Qatar demonstrates an open stance towards new innovations and is ready to further update its regulation of fintech companies, taking into account that a growing number of players in the industry leverage blockchain technology in their day-to-day operations. Oman In a move to bring crypto regulation to Oman, last year the country's Capital Market Authority (CMA) gathered comments from the public and businesses on its blueprint of a regulatory framework aimed at governing digital assets. The blueprint, which appeared on July 27, 2023, outlined a comprehensive regime for the digital (virtual) asset sector, including business requirements and the protection of market participants. The primary objective of this innovative framework is to create a robust and flexible system tailored for the vibrant digital assets industry. This framework encompasses a wide range of prudential measures and business conduct standards, alongside stringent regulations aimed at thwarting market manipulation. These regulations are reinforced by vigilant surveillance protocols and effective enforcement mechanisms, particularly concerning the issuance and management of digital assets. The blueprint included 26 questions, allowing key stakeholders and concerned parties to share their insights on regulatory and licensing rules for digital asset service providers, corporate governance, risk mitigation, and digital asset issuance. The beginning of 2024 has been marked with a number of practical developments in the relevant field. At the start of the year, Oman's Ministry of Housing and Urban Planning (MoHUP) announced its roadmap for 2024, which will encompass 130 initiatives, including DLT among many other proposals. The Oman MoHUP has a plan to develop a multi-level portal whose structure will be based on blockchain. Also in January 2024, the Oman Development Bank made its own way into the blockchain world by starting to transform its operations into a digital format utilizing blockchain for this purpose. On January 29, the Oman Sohar port free zone struck a deal with the encryption mining firm Green Data City to develop a $210 million data computing center, which will include data mining. The data mining center is aimed at performing blockchain data mining as well as cryptocurrency mining. The packet of documents includes a land lease contract featuring the development of a 45,000-square-meter site that will house 20,000 servers from key manufacturers of mining equipment. In February, another governmental body, the Ministry of Transport, Communications and Information Technology, joined the blockchain race and revealed the intent of piloting a Blockchain Land Transport eWay Bill. In March, the Oman-based fintech infrastructure provider Mamun Ventures announced that it would pour $1 million into digital asset startups operating in compliance with local traditions. Earlier, in December 2023, the UAE and Singapore-based Triterras, a fintech company focused on digital trade and supply chain finance, partnered with Mamun Ventures to join efforts in developing this sphere in Oman. The Unfolding Blockchain and Crypto Story Major US and European companies are relocating to the region as the Gulf countries embrace blockchain and crypto. The US could lead this tech but instead looks like it is missing its piece of the pie. Blockchain adoption is more visible in the region. In Dubai, exemplifying this trend, the UAE Pass application functions as a digital passport providing entry to a wide array of government services. The application's digital vault allows the user to store and share official documents digitally and is based on blockchain, as it securely records all necessary data and provides a higher level of transparency, traceability, and security of this system. Besides DIFC's movement in the blockchain direction, the same trend has appeared in the Dubai Multi Commodities Centre (DMCC) as well. A total of 2,692 new companies joined DMCC last year, bringing the total number of entities in DMCC to over 24,000, according to its 2023 Annual Report. Finally, DMCC is now home to 600 blockchain and crypto-related companies. Crypto mining is evolving in the region, and the Gulf countries' total Bitcoin hashrate accounts for 8% of the world's BTC hashrate. One of the breathtaking investments in this direction is Oman's crypto mining project launched in August 2023, with an investment budget of $1.1 billion. The abundance of energy and the development of a balanced regulatory landscape are key factors playing a role in attracting mining business activities to the Gulf countries. Moreover, the anticipation of Bitcoin halving in April, 2024 sparked migration of US miners to low-cost power countries. For cooling crypto mining equipment, the companies leverage the power of wasted flared gas combustion, and hydropower is also in play. This development underscores the Gulf countries' drive to take a leading part in the global trend towards green energy. It's worth mentioning that these mining entrepreneurs also bring the whole ecosystem of blockchain and crypto-related services to the hosting countries, giving a boost to these activities in the region.

26.03.2024

Economics and financial markets

Source: Spark

Konstantin Vladimirovich Tserazov: «The market will continue to win back losses»

The main events of the week from March 18 to 22 were the results of the meetings of the world’s leading central banks. Against this background, the Russian market showed a decline. The former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke about the most important events in the banking sector in our interview. On the Russian market, of course, the main attention was focused on the March meeting of the Bank of Russia, which took place on March 22. According to Konstantin Tserazov, on the eve of the regulator’s meeting, market participants preferred caution, which was the main reason for the index correction. In the trading week from March 18 to 22, the Russian market showed a decline — the Moscow Exchange index lost 0.8%, falling to 3273.49 points, the RTS index dipped by 0.6%, falling to 1113.05 points. The dollar fell against the ruble to 92.64 rubles/dollar, losing 0.26 rubles to the domestic currency; oil ended the week at $85.71 per barrel of Brent. Following the meeting, the Bank of Russia kept the key rate at 16% per annum, as most market participants expected. «The return of inflation to the target in 2024 and its further stabilization around 4% implies a long period of maintaining tight monetary conditions in the economy. According to the forecast of the Bank of Russia, taking into account the current monetary policy, annual inflation will drop to 4.0–4.5% in 2024 and will be close to 4% in the future,» the regulator noted. The Bank of Russia emphasized that although inflation expectations of the population and price expectations of enterprises continued to decline, they still remained at elevated levels. Speaking at a press conference following the meeting, the head of the Russian Central Bank, Elvira Nabiullina, noted that for a confident return of inflation to the target, long-term maintenance of strict monetary conditions is required. Speaking about the criteria by which the regulator will determine that disinflation has reached the desired pace, the head of the Bank of Russia named the stability and rate of decline in current inflation as such indicators. In addition, a more balanced dynamics of consumer activity, lending and imports, as well as a decrease in the rigidity of the labor market, will indicate a sufficient rate of disinflation, Ms. Nabiullina noted. The opening of the next meeting of the Board of Directors of the Bank of Russia, at which the regulator will consider the issue of the level of the key rate, is scheduled for April 26, 2024. Other central banks also left the rate at the same level, notes Konstantin Tserazov. Thus, following the results of a two-day meeting of the US Federal Reserve, which opened on March 19–20, the key rate was kept in the range of 5.25–5.5% per annum. The rate has remained at this level since July 2023, the expert recalled. The regulator’s decision was expected by the market, and therefore did not have a serious impact on the dynamics of the indices. The Fed reiterated that it will cut rates only after it is confident that inflation is falling steadily toward its 2% target. Fed Chairman Jerome Powell said at a press conference following a two-day meeting of the regulator that the Fed will cut interest rates in 2024. However, what the reduction cycle will be, and whether it will begin at the meeting, which is scheduled to open on April 30 — May 1, is still an open question, says Konstantin Tserazov. Most investors are inclined to believe that the regulator will begin reducing prices no earlier than June 2025. Konstantin Vladimirovich Tserazov: «The domestic market is supported by oil prices, which remain at a comfortable level of 85-87 dollars per barrel of Brent. According to my assessment, the Moscow Exchange index may try to storm the 3200 point mark this week.» At the same time, the American regulator raised the US economic growth forecast for 2024 to 2.1% against the December forecast of 1.4%. For 2025, the agency raised its forecast to 2% from 1.8%; for 2026, the US Federal Reserve expects economic growth to reach 2% against the previous forecast of 1.9%. As for inflation, the regulator kept expectations for the current year at the same level of 2.4%. Next year growth is expected to 2.2% against the previous forecast of 2.1%, and for 2026 expectations remained at the same level of 2%. The Bank of England, as the market expected, left the key rate at the same level at 5.25% per annum. But the Central Bank of Turkey suddenly increased the rate from 45% per annum to 50%. The key rate increase cycle in Turkey started in June 2023. In February 2023, inflation in Turkey accelerated to 67.1%. It is expected that by the end of 2023 the rate of price growth will decrease to 36%, and by the end of 2025 it will fall to 14%. From internal stories in the banking sector, Konstantin Tserazov noted the approval by the supervisory board of Bank St. Petersburg of a new dividend policy and a recommendation for dividend payments for 2023. The Supervisory Board of Bank St. Petersburg recommended that shareholders pay final dividends for 2023 in the amount of 23.37 rubles per ordinary share and 0.22 rubles per preferred share, which corresponds to a dividend yield of 8% and 0.4%, respectively. The bank’s net profit under IFRS for 2023 reached 47.3 billion rubles; the bank can use 40% of the net profit to pay dividends for 2023 on ordinary shares. It is important that the share of net profit allocated for dividend payments may increase in the future — this volume in the new edition of the bank’s dividend policy is adjusted from the level of «at least 20%» to the level «within 20 to 50%» according to IFRS. The amount of funds allocated for dividends may increase. The target share of net profit allocated for the payment of dividends has been adjusted from «at least 20%» to «within 20 to 50%» according to financial statements under IFRS. In addition, the bank now has the opportunity to pay interim dividends based on the results of the first quarter, half a year or nine months. The Russian market continues to actively discuss the merger of Rosbank and TKS Group. In anticipation of the transaction, the board of directors of TKS Holding announced the parameters for the additional issue of shares. The price of shares for the issue is set at 3,423.62 rubles per share, the volume of placement by private subscription may amount to 130 million shares. The issue of additional issue of shares will be discussed by absentee voting at an extraordinary meeting of shareholders; the acceptance of ballots with shareholder votes will end on May 8, 2024, the expert notes. The market reacted to the news about the additional issue of shares by reducing quotations, estimating that such a significant volume was 130 million securities, or 445.1 billion rubles. will have a negative impact on minority shareholders. However, according to the expert, it is unlikely that the entire volume of the additional issue will be used to acquire Rosbank. «The purchase price has not yet been announced, according to my estimates, it could be about 200-220 billion rubles. Thus, about half of the additional issue will be used for purchases,» predicts Konstantin Tserazov. «Despite the correction caused by objective reasons, the market next trading week has every reason to win back losses, enter a growth trajectory and consolidate above the level of 3300 points. The dividend factor continues to be positive — the market lives in anticipation of the generosity of Russian companies; the volume of dividend payments at the end of the year could amount to about 5 trillion rubles. In addition, the domestic market is supported by oil prices, which remain at a comfortable level of 85-87 dollars per barrel of Brent. According to my assessment, the Moscow Exchange index may try to storm the 3200 point mark this week,» concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

19.03.2024

Economics and financial markets

Source: vc

Konstantin Vladimirovich Tserazov: «The market does not yet believe in a rate cut»

In our interview, the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke about the most important events in the banking sector and the market as a whole, which marked the trading week from March 11 to 15. The pre-election week was marked by a correction in the market — following the results of the trading week from March 11 to 15, the Moscow Exchange index lost 0.5%, amounting to 3,300.07 points, the RTS index decreased by 2.8%, to 1,119.66 points. The main reason for the correction of the Moscow Exchange index, according to Konstantin Tserazov, was the desire of players to take profits. The ruble weakened to 92.92 rubles/dollar, the American currency rose in price by 2.32 rubles over the week. At the same time, the weakness of the ruble allowed the index to maintain the level of 3000 points on the Moscow Exchange index. May oil futures rose 2.2% to $85.18 per barrel of Brent crude. The main newsmaker of the past trading week was TCS Group. Trading in the company’s securities is currently suspended; since February 15, the company has been undergoing a redomiciliation procedure. But on Monday, March 18, trading in shares on the Moscow Exchange will resume. On Thursday, March 18, Tinkoff Group announced the opening of consolidated financial results under IFRS for the fourth quarter of 2023 and the whole of 2023. The results were record-breaking — the Group’s total revenue in 2023 increased by 33% year-on-year and amounted to RUB 487.7 billion. against 366 billion rubles. a year earlier. Net profit in 2023 amounted to 80.9 billion rubles. against 20.8 billion rubles. in 2022. At the same time, the number of clients in 2023 reached 40.4 million people, the figure increased by 32%, in 2022 the number of clients was 30.7 million people. The number of active clients increased by 30% and amounted to about 28 million people. Return on equity at the end of 2023 amounted to 33.5% versus 10.9% in 2022. The group intends to present a long-term development strategy and dividend policy by the end of 2024. At the same time, news has emerged that the board of directors of MCPAO TKS Holding plans to invite shareholders to consider the integration of Rosbank PJSC into the TKS Holding Group. According to media reports, the deal to purchase Rosbank involves merging them into the Tinkoff group while maintaining licenses and names. The purchase of Rosbank is planned through an additional issue of TKS shares. In addition, the Board of Directors of TKS Holding announced a program to repurchase its own shares (up to 19 million shares, no more than 10% of capital). The program will be implemented until the end of 2024, shares can be purchased both on the Moscow Exchange and on the over-the-counter market. Konstantin Vladimirovich Tserazov: «According to media reports, the placement of MTS Bank shares may take place in the spring of 2024, and reporting indicates that investors will show high interest in the IPO.» The news aroused serious investor interest; Rosbank’s quotes soared by 20.5% over the week. The announced merger may significantly reduce the risk of an overhang in TCS securities at the opening of trading on March 18, predicts Konstantin Tserazov. Now Rosbank is in the top 10 largest Russian banks in terms of assets, with an indicator of 2.1 trillion rubles. In addition, the bank is in the top 3 in the car lending category, in the top 6 in mortgage lending and in the top 8 in corporate funds. As for Tinkoff Bank, it ranks 12th in the ranking of the largest banks in terms of assets with an indicator of 1.93 trillion rubles. Upon completion of the merger of the two banks, the holding structure will own total assets of over 4 trillion rubles, the expert says. Investors also drew attention to the publication of MTS Bank’s financial statements for 2023 in light of this organization’s possible entry into the stock exchange. The bank showed record results — net profit in 2023 exceeded 12.5 billion rubles, which is 3.8 times more than the previous figure. The retail loan portfolio grew by 33%, to 339.1 billion rubles, and operating income showed an increase of 47%, to 64.5 billion rubles. Of course, these figures are impressive. According to media reports, the placement of MTS Bank shares may take place in the spring of 2024, and reporting indicates that investors will show high interest in the IPO, believes Konstantin Tserazov. Individual RAS results presented by Sberbank for February and January-February 2024, although they turned out to be strong, generally coincided with investor expectations. Sber’s net profit in February increased by 4.8% in annual terms, reaching 120.4 billion rubles; in January-February, Sber increased its net profit by 4.7% in annual terms, to 235.5 billion rubles. The sector leader’s shares still retain significant investment potential ahead of the company’s board meeting in April, at which the dividend recommendation will be announced. Among the events in foreign markets, the expert noted the publication of the consumer price index in the United States. The indicator in February increased by 3.2% compared to the same month last year, while in January inflation was 3.1% in annual terms. In February, the growth rate amounted to 0.4% in monthly terms, with market expectations of growth of 0.3%. At the same time, American labor market statistics show some cooling, but the Fed does not yet see this as a sustainable trend. The market believes that the Fed has a 79% probability of maintaining the current rate at the meeting, which is scheduled to open on March 19-20. Most traders expect the rate could be cut by 25 bps. in June or even later, explains Konstantin Tserazov. The market remains on dividend drive — this year investors expect record dividends from Russian companies. According to experts, the largest companies will pay investors about 4 trillion. rubles, and dividend stories are certainly in the spotlight of the market. «Despite the market closing in positive territory following the results of the trading week from March 11 to March 15, a continuation of the correction is still possible. In my opinion, the Moscow Exchange index retains the potential for a decline to 3280 points. The key event of the week from March 18 to March 22 will be the meeting of the Bank’s board of directors Russia, which is scheduled to open on March 22. At this meeting, the issue of the rate, which is currently at the level of 16%, will be considered. According to the consensus forecast of analysts published by the Bank of Russia, the market expects inflation to rise in 2024 from 4.9% to 5.2%. Analysts also expect the average rate in 2024 to range from 13.9% to 14.5%. Inflation in February amounted to 7.7% in annual terms, while inflation was expected at 7.6%. In my opinion, the regulator can begin to significantly reduce the rate no earlier than the third quarter of 2024, since at the moment there are not many factors that would indicate a stable downward trend in consumer prices. In the March bulletin «What Trends Are Talking About,» published by the Bank of Russia, the regulator notes that «In December 2023 — February 2024, monthly growth in consumer prices slowed down compared to the autumn peak. This reflects the effect of tightened monetary conditions, primarily in terms of the increased attractiveness of savings. However, price increases remain elevated. This assumes that in order to fall within the forecast inflation range of 4.0–4.5% in December 2024, by the third or fourth quarter the disinflation process must intensify, and monthly price growth must slow down slightly below 4% in annualized terms. This requires maintaining a strict monetary policy.» The market does not yet believe that the Bank of Russia will cut the rate at the March meeting; moreover, a number of analysts admit that the rate may be raised,» concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

18.03.2024

Fintech, banking sector, IT

Source: mid-day

Konstantin Tserazov: AI Revolution in the Gulf - Reshaping Finance and Beyond

Konstantin Tserazov, a distinguished economist and former Senior Vice President of Otkritie Bank, dives into the transformative impact of AI in the financial sectors of Gulf countries. His comprehensive study illuminates how these nations, propelled by AI-driven technological advances, are redefining their economic landscapes. From Saudi Arabia's strategic investments in AI to propel business growth, to Qatar's ambitious initiatives fostering AI integration in global finance, and the UAE's pioneering steps in AI leadership and collaboration, Tserazov captures the essence of a region on the cusp of an AI revolution. This profound shift, exemplified by advancements in banking efficiency, customer interaction, and big data analysis, underscores the Gulf's potential to become a global AI hub, leveraging its strategic geographical position and substantial investments in technology. In the early months of 2024, the S&P 500 achieved unprecedented success, driven by AI-associated technology stocks. This rise isn't solely attributed to speculation about AI. Jamie Dimon, the CEO of J.P. Morgan Chase, pointed out in February 2024 that AI represents more than a fleeting trend; it's a concrete phenomenon. This is supported by preliminary estimates indicating that Generative AI might enhance banking operations' productivity by up to 30%. AI enables computational systems to execute tasks previously requiring human cognition. Integrating Machine Learning, Artificial Neural Networks, and Deep Learning, AI is set to revolutionize the financial industry significantly. There were speculations in February 2024 that OpenAI, supported by Microsoft, was aiming to secure $7 trillion for bolstering AI infrastructure, possibly with investments from the UAE. Pending official verification, this proposed shift suggests several things: AI as a transformative element in finance, the extensive financial backing needed for AI development (particularly in chip technology), and potential investments from Gulf nations such as Saudi Arabia and the UAE in recognition of AI's ability to generate income beyond the petroleum trade, noted Konstantin Tserazov. By 2030, it's projected that AI-induced economic growth could represent 15% of the GDP in these countries. The strategic evolution of the Gulf region, through the cultivation of sectors outside oil via AI technology investments, could be a critical turning point in the forthcoming years. During various global economic hardships, including the financial crisis of 2008-2009 and the COVID-19 lockdowns in 2020, the Gulf countries have displayed remarkable economic fortitude. A key factor in their swift advancement in AI is their increased collaboration with Western and Asian countries, especially China. Adopting a supportive regulatory environment and enacting strategies that focus on AI, these nations are advancing their competitive stance in the global arena. Artificial Intelligence is reshaping the financial sector of Gulf nations through various innovations: Improving Client Interaction: AI-driven virtual assistants offer more nuanced and personalized communication. These digital assistants are evolving to better understand and connect with customers, fostering stronger emotional engagement. Enhancing Security Measures: Advanced AI algorithms are adept at identifying irregular patterns, playing a crucial role in identifying and preventing fraudulent activities. This reduces the need for extensive manual monitoring, thereby fortifying the security of financial operations. Leveraging AI for Data Analysis: AI systems are adept at processing and analyzing extensive datasets. This is instrumental in refining processes such as credit evaluation, loan processing, and managing financial risks, says Konstantin Tserazov. Automated Financial Advisory: AI technologies are being utilized to offer automated investment guidance and execute trading activities. As of early 2024, the rapid adoption and integration of AI in the financial sectors of Gulf nations is increasingly noticeable. **Saudi Arabia** In the Kingdom of Saudi Arabia, the Ministry of Investment (MISA) is actively pursuing the National Technology Development Program (NTDP), with a particular emphasis on AI integration. The Ministry has effectively drawn interest from Chinese companies for AI development within the country, told Konstantin Tserazov. Additionally, the Saudi Data and Artificial Intelligence Authority (SDAIA), a dedicated government unit, proclaimed in January 2024 their dedication to promoting widespread adoption of AI technologies throughout Saudi Arabia. Monsha’at, the Saudi agency responsible for business development, is making strides to utilize AI. It has introduced the "Saudi AI" platform, geared towards helping local enterprises automate their operations and boost efficiency. The tangible outcomes of these efforts are evident. For instance, Saudi Awwal Bank (SAB) in Riyadh is expanding its cooperation with Mastercard in 2024. The bank is integrating Mastercard Gateway's Transaction Risk Management (TRM) technology, an AI-driven tool designed to enhance fraud prevention and secure online transactions. This adoption marks SAB's commitment to leveraging AI for strengthening its risk management systems and ensuring a safer digital banking environment for its clientele. **Qatar** In Qatar, the nation is navigating a unique path in the realm of AI, focusing on enhancing two-way investment flow. Notably, in February 2024, Qatar pledged to invest close to $11 billion in French tech startups and funds, specifically targeting the AI industry, over a six-year span. From a governmental perspective, Qatar introduced two major projects at the Trade Tech Forum in Abu Dhabi towards the end of February 2024. These initiatives are designed to accelerate the incorporation of AI and related technologies into the worldwide financial transaction network. The projects, named Regulation 5.0 for the Future of TradeTech and the Trade-Sustain-AI Initiative, aim to boost cooperation between Qatar and various international organizations, government agencies, and industry frontrunners. The goal is to produce detailed analyses that delve into the convergence of AI, global financial communication, and environmental sustainability. **UAE** The UAE is boldly advancing in AI leadership. In a significant move on February 27, 2024, the International Holding Company (IHC), UAE's largest firm by capitalization, introduced "Aiden Insight," an AI-powered Board Observer, under the leadership of Sheikh Tahnoon bin Zayed Al Nahyan, IHC's chairman and the UAE's national security advisor, noted Konstantin Tserazov. This step signifies the nation's high-level commitment to AI innovation. Aiden Insight is tasked with big data analysis, risk assessment, and compliance oversight, roles traditionally handled by human experts. This groundbreaking initiative is a collaborative effort involving Abu Dhabi’s G42, Microsoft, and OpenAI, illustrating the growing influence of AI in the boardroom. This advancement highlights the substantial investments in AI by major tech companies, including Microsoft. On March 1, 2024, Microsoft introduced its Copilot AI Chatbot for finance professionals, a significant milestone in AI application within the financial sector. This launch contributed to a 10.5% increase in Microsoft’s stock value, maintaining its status as the world's most valuable company and demonstrating AI's pivotal role in enhancing corporate value. In line with its vision for AI, the UAE, akin to Qatar, is fostering collaborative AI investment. This was exemplified by the visit of Michelle Donelan, UK Secretary of Science, Innovation, and Technology, in late February 2024, where discussions with Omar Al Olama, UAE's Minister of State for AI, centered on forming a global alliance for responsible AI development. To bolster AI and emerging technology research, the UAE announced a $500 million program in February 2024, as declared by the Advanced Technology Research Council at the World Governments Summit in Dubai. Moreover, the UAE’s Artificial Intelligence Strategy 2031 is aimed at making the nation a global frontrunner in AI advancements, marking another step in its journey towards technological leadership. **Oman** Adjacent to the UAE, Oman is actively venturing into the realm of AI. In February 2024, the Oman Chamber of Commerce and Industry extended an invitation to business proprietors to partake in a study that scrutinizes AI's influence on Small and Medium-sized Enterprises (SMEs), in alignment with Oman's Vision 2040. This investigation is designed to assess how AI implementation can benefit and challenge SMEs, including the formulation of strategies to utilize AI for their expansion and progress. The study will encompass surveys from SME proprietors, sector specialists, and scholars. Oman acknowledges AI’s critical role in molding the future, considering it a key tool for boosting sector-wide competitiveness. The profound engagement of Gulf nations in AI underscores their readiness to lead in incorporating AI in sectors like banking and finance. The interaction of AI with technology and big data is instrumental in generating value across individual businesses and the wider economy. Substantial efforts are already in motion to advance AI technologies and infrastructure in these regions. The Gulf countries are well-positioned to foster AI-driven innovations in financial services, benefiting from their geographic proximity to both Western technological acumen and Asian production centers, a combination that offers significant strategic benefits in leveraging AI effectively.

14.03.2024

Economics and financial markets

Source: Sostav

Konstantin Vladimirovich Tserazov: «Market dynamics over recent weeks require correction»

Another short trading week, from March 4 to 7, brought positivity to the markets. In our interview, the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke about the most important events in the market and in the banking sector. At the end of the trading week from March 4 to March 7, the market showed positive dynamics — the Moscow Exchange index grew by 1.8%, rising to 3315 points, the RTS index — by 2.2%, to 1152 points. The industry index of financial companies gained 0.3% during this period. By the end of the week, Brent oil was trading at $82.2 per barrel. Gold marked the conquest of another historical high, rising in price to $2161.8 per troy ounce. The dollar fell by 1.07 rubles over the week, the rate reached 90.6 rubles per dollar. The growth in consumer prices slowed again — in the first week of March the figure was 0.09% versus 0.13% the week before. In annual terms, inflation remains at approximately 7.6%. The positive market dynamics were due to corporate stories, dividend expectations and a favorable external background, believes Konstantin Tserazov. In particular, investors reacted quite positively to Fed Chairman J. Powell’s speech to the Financial Services Committee of the US House of Representatives with his semi-annual report on monetary policy. The head of the Federal Reserve said that the agency is in no hurry to reduce the key rate, but did not rule out the possibility of reducing it this year. The rate, according to Powell, is likely at the peak of the current cycle. Powell reiterated that the Fed needs further evidence of a sustained decline in inflation towards its 2% target. «The economic outlook is uncertain, and continued progress toward our 2% inflation goal is not guaranteed,» the Fed chairman said. At the same time, the head of the department said that he does not consider the current situation a sign of movement towards recession. The opening of the next two-day meeting of the US Federal Reserve on the key rate will take place on March 20. The market believes that no decision on changing the rate will be made at this meeting — the derivatives market estimates the probability of an interest rate reduction in March at 5%. Investors expect the regulator to begin lowering it in June, estimating the probability of this event at 70%. Konstantin Vladimirovich Tserazov: «Dividends for 2023 were higher than the market expected, which will have a positive impact on Moscow Exchange securities in the medium term.» Another notable event of the week, according to Konstantin Tserazov, was the next meeting of the European Central Bank, which opened on March 7. At the end of the meeting, as the market expected, the European Central Bank left all three interest rates at the same levels — the deposit rate was 4%, the key rate was 4.5%, and for margin loans — 4.75%. The regulator noted that inflation is weakening against the background of high rates, wages are growing. The ECB stressed that rates will remain high as long as necessary, until the agency receives convincing evidence that inflation has returned to its medium-term target of 2%. More important for the market was the next forecast of the ECB, within which the regulator lowered its estimate of inflation in the eurozone. The agency believes that the growth rate of consumer prices in the eurozone in 2024 will slow down to 2.3%, and in 2025 it will reach 2%. At the same time, in December the forecast of the European Central Bank assumed an increase in inflation in 2024 to 2.7%, and in 2025 its decrease to 2.1%. In 2026, eurozone inflation will be 1.9% and core inflation will be 2%. The ECB forecasts that eurozone GDP will increase by 0.6% this year, down from a previous estimate of 0.8% growth. In 2025, the department believes, growth will remain within the previous forecast, at 1.5%. In 2026, the GDP growth rate will increase to 1.6%. In February of this year, recalls Konstantin Tserazov, inflation in the euro area dropped to 2.6% compared to 2.8% in January. Noting the risks of the European economy, the regulator named among the threats a decline in European exports, as well as high price pressure against the backdrop of high wages. The market reacted generally neutrally to the ECB’s decision. Although ECB head Christine Lagarde emphasized that there is a decrease in inflation, there is not yet sufficient evidence that this is a stable trend. Therefore, it is unlikely that monetary easing should be expected earlier than in the summer, until the regulator is finally sure that the progress in reducing inflation has gained sufficient momentum and this trend is sustainable. Among the events in the domestic market, Konstantin Tserazov noted the publication of financial indicators according to IFRS for the fourth quarter of 2023 and the entire year 2023 by Bank St. Petersburg. The bank’s net profit in the fourth quarter of 2023 increased by 22% in quarterly terms and amounted to 10.4 billion rubles. At the end of 2023, the bank’s profit amounted to 47.3 billion rubles. against 47.5 billion rubles. in 2022. «The market believes that the bank will most likely pay dividends for 2023, hence the active growth of the bank’s shares, which have risen in price by more than 30% since the beginning of the year,» the expert explained. Sberbank presented its RAS results for February and the first two months of 2024; the indicators generally coincided with market expectations. The bank’s net profit in February increased by 4.8% y/y, to 120.4 billion rubles, and in January-February increased by 4.7% y/y, to 235.5 billion rubles. Sberbank remains the best idea in the banking sector with good potential, the expert notes. Based on the results of 2023, the bank can pay 34.9 rubles as dividends. per share, representing more than 11% annual return. Based on the results of the meeting of the board of directors scheduled for April, a recommendation on dividends will be issued, which could become another growth driver for the bank’s securities. Another interesting event in the Russian financial sector, according to Konstantin Tserazov, was the decision of the supervisory board of the Moscow Exchange to recommend paying dividends for 2023 in the amount of 17.35 rubles per share. A total of 39.5 billion rubles, or 65% of the Moscow Exchange’s net profit under IFRS for 2023, can be allocated for payment, which implies a dividend yield of 9%. At the end of 2022, recalls Konstantin Tserazov, the Moscow Exchange paid dividends in the amount of 11.02 billion rubles, or 4.84 rubles per share. At the same time, the market expected that the site would use 50% of net profit under IFRS for payments. Thus, dividends for 2023 turned out to be higher than the market expected, which will have a positive impact on Moscow Exchange securities in the medium term, the expert believes. The opening of the annual meeting of shareholders is scheduled for April 25, voting will take place in absentia. The opening of a meeting of the Bank of Russia is scheduled for March 22, at which the regulator will consider the issue of the key rate. Despite the moderate decline in inflation, the market does not expect the regulator to announce the start of a rate cut cycle at this meeting. According to Konstantin Tserazov, most likely, the Central Bank may begin to reduce the rate by the end of the 3rd — beginning of the 4th quarter of 2024. «This week, from March 15 to 17, the presidential elections in Russia will be held, and the pre-election week will most likely be positive for the market. Oil is at fairly comfortable levels, companies continue to pleasantly surprise investors with positive reports, while at the same time the situation on foreign markets remains calm. However, the market growth in recent weeks requires correction; I do not rule out a slight pullback in mid-March,» concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

12.03.2024

Fintech, banking sector, IT

Source: leadership

Konstantin Tserazov: The Role Of AI And Its Impact – Gulf Nations’ Strategic Approach

Is Artificial Intelligence the new kingpin of the financial world? Esteemed economist and former Senior Vice President of Otkritie Bank, Konstantin Tserazov, offers an insightful exploration into this cutting-edge question. Witnessing the S&P 500 reach record highs in early 2024, driven by AI-related tech stocks, Tserazov investigates the factors fueling this surge. He highlights the transformative potential of AI in banking, particularly its ability to enhance productivity by up to 30%. This perceptive article delves into the complexities of AI in finance and focuses on the Gulf countries, revealing their strategic initiatives to become leaders in incorporating AI into the financial sector. AI empowers computer systems to undertake tasks that traditionally demand human intelligence. Combining Machine Learning, Artificial Neural Networks, and Deep Learning, AI holds immense promise for transforming the financial system. Rumors suggested in February 2024 that Microsoft-backed OpenAI was seeking $7 trillion to enhance AI infrastructure, potentially involving investment from the UAE. While awaiting official confirmation, the envisaged shift indicates: AI as a disruptive force in the financial landscape, offering a breakthrough. The massive financial commitment required for AI progress, notably in AI chip development. Potential investments from Gulf countries like Saudi Arabia and the UAE recognizing AI’s revenue-generating potential beyond oil trading. By 2030, AI-generated economic value may account for 15% of these countries’ GDPs. The strategic transformation of Gulf countries through the development of non-oil sectors via investment in AI technologies could be pivotal in the coming years. Konstantin Tserazov: "As the world witnessed various economic challenges, such as the 2008-2009 financial crisis and the COVID-19 pandemic lockdowns in 2020, the Gulf countries have remarkably demonstrated their economic resilience. The primary driver behind their rapid AI development is the strengthening of investment cooperation with Western nations and Asia, most notably China. By embracing a favorable regulatory landscape and implementing government strategies centered around AI, the region is gaining a competitive edge in the global market". AI is transforming the Gulf countries’ financial sector in several ways: Enhanced Customer Experience: Conversational AI-powered virtual assistants have an expanded range of functionality. They are becoming friends with clients, bringing in more emotions and empathy into the interaction. Fraud Detection and Prevention: AI algorithms have the capability to detect patterns and anomalies, aiding in fraud detection and prevention. This saves countless hours of manual reviews and makes the financial system more secure. Big Data and AI: AI models analyze big data to make informed decisions, enhancing credit scoring, loan underwriting, and risk assessment. AI and Stockbrokers: AI algorithms provide automated investment advice and handle trades. In the early months of 2024, it is evident that Gulf countries are quickly advancing on the AI track. Saudi Arabia Saudi Arabia’s Ministry of Investment (MISA) is carrying out the National Technology Development Program (NTDP) with a strong focus on AI. The Ministry has succeeded in attracting Chinese entities interested in investing in AI development in Saudi Arabia. The Saudi Data and Artificial Intelligence Authority (SDAIA) is a special government body that released a statement in January 2024, in which it stated its commitment to facilitating the wide-spread adoption of the technology in Saudi Arabia. Monsha’at, Saudi Arabia’s agency for enterprise development, is joining efforts to leverage AI. The agency has launched an AI-based platform – “Saudi AI”. This platform is designed to aid local businesses in automating their processes and enhancing productivity. And we see results. Saudi Awwal Bank (SAB), headquartered in Riyadh, is broadening its collaboration with Mastercard in 2024. The bank is adopting Mastercard Gateway’s Transaction Risk Management (TRM) technology, an AI-powered solution aimed at bolstering its fraud prevention mechanisms and facilitating secure digital transactions. SAB is set to utilize this AI technology to amplify its risk management capabilities and provide a more secure digital banking experience for its customers. Qatar Meanwhile, Qatar is charting its own course in AI, a strategy that will be realized through an increase in bi-directional investment flow. For instance, in February 2024, Qatar committed to investing nearly $11 billion in French technology startups and technology funds over the next six years, with a particular emphasis on the AI sector. On the governmental side, Qatar unveiled two significant initiatives at the Trade Tech Forum in Abu Dhabi in late February 2024, aimed at expediting the integration of technologies such as AI into the global financial web of transactions: Regulation 5.0 for the Future of TradeTech and the Trade-Sustain-AI Initiative. The Trade-Sustain-AI Initiative is poised to foster collaboration between Qatar and international structures, governmental bodies, and industry leaders to generate comprehensive reports that explore the intersection of AI, global financial communications, and sustainability. UAE Konstantin Vladimirovich Tserazov: "The United Arab Emirates (UAE) is taking a bold step towards AI leadership. On February 27, 2024, its largest company by capitalization, International Holding Company (IHC), appointed an AI-powered Board Observer named “Aiden Insight.” This decision, spearheaded by Sheikh Tahnoon bin Zayed Al Nahyan, who is both the chairman of IHC and the UAE’s national security advisor, highlights the nation’s top-level commitment to AI development". Aiden Insight is assigned with functions such as big data analysis, risk assessment, and compliance oversight, traditionally performed by human experts. This innovative member is the product of a collaboration between the Abu Dhabi based AI related company G42, Microsoft, and OpenAI. This further underscores the significant investment of Microsoft and other leading tech companies (collectively known as the ‘Magnificent 7’) in fostering AI innovation. On March 1, 2024, Microsoft unveiled its Copilot AI Chatbot designed specifically for finance professionals using Excel and Outlook, marking a significant milestone in AI application within the financial sector. The Seattle-based firm’s stock soared 10.5% in just the first two months of 2024, helping it maintain its status as the world’s most valuable company. The company’s decision to create a special AI application tailor-made for the needs of financial specialists underscores how the proliferation of AI in finance is a key engine for creating corporate value. Tserazov Konstantin Vladimirovich: "The UAE, like Qatar, advocates collaborative AI investment. Talks with the UK government led to a visit by Michelle Donelan, UK Secretary of Science, Innovation, and Technology, in late February 2024. She met with Omar Al Olama, UAE’s Minister of State for AI, discussing a global coalition for responsible AI development". Foreseeing the AI surge, the UAE established the Mohamed bin Zayed University of Artificial Intelligence in 2019. Additionally, the country is actively educating its citizens through initiatives like a mass mobile text message campaign emphasizing the importance of AI for the future. This campaign, which included a link to a digital “journey” for further AI learning, attracted over 200,000 UAE residents by the end of February 2024. To accelerate research and development in AI and other emerging technologies, the UAE launched a $500 million program on February 13, 2024, as announced by the Advanced Technology Research Council at the World Governments Summit in Dubai. Moreover, the UAE’s Artificial Intelligence Strategy 2031 is designed to establish the nation as a worldwide frontrunner in AI advancements. Oman Beyond the UAE, Oman is also exploring the AI landscape. In February 2024, the Oman Chamber of Commerce and Industry invited business owners to participate in a research study examining the impact of AI on Small and Medium-sized Enterprises (SMEs) within the context of Oman’s Vision 2040. This study aims to analyze the potential benefits and challenges of AI adoption for SMEs, alongside strategies for leveraging AI technologies for their growth and development. The research will involve a survey of SME owners, industry experts, and academics. The Sultanate recognizes the pivotal role that AI plays in shaping the future and views AI as a powerful instrument to enhance competitiveness across various sectors. The Gulf countries’ avid interest in AI indicates they are primed to become global pioneers in integrating AI into banking and finance. AI applications drive the relationship between technology, big data, and create value at both the corporate and whole economy levels. Tserazov Konstantin: "With major investments already underway in developing AI technology and infrastructure, the Gulf countries have laid the groundwork to drive innovation in AI applications for financial services. Their proximity to both Western tech expertise and Asian manufacturing hubs also provides strategic advantages for these countries to effectively leverage AI".

05.03.2024

Fintech, banking sector, IT

Source: vc

Konstantin Vladimirovich Tserazov: «The market maintains a medium-term upward trend»

The past trading week from February 26 to March 1 was marked by optimism, with market participants actively winning back losses incurred in February. What was happening in the IT sector, how our high-tech companies spent the week — the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, told us in our interview says Tserazov Konstantin. In the trading week from February 26 to March 1, the Moscow Exchange index grew by 4%, to 3266.66 points, the RTS index soared by 5.4% and reached 1122.32 points. The Moscow Exchange Information Technology Industry Index grew by 2.5%. The positivity on the market was due, first of all, to the reduction in the threat of sanctions — fears that NCC would fall under sanctions did not come true. At the same time, investors were supported by the message of Russian President V. Putin to the Federal Assembly, at which the head of state outlined the vectors of economic development of the country. Rising oil also played a role — over the week, a barrel of Brent rose by 2.6%, to $83.82%, says Konstantin Tserazov. The national currency strengthened, winning back 1.16 rubles from the dollar over the week and reaching 91.69 rubles/dollar. So, Western sanctions pressure turned out to be moderate. The US and EU introduced new sanctions aimed at restrictions against the Russian military-industrial complex, however, the market took these restrictions calmly. On Monday, the market, supported by the absence of sanctions against NCC, began to win back the losses of the previous week. The Moscow Exchange index soared above 3,210 points on the first day of the trading week; Yandex shares looked the best, growing by 5%. During the day, the Moscow Exchange index added 2.14%, and the RTS dollar index, against the background of the strengthening of the ruble, grew by 3.1%. Tserazov Konstantin Vladimirovich: "On Tuesday, the market moved to consolidation around 3210 points. The growth leader was Rostelecom, which presented IFRS reports for the fourth quarter of 2023 and the entire year 2023. Revenue in the fourth quarter increased in annual terms by 9% to 209.3 billion rubles, and for 2023 revenue reached 707.8 billion rubles, an increase of 13% over the year." Net profit increased by 20% in 2023, reaching 42.33 billion rubles, however, in the fourth quarter the figure decreased in annual terms by 52%. The company, according to management, intends to increase revenue to 1 trillion rubles, but has not yet announced the time frame for achieving this result. The company’s dividend policy involves paying dividends of at least 50% of net profit under IFRS and at least 5 rubles. per share, recalled Konstantin Tserazov. Based on this, Rostelecom can pay at least 6.3 rubles for 2023. per ordinary and preferred share, the expert predicts. In addition, Rostelecom intends to list the securities of one of its subsidiaries on the stock exchange in the second half of 2024. As the market believes, this placement could be an offer of shares in the Wink video service. On this news, Rostelecom’s shares rose by 2.5% during the day, and over the week, Rostelecom’s preferred shares rose by 10.9%. Another event for the Russian IT sector could be the placement of securities of the Skillbox educational platform, which is owned by VK. According to media reports, the company has again returned to the idea of holding an IPO, but is in no hurry to open specific terms for the placement. According to VK reporting, for the nine months of 2023, the educational segment of the VK holding showed revenue growth by 38% compared to the same period in 2022, to 11.1 billion rubles. At the same time, the segment also demonstrated a steady increase in the number of registered clients — by 17%, to 14 million people. Analysts estimate the company at the level of 30-50 billion rubles; of course, this placement will attract the attention of investors, since a fast-growing company can become the first issuer in the edtech field and take leadership in the industry, believes Konstantin Tserazov. However, it is possible that Skillbox will be ahead of its competitor in entering the market — last year the media reported the Skyeng group’s intention to enter the stock exchange in the first half of 2014. Konstantin Vladimirovich Tserazov: «Of course, Yandex will become one of the beneficiaries of new measures to support the IT sector. The company is already a leader in the implementation of digital services and generative artificial intelligence, and its products are highly likely to become one of the foundations for the implementation of the national project.» In the middle of the week, the IT sector was given a powerful impetus by the speech of Russian President V. Putin with a message to the Federal Assembly. Investors were inspired by the economic component of the President’s message, says Konstantin Tserazov. According to the head of state, the capitalization of the Russian stock market by 2030 should double compared to the current level and amount to 66% of GDP. The President also proposed extending the income tax benefit to Russian companies purchasing domestic high-tech equipment. «Starting this year, Russian companies can reduce their income tax payments if they purchase advanced domestic IT solutions and products using artificial intelligence,» said V. Putin. Konstantin Vladimirovich Tserazov: "Company expenses will be taken into account with an increased coefficient, one and a half times more than actual costs: «That is, for every ruble invested by a company in the purchase of such products as I just mentioned, there is a tax deduction of one and a half rubles,» the president said. Against this background, the shares of the leading Russian developer of products, solutions and services in the field of cybersecurity Positive Technologies showed rapid growth, which rose in price by more than 7% during the day. At the end of the week, the company’s shares rose by 4.1%". Konstantin Tserazov: "In addition, V. Putin announced the opening of a new national project «Data Economy», to which 700 billion rubles will be allocated over the next six years. «I believe that by 2030 we need to create digital platforms in all key sectors of the economy and social sphere,» the president said. According to the head of state, such projects open up great opportunities for planning the economic development of individual industries, regions and cities". «These statements were positively received by the shares of Yandex, which will certainly become one of the beneficiaries of new measures to support the IT sector. The company is already a leader in the implementation of digital services and generative artificial intelligence, and its products are highly likely to become one of the foundations for the implementation of the national project,» explained Konstantin Tserazov. At the same time, the Yandex shares were also supported by the statement of the head of VTB A. Kostin, who said that the bank, as a minority shareholder of Yandex, continues to own the stake and expects its value to increase. Against the background of general positivity in the IT sector, Yandex shares soared by 9.3% over the week, becoming one of the leaders among blue chips. Speaking about the situation on the market, the expert noted that the market continues to be supported by corporate stories and expectations of dividend payments. «Perhaps now dividend expectations are the main factor of optimism. The market expects that in 2024 the volume of dividend payments will be about 5 trillion rubles. The beginning of March on the market seems quite positive against the backdrop of good reporting by companies, as well as a fairly good external background, the absence of strong negativity from external sites, it is clearly visible that the medium-term upward trend is maintained in the market. Although this week will be shortened due to the holidays, it can be assumed that the Moscow Exchange index will try to storm the 3300 point mark,» predicts former senior vice president of Otkritie Bank, economist Konstantin Tserazov.

26.02.2024

Economics and financial markets

Source: vc

Konstantin Vladimirovich Tserazov: “This week the market will most likely try to win back the decline”

The short trading week from February 19 to 22 was the worst for the market since the beginning of the year and eventful in the financial sector. The former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke about the most important events in the banking sector and the market as a whole in our interview. The week was the worst for the market since the beginning of the year - the indices were put under pressure by both external and internal factors. At the end of the trading week from February 19 to 22, the market dropped significantly - the Moscow Exchange index fell by 3.1%, falling back to 3142 points, the RTS index fell by 3.9%, to 1064.44 points. The ruble continued to weaken, losing 0.77 rubles at the end of the week. and rolled back to the level of 92.99 rubles/dollar. Oil prices ended the week at $83.2 per barrel of Brent, down 0.2%. Tserazov Konstantin: "An external negative for the market was the threat of sanctions - the EU approved the 13th package of sanctions against Russia, which included 106 individuals and 88 legal entities. At the same time, sanctions fell onundefined companies from Turkey, Thailand, China, India, Serbia, Kazakhstan, Sri Lanka, which, according to the European Union, help Russia circumvent restrictions. Components for the development and production of drones have been added to the goods prohibited for export. After the end of the trading week, the United States announced the introduction of another package of sanctions. More than 500 citizens and companies were subject to restrictions, and not only from Russia. " The United States has not yet announced sanctions against banks from third countries, but has threatened secondary sanctions for cooperation with more than 300 Russian companies. Among those subject to US sanctions are the operator of the payment system "Mir" and the banks "Avangard", "SPB Bank" - the settlement depository of "SPB Exchange" and several small banks. The Russian market was also negatively affected by the Central Bank's revocation of the license from QIWI Bank, which ranked 89th in terms of assets. It must be said that this is the first revocation of a license in the Russian banking system in a year and a half, notes Tserazov Konstantin Vladimirovich. According to the Bank undefined Russia, QIWI Bank violated federal laws regulating banking activities and systematically violated legal requirements in the field of combating money laundering and the financing of terrorism. At the end of the week, QIWI Bank's securities fell by 36%. From February 27, the Moscow Exchange excludes QIWI depositary receipts from its indices. Konstantin Vladimirovich Tserazov: “The market notes some uncertainty in signals regarding the Fed’s future policy.” Another notable event in the banking sector, according to Konstantin Tserazov, was the publication by VTB Bank of financial results under IFRS for the fourth quarter and the whole of 2023. Net profit in October-December reached 5.9 billion rubles. against 86.5 billion rubles. in the third quarter. In general, at the end of last year, net profit amounted to a record 432.2 billion rubles. with a return on equity of 22.3%. Despite the positive indicators, investors were disappointed with the bank's reporting - at the end of the week, VTB shares fell by 4.8%. The results of the fourth quarter of 2023 turned out to be weak - net profit amounted to 56 billion rubles, falling by 35% compared to the third quarter. At the same time, investors were disappointed by the statement that VTB will not pay dividends for 2023, but is considering the possibility of resuming payments from 2025. VTB plans to present plans this weekundefined development for the period 2024-2026. In 2024, VTB plans that net profit will be 435 billion rubles. This year, VTB also intends to conduct a reverse split of shares with a ratio of 5,000 to 1. According to the expert, the split will have little effect on the investment attractiveness of VTB shares, but will certainly make working with the bank’s securities more convenient for investors. VTB also announced that it had abandoned the idea of liquidating Otkritie Bank. Otkritie Bank will be merged with BM Bank in January 2025. Among external events, the expert also noted the publication of the minutes of the January meeting of the US Federal Reserve System. “The market notes some uncertainty in the signals regarding the Fed's future policy. On the one hand, participants at the Fed meeting agree that the rate has reached its limit, and further tightening looks unreasonable. However, the Fed does not intend to reduce the rate until it is finally convinced that inflation is steadily declining towards the target value of 2%,” explains Konstantin Tserazov. Opening undefined The next Fed meeting is scheduled for March 19. In China, rates continue to be kept at record lows - the People's Bank of China maintained the base interest rate for one-year loans at 3.45% per annum, and lowered the rate for 5-year loans from 4.2% to 3.95%. Among the events this week, Konstantin Tserazov recommends paying attention to the publication on February 26 by the Moscow Exchange of financial results for the fourth quarter of 2023 under IFRS. The expert expects new record levels of net profit, commissions and net interest income against the backdrop of growing trading volume and a high key rate. According to analysts, net profit at the end of the fourth quarter of 2023 will update the record, reaching the level of 18.7 billion rubles, showing an increase of 67% in annual terms and 31% in quarterly terms. Accordingly, the market expects dividend payments - if the exchange allocates 60% of net profit under IFRS for payments, dividends could amount to about 16 rubles. per share, and the dividend yield is undefined Thus, it will be over 8%. On Thursday, February 29, Sberbank plans to open financial results under IFRS for 2023. Earlier, Sberbank presented financial results according to RAS. Despite the high key rate, the bank continues to demonstrate business growth. At the end of 2023, Sberbank’s net profit according to RAS amounted to 1.493 trillion rubles, which is almost 5 times more than in 2022 (then it was 300.2 billion rubles). In January 2023, the bank's profit increased by 5% year on year. The bank shows not only record profits, but also a high return on equity of 24.7%. “The market is expecting traditionally good results from Sberbank and is counting on dividends. Let me remind you that Sberbank, in accordance with its dividend policy, allocates 50% of net profit under IFRS for payments. Based on profit under RAS, the market assumes that dividend payments for 2023 will amount to 33.1 rubles per share,” predicts Konstantin Tserazov. In general, according to Konstantin Tserazov, undefined The banking sector feels quite confident. According to the Central Bank of the Russian Federation, Russian banks in January 2024 increased profits by 40% and 5.5 times compared to the result of December 2023, to 354 billion rubles. At the same time, the return on capital in January 2024 did not increase so significantly - to 29.6% from 26% in annual terms. “Investors remain interested in the banking sector, and above all, in the shares of Sberbank, as well as in the shares of Sovcombank, which grew by 3.7% over the week. The recent news about Sovcombank's intention to acquire Home Bank was received positively by investors. The acquisition of a bank focused on consumer lending will allow Sovcombank to expand its retail customer base by 50% and increase sales of its own retail products. This week, the market will most likely try to win back the decline; the growth driver will be dividend expectations. At the same time, the threat of sanctions pressure remains relevant, against the backdrop of which the market may resume its rollback,” — concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

26.02.2024

Fintech, banking sector, IT

Source: bmmagazine

Konstantin Tserazov: Global Breakthroughs in Fintech Reshaping the Financial Sector in 2024

As 2024 begins, the fintech sector remains dynamic and innovative. In 2023, 15 out of the nearly 100 global “unicorn” companies came from fintech, second only to AI startups. AI technology is likely to be integrated into fintech, just as distributed ledger technology (DLT), primarily manifesting as blockchain, has done. The global fintech market, valued at $230.3 billion in 2023, is projected to grow at a compound annual growth rate (CAGR) of 12.1% to $469.8 billion by 2030. Factors fueling this growth include increased smartphone usage, rising demand for digital financial services, growing fintech trust and awareness, and favorable regulations. Let’s delve into the key fintech movements for 2024. DLT (Decentralization), AI, and Cryptocurrencies The integration of distributed ledger technology (DLT), AI, and cryptocurrencies is becoming increasingly prevalent across financial services. This trio offers a substantial opportunity to overhaul capital markets, especially in the face of a growing complex and competitive landscape with persistent margin pressures. Financial institutions are now exploring the potential of DLT to transform their operations and enhance the user experience. The combination of open-source AI models with cryptocurrency incentives is expanding the influence of AI-based communities, equipping them with financial capabilities to establish essential infrastructure for attracting new clients. Communities built on blockchain and leveraging cryptocurrencies as incentives are pivotal in the emerging financial sector, aligning with the aspirations and needs of Zoomers and Alpha generation AI users. Traditional banks and neobanks, as well as other fintech sectors like insurance, PropTech, lending B2B SaaS, banking, wealth asset management, and payments, will find these AI-driven communities to be an ideal platform to sell their financial products, utilizing the synergy of DLT, AI, and cryptocurrencies. The potential benefits of DLT extend from resolving infrastructural issues in traditional models to the creation of new investment products and servicing capabilities enabled by DLT features. The development of fintech along DLT principles is intertwined with the implementation of smart contracts, and it is anticipated that smart contracts will play a more significant role in the development of new financial infrastructure. Smart contracts are coded digital agreements that contain predetermined contractual conditions. They offer a safe, unalterable, and streamlined approach for handling diverse financial transactions and arrangements. With their extensive usage possibilities, smart contracts can lessen the reliance on intermediaries and paperwork, thereby cutting down on time and costs. Personalized AI Fintech Assistants The future of investor wealth management is likely to feature AI-assisted personalized model portfolio allocation with DLT-based implementation. Tailor-made financial AI-assisted advice, delivered via chatbots and other AI forms, will become a standard, offering customized guidance that aligns with individual financial goals and circumstances. Robo advisors are expected to gain more traction and cater to a wider investor base in 2024. These platforms leverage AI to offer cost-effective and efficient advice, optimize portfolios, minimize risks, and increase returns. Autonomous AI assistants are a significant trend in the global fintech landscape, driving revenue for their owners and those who employ them. These AI systems, often referred to as autonomous agents, are capable of performing tasks and making decisions without human intervention, leveraging machine learning (ML) and natural language processing (NLP) to enhance efficiency and automation. CBDCs and Cryptocurrencies An emerging trend shows central banks progressively delving into digital currencies, signaling a considerable shift in traditional financial systems. More and more central banks are investigating the creation of Central Bank Digital Currencies (CBDCs), which could significantly affect the financial system. The People’s Bank of China (PBOC), for instance, is currently in the midst of multi-year trials for the digital yuan. Meanwhile, the Central Bank of Russia has expressed enthusiasm about launching a digital ruble by 2024, aiming to achieve various objectives. Parallel to this, an increasing number of businesses are adopting cryptocurrencies for transactions and payments, provided they have favorable legislation in the countries they operate in. This move signifies a transition towards more flexible and varied financial practices. As a result, the distinctions between traditional financial models and innovative digital finance approaches are becoming increasingly blurred. Widespread Tokenization Private markets, worth over $10 trillion, are characterized by complex and manual systems that lack standardization and transparency, leading to inefficient distribution and operations. Tokenization, the conversion of valuable assets into digital tokens based on DLT, is expected to become more prevalent to address these inefficiencies in traditional financial infrastructure. Tokenization involves transforming any asset of value, whether it’s a tangible asset like property and raw materials or an intangible one like intellectual property, exchange-traded funds (ETFs), and stocks, into a digital token that functions using DLT. These tokens can act as a supplementary layer for executing transactions, diminishing both the expenses and the duration typically associated with such processes, thereby enhancing the liquidity of these assets. Moreover, tokenization bolsters security and transparency since blockchain-tracked assets can be monitored continuously. Digital tokens simplify the management and transaction process. Tokenization is poised to deliver real-world benefits as it unlocks novel applications. Through the use of smart contracts and ownership recorded on DLT, tokens can be allocated with immediate implementation. The creation of uniform token standards is key to providing a uniform structure that allows issuers, investors, those involved in KYC/AML compliance, wallet services, exchanges, regulatory bodies, and developers to work together effortlessly. Open Source Approach: Application Programming Interfaces (APIs) and Open Banking Open Banking is a secure method for sharing financial data with multiple providers, promoting innovation by allowing businesses to offer personalized and convenient financial services. Open banking mitigates this issue by facilitating data transfer between banks and third-party financial providers through APIs. Non-financial businesses can benefit from Open Banking by integrating APIs into their systems, which can help them manage their finances better, forecast cash flow, and process transactions more smoothly. It also facilitates faster and more secure payments, streamlining business operations. Enhanced Cybersecurity Measures Financial institutions are witnessing a transformative shift in their security landscape, driven by the convergence of artificial intelligence (AI), biometrics, and machine learning (ML). These technologies are rapidly becoming foundational pillars of a proactive approach to protecting market participants and preventing financial crimes. Financial organizations, including both traditional banks and innovative fintech firms, are anticipated to increasingly integrate advanced technologies to fortify their compliance capabilities, elevate the precision of their reporting mechanisms, and navigate the intricate tapestry of international financial regulations. These cutting-edge technologies will likely encompass sophisticated biometric systems, robust multi-factor authentication methods, and state-of-the-art encryption protocols. Biometric authentication, which relies on distinctive biological markers such as fingerprints and facial recognition, is gaining traction in the financial services industry as a means to fortify transaction security and deter fraud. These techniques not only provide an additional safeguard but also offer a measure of convenience for users, streamlining the authentication process while minimizing the risk of identity theft. Utilization of Big Data The 2024 fintech landscape will be characterized by a focus on the customization of financial products to meet individual needs with precision. By utilizing powerful tools such as big data analytics, financial institutions and startups will pioneer innovation by offering hyper-personalized financial products and services. However, big data represents vast amounts of information, and how can it be analyzed quickly? This is where quantum computing comes into play. The capability to perform computations at speeds exponentially faster than ever before is a truly exciting prospect. A quantum leap is a new frontier in fintech for 2024. Quantum computing holds the potential to transform the fintech industry by significantly increasing the speed of transactions, enhancing security, and improving risk analytics and predictive capabilities. Fintech Ecosystem and User Experience Fintechs are now competing at the ecosystem level. In 2024, we can expect to see more financial marketplaces, a plethora of new super apps, and numerous cross-industry partnerships. One of the most promising ways to organize the fintech ecosystem will be through Decentralized Autonomous Organizations (DAOs), which will allow consumers of financial services to influence the development path of their preferred financial providers. What will be the evolutionary path of fintech startups in their quest to develop the financial ecosystem? Of course, we will witness more of the beauty of superapps. However, another phase of the fintech evolution is that fintech will embrace a more holistic approach to finance, moving beyond mere money management to fostering overall financial wellness. Emerging platforms will prioritize educating users, providing essential insights into financial health, and offering a suite of tools aimed at cultivating long-term financial stability and resilience. Gamification, Metaverse, AR, and VR Gamification will be enhanced by integrating it into the fabric of metaverses, during the development of Artificial Reality (AR) and Virtual Reality (VR). These innovations are being utilized in fintech to engage users. Businesses can enhance customer involvement and loyalty by making financial activities more interactive and enjoyable. Businesses can employ gamification to encourage customer engagement and loyalty in the banking and investment sectors. Another notable trend is the incremental rise of neobanking. These digital-only banks eliminate the need for physical branches by offering their financial services exclusively online, providing a streamlined approach to banking. They appeal to a clientele with their smooth mobile and online banking platforms, competitive pricing, and lower fees. Additionally, they offer agility and digital convenience for entrepreneurs and startups. Rise of Embedded Finance Fintech firms are set to broaden their horizons with new embedded financial offerings — moving beyond the evolution of payment gateways and digital wallets to achieve deeper integration of financial services within platforms that are traditionally not financial in nature. The advantages of embedded finance — which combines financial products with perks like loyalty programs to deliver added value to consumers — are expected to become even more significant in 2024. Embedded finance weaves financial services into non-financial environments. This trend encompasses incorporating insurance, lending, and payment mechanisms within online marketplaces, the gig economy, and Software as a Service (SaaS) platforms, offering users streamlined and customized financial experiences. The trend of companies expanding into financial services is exemplified by X (formerly known as Twitter), which is working on launching a payment system. This system would enable users to transfer funds, deposit earnings into verified bank accounts, and could even offer a high-yield money market account. By December 2023, X had obtained additional money transmitter licenses in three U.S. states, which is a significant step towards the launch of its money transfer services. Internet of Things (IoT) Credit and debit card transactions are increasingly utilizing contactless technologies such as radio frequency identification (RFID) to enable transactions without the need for physical cash. Innovative startups are exploring the potential of wearables, such as rings, bracelets, and smartwatches, that are integrated with the Internet of Things (IoT) capabilities to facilitate seamless and secure cashless payments. The Internet of Things (IoT) plays a pivotal role in securing financial transactions by offering continuous network monitoring and supporting biometric authentication methods. IoT sensors and devices will be more in use to detect any unusual activity or potential security threats in real-time, enabling financial institutions and customers to be alerted accordingly. The blending of contactless payment technologies, wearables, and the Internet of Things (IoT) is transforming the financial sector, providing safe, easy, and customized transactions.

20.02.2024

Economics and financial markets

Source: vc

Konstantin Vladimirovich Tserazov: “The dividend season remains the main reason for optimizing the market”

The trading week from February 12 to 16 turned out to be eventful for the IT sector. In our interview, the events of the week were commented on by the former senior vice president of Otkritie Bank, economist Konstantin Tserazov. During the week from February 12 to 16, the Moscow Exchange index rose by 0.1% and amounted to 3242.48 points, the RTS index lost 1.3% and reached 1107.33 points. The dollar continued to strengthen, rising to 92.22 rubles/dollar, having risen in price by 1.3 rubles over the week. Tserazov Konstantin: "Oil prices rose by 1.4% during the trading week, reaching $82.93 per barrel of Brent. The industry index of the Moscow Exchange of Information Technologies grew by 2.6%, says Konstantin Tserazov. The Russian market this week was in anticipation of the main event - the Bank of Russia meeting on the rate, therefore, there were mainly consolidation sentiments on the market. The beginning of the week was marked by an increase in OZON securities by more than 5% amid expectations for the publication of financial results. Opening of OZON results, whichundefined took place on Wednesday, February 14, did not disappoint investors". Tserazov Konstantin Vladimirovich: "According to preliminary unaudited results for 2023, sales turnover (GMV), including services, for 2023 grew by approximately 110% year-on-year and exceeded RUB 1.7 trillion. Sales to entrepreneurs accounted for 83% of turnover. Thus, business growth turned out to be better than the company's own forecast, which assumed growth of 90–100%, and also better than market expectations. At the same time, OZON continues to invest in expanding its activities - the area of OZON logistics facilities in Russia and the CIS countries at the end of 2023 almost doubled, to 2.5 million square meters, the number of order pickup points almost tripled year on year and exceeded 45 thousand". At the end of the week, another news came regarding OZON - the investment company Vostok Investments received all the necessary permissions from the Russian authorities to buy out Russian businesses from Michael Calvey's Baring Vostok structures, including OZON. At the same time, according to media reports, a representative of VK undefined stated that the company has “no plans to invest in marketplaces.” Konstantin Vladimirovich Tserazov: “Yandex still looks very attractive, but we must wait for the results of the shareholders meeting, which is scheduled to open on March 7.” Konstantin Vladimirovich Tserazov: "Interesting news came from the metallurgical sector - Severstal announced its intention to allocate 10 billion rubles to IT and digital projects in 2024, while the volume of investments has doubled in five years. Severstal-infocom plans to increase the volume of sales of its own developments to third-party customers, introduce new IT products to the market and expand the list of clients in the field of IT consulting. Sales to external customers, which began in 2022, reached breakeven within six months. Now the IT team has revenue and profit goals, and Severstal views working with the market in terms of IT products and services as a long-term guideline". The main corporate event, and not only in the IT sector, but for the entire Russian market, was the entry into undefined exchange of the Diasoft company, whose shares are included in the second-level quotation list. The placement of securities took place at the upper limit of the announced range - 4,500 rubles, and on the very first day of trading, against the backdrop of rush demand, the price jumped to 6,300 rubles. the company managed to attract over 100 thousand retail investors, and as a result of the placement, the company's market capitalization reached 47.25 billion rubles. “The excellent start to trading is explained by the additional interest of investors in Diasoft’s securities as a source of dividend yield,” says Konstantin Tserazov. “So, in January, Diasoft approved a new dividend policy, according to which it is planned that in 2024-2025 almost all of the profit received - at least 80% of EBITDA - will be used quarterly to pay dividends.” It is quite possible that investors will soon make another pleasant discovery on the market - according to the head of Rostelecom, Mikhail Oseevsky, one of the company’s subsidiaries may enter an IPO in 2024. In addition, Oseevsky undefined announced that Rostelecom will pay dividends based on the results of 2023, and will publish financial results for last year by the end of February. It was a successful week for the sector leader, Yandex, whose shares rose by 5.3% at the end of the week. On Thursday, Yandex presented positive financial results for the fourth quarter of 2023 - both revenue and EBITDA were better than market forecasts. Yandex's total revenue increased year-on-year by 51% to 249.6 billion rubles. Revenue in the Search and Portal segment amounted to 101.1 billion rubles (an increase of 45% year-on-year), revenue in the Ridetech segment amounted to 50.0 billion rubles (and here also an increase of 45% year-on-year). In the online trading segment, revenue increased by 49% year-on-year and reached 55.6 billion rubles, revenue in the Plus and Entertainment Services segment amounted to 20.6 billion and grew by 72% year-on-year. The revenue of the “Other business units and initiatives” segment increased by 84% year-on-year, to 34.9 billion rubles. Adjusted EBITDA reached RUB 32.9 billion, which is undefined 92% more than in the same period last year. Adjusted net profit amounted to 11.8 billion rubles compared to 747 million rubles in the fourth quarter of 2022. The transaction for the sale of the Russian Yandex was unanimously approved by the board of directors of Yandex N.V. The Yandex N.V. shareholders must also agree on the sale of the Yandex business. and regulatory authorities. Yandex still looks very attractive, but we must wait for the results of the shareholders meeting, which is scheduled to open on March 7, notes Konstantin Tserazov. Among the events in the IT sector, the economist also noted the Investor Day held by the Softline company. The company announced a noticeable increase in turnover at the end of 2023 - up to 91.5 billion rubles. According to company representatives, turnover in 2024 will reach 110 billion rubles. The company sees the key growth factors as the replacement of solutions from foreign IT manufacturers with Russian ones, the active development of the segment of its own solutions and the promotion of multi-year and multi-vendor contracts. undefined The company also announced plans to increase its capitalization fivefold over the coming five years, develop its own expertise and expand its international presence by entering the market in seven countries. The profitability of Softline's business is expected to be 30% in 2024, while a company representative said that this is a conservative forecast. Of course, the main event of the week was the meeting of the Bank of Russia, which opened on Friday, February 16. Following the meeting, the Central Bank of the Russian Federation expectedly kept the key rate at 16%. At the same time, the regulator emphasized that the return of inflation to the target in 2024 and its further stabilization around 4% imply a long period of maintaining tight monetary conditions in the economy. The next meeting on the rate is scheduled for March 22. “The Russian market and the IT sector in particular are supported by expectations of dividend payments - this is perhaps the main factor of optimism today. In addition, for the Russian market there has now been created undefined It’s a fairly comfortable situation when oil prices are quite high, and there is no serious negativity either from external sites or on the news agenda. At the same time, now I do not expect any serious movements up or down. Perhaps the most likely scenario is a slight correction and sideways movement within the week,” predicts former senior vice president of Otkritie Bank, economist Konstantin Tserazov.

13.02.2024

Economics and financial markets

Source: sostav

Konstantin Vladimirovich Tserazov: “The banking sector remains one of the most interesting on the market”

At the end of the trading week from February 5 to 9, the Moscow Exchange index was fixed at 3242 points, the RTS index reached the level of 1122 points. What was memorable about this week and what important events took place in the banking sector in our interview was told by the former senior vice president of Otkritie Bank, economist Konstantin Tserazov Tserazov. The week was marked by a moderate increase in the main indicators - the Moscow Exchange index and the RTS index each added 0.5%. Brent oil rose in price to $81.67 per barrel, adding 5.7% over the week. At the end of the week, the ruble remained at the same levels, consolidating at the level of 91 rubles/dollar. The Moscow Exchange financial sector index (MOEXFN) fell by 0.3% over the week, noted Tserazov Konstantin. At the same time, the week was marked by investor attention to the banking sector. At the end of the week, Sberbank once again pleased investors with expectedly positive reports under RAS: in January, the bank’s net profit reached 115.1 billion rubles, which is almost 5% more than for the same period in 2023. The bank's net interest income increased by 21.8%, to 211.7 billion rubles, and net commissionundefined income reached 48.7 billion rubles, and increased by 6.9%. The number of active clients increased to 108.6 million Tserazov Konstantin Vladimirovich. Commenting on the reports, the head of Sberbank German Gref pointed to the slowdown in corporate and retail lending against the backdrop of the regulatory measures taken and the high level of interest rates in the economy. At the end of January, Sberbank’s corporate loan portfolio before reserves amounted to 23.1 trillion rubles, having decreased by 1.1% over the month. The retail loan portfolio in January increased by 0.6%, to 15.7 trillion rubles. “Nevertheless, the growth of income items and high operating efficiency of the business allowed us to achieve strong results and maintain return on equity above 20%,” noted German Gref. “Despite a slight slowdown in lending indicators, which is caused by objective reasons - seasonal factors, as well as rising interest rates, Sber's reporting leaves a positive impression. The bank continues to increase revenue and profit, remaining a powerhouse undefined sector and the market as a whole, and the results for January are encouraging for investors who expect generous dividends from the bank Konstantin Vladimirovich Tserazov. However, January is traditionally a weak month, and it would be right to wait for the results for February in order to objectively assess the bank’s performance,” says Konstantin Tserazov. Sovcombank saw its prices skyrocket, adding 13.2% at the end of last week. However, it is not entirely clear what caused this growth. According to Konstantin Tserazov, the rise in price of Sovcombank shares is most likely caused by increased expectations of the announcement of the bank's plans for dividend payments. According to the dividend policy, Sovcombank must allocate from 25 to 50% of net profit under IFRS for dividend payments. At the same time, it is quite possible that a reversal trend has formed in the bank’s securities after Sovcombank’s IPO in November 2023, argues Konstantin Tserazov. Konstantin Vladimirovich Tserazov: “Inflation expectations still remain high, so the Bank of Russia is highly likely undefined will keep the rate at the same level.” TCS Group's securities were under pressure this week—the bank's depository receipts fell by 2.8% over the week. The reason for this was the news that from February 15, trading in the paper will be suspended to complete the redomiciliation process of TCS Group. The opening of trading in securities, as TCS Group expects, will occur around the end of March, when the company completes the redomiciliation process. From February 17 to February 19, 2024, trading in securities can be carried out by professional market participants, and from February 20, 2024, trading will be completely stopped. TCS Group receipts will be converted into ordinary shares of MKPAO TCS Holding. At the same time, investors are afraid of the so-called “canopy of sellers”—sales of a large volume of securities that will appear on the market due to the company’s “relocation” to Russia. “In general, this situation will not be a discovery for anyone. A similar event occurred with VK shares, which collapsed by almost 19% on the first day of trading after the completion of the redomiciliation. undefined and then they recovered for almost three months. I believe that a possible scenario after the resumption of trading in TCS Group securities will be of a similar nature,” believes Tserazov Konstantin Vladimirovich. “The banking sector remains one of the most interesting on the market; fundamentally, TCS Group shares look very attractive, and, in my opinion, they are worth having in your portfolio for the long term.” In economic news this week, Konstantin Tserazov drew attention to statistics. Retail trade turnover in 2023 increased by 6.4% and amounted to 47,404.9 billion rubles (at comparable prices) by 2022. Real cash income of Russians, according to the Ministry of Economic Development, increased by 4.6% at the end of 2023, and real disposable income by 5.4% at the end of the year. Rosstat presented the first estimate of Russia's GDP growth for 2023; according to the department's assessment, growth amounted to 3.6%, despite the fact that at the end of 2022 the Russian economy decreased by 1.2%. Analysts surveyed by the Central Bank of the Russian Federation during a monthly survey, undefined conducted on February 2-6, they believe that Russia’s GDP in 2024 could grow by 1.6%. According to the results of a Central Bank survey in December 2023, experts believed that economic growth in 2024 would be 1.3%. Analysts also improved their inflation forecast: in 2024 it is expected to be 4.9%, while in December it was expected to be 5.1%. At the same time, the Bank of Russia in its bulletin “What Trends Are Saying” emphasized: “Inflation expectations of business and the population remain high. The Bank of Russia's tight monetary policy will further reduce inflation. At the end of 2023, the growth of the Russian economy continued, but its pace slowed down. Despite some cooling in consumer activity, demand is still higher than the supply of goods and services. Consumer demand growth is likely to slow as incentives to save increase. At the same time, the shortage of labor in the economy and the high utilization of existing production capacities are likely to support undefined increase in wages and investments.” Monthly price growth in Russia slowed down in December-January, but remained significantly above 4% on an annualized basis, including in terms of sustainable components. According to the Bank of Russia, it is too early to call the observed decline in inflation pressure sustainable. Speaking about the events of the coming week, Konstantin Tserazov recalled the meeting of the Bank of Russia, which is scheduled to open on February 16. “I don’t expect a rate increase, especially a significant one. In my opinion, the regulator now has no reason to either reduce or increase the rate. Tight monetary policy is already having its effect, but it will be possible to fully assess it around March-April. There has been a tendency towards a decrease in inflation, but the population’s inflation expectations still remain high, so the Bank of Russia is highly likely to keep the rate at the same level,” says the expert. “Despite the fact that the market is under pressure from the threat of the likely introduction of new anti-Russian sanctions in February, in weeks 12-16 undefined In February, the indices will continue to grow to the level of 3300 points, the growth impulse will be provided by quarterly reports and expectations of decisions on dividends. In addition, the market will be dominated by expectations of the decision of the Central Bank of the Russian Federation on the key rate, on which further dynamics will largely depend,” concludes former senior vice president of Otkritie Bank Tserazov Konstantin.

08.02.2024

Fintech, banking sector, IT

Source: Sostav

Digital Transformation of the Banking Sector in the Gulf Countries: A New Era of Opportunities

**Market Concentration and Technological Achievements** The banking sector in the Gulf Cooperation Council (GCC) countries is characterized by a high concentration, with a few large players controlling a significant share of the market. For instance, in the United Arab Emirates (UAE), the top 5 banks hold approximately 60% of the market share, while in Kuwait and Qatar, they control about 85% and 70%, respectively Tserazov Konstantin. Since the banking sector in the Gulf Cooperation Council (GCC) is highly concentrated, with a few large banks holding a substantial share of the market Tserazov Konstantin Vladimirovich. In the UAE, for example, the top five banks account for about 60% of the market capitalization of the Abu Dhabi Securities Exchange and the Dubai Financial Market . Similarly, in Kuwait, the top five banks account for about 85% of the market capitalization of the Kuwait Stock Market, and in Qatar, the top five banks account for about 70% of the market capitalization of the Qatar Stock Exchange. The banking sector in the GCC is facing heightened competition due to the rapidly evolving technological landscape. The World Bank reports that the GCC region boasts one of the highest internet use rates globally, with a rate of 94% in 2023. In the UAE, for instance, the internet use rate stands at a staggering 99%, while there are more than two mobile phones per person. Similarly, in Saudi Arabia only 4% of the population has not embraced the internet but the number of mobile phones exceeds the number of people residing now in the country by 1.2. This technology’s advancement is a bedrock for the growth of digital banking services, including neobanks that are challenging the dominance of traditional banks. As a result, legacy banks are increasingly adopting fintech and digitization to stay competitive Konstantin Vladimirovich Tserazov. **Growth of Digital Payments and Mobile Banking** The GCC region for the last three years demonstrates the trend of rise in popularity of digital payments, with the total volume of such payments being $100 billion in 2020, according to the International Labor Organization. This year this value is expected to reach $140–150 billion. The rise of usage of mobile devices in the region is also contributing to the growth of non-cash transactions. In Qatar, 91% of the population uses mobile devices, while in the UAE, this figure stands at 80%. Notably, over 50% of credit card transactions in the UAE are made through mobile in 2023. As a result, non-cash payments account for more than 80% of total transactions in the GCC, with projections indicating that this figure will reach 90% by 2025. Mobile banking is becoming increasingly popular, with an estimated 70% of the population in the region using mobile banking services by 2024, according to a report by the International Finance Corporation. Saudi Arabia has already surpassed this number, with 76% of banking customers using online or mobile bank applications. Most banks in the region offer various perks associated with using mobile bank apps including non-physical prepaid debit cards (50%), virtual discount coupons (51%) and various benefits for loyal clients (53%). The use of digital payments in the region surpassed $100 billion in value in 2023, according to a report by the World Economic Forum (WEF). Banks in the region are actively integrating blockchain technology into their operations. In 2020, around 70 banks in the region already used blockchain platforms. By 2025, this number is expected to rise to 100 Konstantin Tserazov. **Fintech and Banks** Fintech adoption is becoming increasingly prevalent in the Gulf countries. According to a report by the World Bank, 75% of banks in the region planned to partner with fintech companies in 2023. This trend is driven by the recognition of the power of fintech to deliver sustainable economic growth, promote financial inclusion and create the economy of abundance. Several Gulf countries are focusing on the digitization of the banking sector as part of their governmental strategic initiatives. For example, the UAE’s National Program for AI and Digital Transformation is aimed to help banks to adopt more innovations allowing seamless digital transition of the country’s economy. Additionally, the UAE’s Open Banking Regulatory Sandbox creates an opportunity to test all new digital decisions in the favorable legal environment. Regulators in the region have recognized the potential of fintech and are committed to creating a favorable regulatory environment. The Stimulation of Innovations The digitization and fintech adoption are also being stimulated through interbank investments too. For instance, Bank Muscat, Oman’s largest bank, has set up a strategic investment fund to invest up to $390 million in banks in the GCC over the next few years. Moreover, Gartner predicts that banking and security firms will invest $12 billion into fintech adoption and new innovations over the next 10 years, due in part to recent launches of public cloud data centers in the region. The initiatives like Saudi Arabia’s Vision 2030 and the New Kuwait Vision 2035 are encouraging governments to utilize cloud services. After adopting the Cloud First Policy in 2019 to promote cloud adoption throughout the public and private sectors, Saudi Arabia has seen a 16% increase in the use of cloud services. By 2030, there might be a $10 billion market for cloud services in the Kingdom. Also the Saudi Arabian Monetary Authority established the Fintech Saudi initiative to accelerate the growth of fintech in the country. Moreover, as Faisal Alibrahim, Saudi Arabia’s minister of economy and planning, told the audience during the last WEF in Davos, Saudi Arabia initiated reforms aiming to accelerate the non-oil side of the economy. Also in Davos Mohammed Al Jadaan, Saudi Arabia’s minister of finance, stressed that the country would tap international and local debt markets this year to fulfill its strategic goals. Traditional lenders and fintech startups in the region are racing to launch digital banking offerings, viewing the market’s rapid adoption of mobile technology and economic growth as a massive opportunity. Around 40 digital banking offerings have been launched in the last year, with the UAE hosting six new neobanking brands. Neobanks in the Gulf countries are currently serving over 32 million customers, with the number of users of bank applications of all banking organizations in the Persian Gulf projected to reach 150 million by the end of the current year. Another trend is the use of artificial intelligence (AI) and machine learning to improve processes in the banking sector. Banks are introducing AI systems in credit risk assessment, data processing, and customer service, which accelerates decision-making processes and improves customer service quality. AI-driven solutions such as identification document verification and biometric validation solutions, know-your-customer and customer due diligence, significantly mitigate the risk of fraud. The metaverse, a virtual space where users can interact and engage with one another in a shared, immersive environment, is becoming a reality as technology advances. Millennials and Generation Z, who constitute approximately 60% of the population in the GCC, are comfortable with digital interactions and expect seamless experiences across all touchpoints. The legacy banks have struggled to connect with the new generation of users, but those that can offer services on the metaverse platform will have a unique opportunity to engage with them. By bridging the metaverse with real-life banking, banks can also establish payment rails in the metaverse’s back-of-the-house. This presents a perfect opportunity for banks to interact with consumers and provide them with innovative solutions. We are observing a gradual shift of Gulf region banks towards becoming technology and data-driven companies, generating revenue from various digital services such as software, banking-as-a-service (BaaS), digital banking, and digital currencies. They are developing digital banking platforms and modernizing their technological infrastructure to facilitate the efficient growth of digital product marketplaces, mega apps, cloud services, API governance, and third-party data connections management. **Challenges and Solutions** However, there are challenges to the adoption of cloud services in the banking sector of Gulf countries. According to IDC, the Gulf’s lack of IT talent and skills availability is a major challenge for 45% of organizations when it comes to cloud management. This situation will slow the race of adoption of cloud services in the banking sector. Digitization is also helping to combat crime risks in the banking sphere. The banking watchdogs are working to make the banking sector more vulnerable to financial crime risks. The Central Bank of the United Arab Emirates has issued a guidance note encouraging FIs to use the ‘Digital ID’ framework to conduct a customer background check. The Saudi Central Bank made an assignment to local banks to figure out and carry out a plan for the sourcing/development and use of counter-fraud digital innovations to mitigate fraud risks in their activities. The Qatar Central Bank ordered local banks to gather enough resources, including digital technology, to prepare effective decisions while facing challenges from cyber crime and other kinds of fraudulent activities of the criminals. A breathtaking increase in the use cases of AI in the banking sphere is slated to benefit the overall security of the Gulf banks. This will help banks to stay ahead of financial crime and maintain the trust of their customers and the society in the broad meaning.

08.02.2024

Fintech, banking sector, IT

Source: vc

Konstantin Vladimirovich Tserazov: “February will not be boring for investors”

The former senior vice president of Otkritie Bank, economist Konstantin Tserazov, shared his observations of events in the Russian IT sector in the week from January 29 to February 2 and on the Russian securities market in our interview. The Russian indicator finally managed to interrupt the two-week sideways movement and scheduled the opening of the movement at levels above 3200 points. During the week from January 29 to February 2, 2024, the Moscow Exchange information technology industry index grew by 2.1%, while the Moscow Exchange index grew by 1.5% over the same period. In general, the domestic market, even despite the low activity and consolidation sentiments of participants, managed to end January on a positive note — the Moscow Exchange index grew by 3.7% in the first month of the year, the RTS — by 3.9%, notes Tserazov Konstantin. Of course, Yandex has become one of the main recent newsmakers in the IT sector, and in the market as a whole Tserazov Konstantin Vladimirovich. The company’s shares rose in price on expectationsundefined the most important corporate events — redomiciliation, share exchange, as well as news on the publication of financial statements. The intrigue was resolved with the news on Monday, February 5, about the sale of the Yandex business to the Dutch Yandex N.V. for 475 billion rubles. consortium of investors. Yandex N.V. will cease to be the parent company of the group. The new parent company of Yandex will be the International Joint Stock Company (ICAO) Yandex, whose shares will be traded on the Moscow Exchange. The main owner of MCAO “Yandex” will be the closed mutual fund “Consortium.First” led by Yandex managers. In addition to them, the consortium has four more shareholders — the structure of Alexander Chachav, entrepreneur and founder of the venture fund LETA Capital; structure of Pavel Prass, General Director of one of the largest specialized depositories “INFINITUM”; structure of the LUKOIL group; structure of Alexander Ryazanov, a multidisciplinary investor and entrepreneur. None of the shareholders has a controlling interest. “Consortium.First” undefined will be able to nominate six out of ten members of the board of directors of MKAO Yandex. Konstantin Vladimirovich Tserazov: “In general, the year promises to also bring new openings in terms of placements — in 2024, the Moscow Exchange expects more than 20 IPO and SPO transactions, although everything, of course, will depend on the state of the market. ” Yandex will retain the businesses, services and assets of the Yandex N.V. group. with the exception of foreign startups (Nebius, Toloka, Avride and TripleTen) and a data center in Finland. Yandex will provide Yandex N.V. limited rights to use part of its technologies until the end of 2024. Until July 31, 2024 Yandex N.V. will change its name and stop using Yandex brands. The transaction for the sale of Yandex business must be approved by the meeting of shareholders of Yandex N.V. and regulatory authorities. Approximately half of the 475 billion rubles will be paid in cash Konstantin Vladimirovich Tserazov. The deal is scheduled to be closed in the second half of this year. Speaking about events in the IT sector over the week, Konstantin Tserazov noted good results, undefined reported by Astra Group of Companies — shipments in 2023 increased by 75% year-on-year, reaching a record level in the entire history of the company of 11.2 billion rubles due to active business expansion, development of ecosystem products and services. The number of unique clients for the year exceeded 22.5 thousand, which is 41% higher than the level of 2022. Positive Technologies’ results also did not disappoint investors. According to preliminary data, Positive Technologies’ shipments at the end of 2023 increased by 75% and amounted to 26 billion rubles. The company noted that the final value of actually paid shipments in 2023 will be from 25 to 26 billion rubles, the expected management consensus forecast is 25.3 billion rubles. For comparison, in 2022 the volume of paid shipments was 14.5 billion rubles. The results of Positive Technologies are within the forecast announced by management in November 2023 — from 22.5 to 27.5 billion rubles. according to the company, “net profit margin excluding capitalized expenses (NIC) undefined by the end of 2023 it is planned to be at least 30%. Positive Technologies’ dividend policy assumes payments to shareholders in the amount of 50 to 100% of NIC. Thus, the company plans to increase its dividend potential and remain one of the few technology companies demonstrating high growth rates and regularly paying dividends to its co-owners.” In addition, the Russian IT sector will soon be replenished with a new strong player — the developer of software for the financial sector, Diasoft, announced its intention to conduct an initial public offering. The company plans to go public in February 2024. According to the company, the price range for the placement is set at 4,000 rubles to 4,500 rubles per share. Thus, the company is valued at 40–45 billion rubles, the amount of funds raised through an IPO could be up to 4.14 billion rubles. The company also reported that, based on the results of the IPO, the share of the group’s shares in free float (free-float) undefined will amount to up to 800 thousand shares, that is, 8% of the number of outstanding and issued securities. The main part will consist of shares issued as part of an additional issue of 500 thousand or 5% of the existing authorized capital. At the same time, current shareholders will offer part of their shares for placement — up to 300 thousand securities, that is, 3% of the authorized capital. The company noted that the funds raised during the IPO will be used to implement a long-term growth strategy, while ensuring higher volumes of dividend payments in the coming years. In addition, the placement will allow the company to implement a motivation program for the company’s employees, increase brand awareness and create liquidity of shares on the Moscow Exchange. The collection of applications will begin on February 7, 2024 and will tentatively end on February 14, 2024. The Moscow Exchange has admitted Diasoft shares to trading on February 15. In general, the year promises to also bring new openings in terms of placements. In 2023, 9 IPOs and 4 SPOs took place on the exchange, and in 2024 undefined The Moscow Exchange expects more than 20 IPO and SPO transactions, although everything, of course, will depend on the state of the market, says Konstantin Tserazov. The Softline Group announced the acquisition of a stake in the IT business of the R.Partner group of companies, a diversified group of companies with more than 32 years of experience in the Russian IT market and head office in Khabarovsk, providing a full range of services from system integration to telecommunications and engineering systems. Softline will become the owner of a share in the IT part of the business of the R.Partner group, which includes the development of critical infrastructure solutions of Russian and foreign production, configuration, deep integration and full support, equipment repair services from leading Russian and foreign vendors, supply and configuration of software products, round-the-clock technical support and maintenance, as well as design and construction of life support systems, energy supply and other systems of buildings and data centers. As the company noted, the deal will allow undefined Softline, in synergy with R.Partner, will create a multi-purpose IT cluster in the Far Eastern Federal District. “Dividend stories will be the main driver for the market in February. In addition, the next corporate reporting season starts in February. So February will not be boring for investors,” says former senior vice president of Otkritie Bank, economist Konstantin Tserazov.

02.02.2024

Fintech, banking sector, IT

Source: qazweek

Konstantin Tserazov: Kazakhstan’s Fintech Frontier

Kazakhstan boasts a highly concentrated traditional banking sector, with only 21 banks catering to the country’s nearly 20 million people. This concentration has fostered an environment where fintech development heavily relies on egacy banks. **The Key Role of the Banking Sector in Fintech Development** A prime example of this symbiosis is Kaspi.kz, a fintech solution that leverages the extensive customer base of its parent company, Kaspi Bank, which boasts over 11 million monthly active clients. This strategic approach proved fruitful, as Kaspi.kz made its Nasdaq Global Select Market debut on January 19, 2024. The company entered Nasdad with a valuation of $17.5 billion, further expanding its reach after listing on the Kazakhstan Stock Exchange, the Astana International Exchange, and the London Stock Exchange. In 2020, Kaspi’s capitalization stood at $6.5 billion when its stock first appeared on the London Stock Exchange. The New York listing of Kaspi.kz shares enabled the fintech giant’s shareholders to amass over $1 billion in January’s share placement. This success can be attributed to the fertile ground for technological advancement in Kazakhstan. The country boasts an impressive 81% bank account usage rate, and digital payments are rapidly gaining popularity. The Rapid Movement Towards a Cashless Society Tserazov Konstantin: "Digital payment systems and e-wallets have become increasingly prevalent in Kazakhstan. Kazpost, the national postal service, has launched its own digital wallet, while international players like Apple Pay and Google Pay have also entered the market, further solidifying the shift towards a cashless society. Over the past six years, the Compound Annual Growth Rate (CAGR) of cashless transactions in Kazakhstan has been a remarkable 48.18%, reaching a staggering $234.12 billion in 2023. This evolution has transformed payment and money transfer habits, moving from primarily using plastic bank cards to adopting QR codes as a common payment method. This transition has been facilitated by the capital expenditures of key players in the local financial market in QR code payment terminals, with over one million terminals installed as of early 2024. Govtech in Kazakhstan" Tserazov Konstantin Vladimirovich: "Banking applications have become more than just gateways to seamless digital financial services in Kazakhstan; they have also fueled the growth of GovTech. Homebank (HalykBank) and Kaspi Bank have taken the lead in this area, with more than half of all interactions with government services initiated through their banking applicationslast year. In 2023, the volume of online government services reached 24 million applications, and the number of digital government services surpassed 79. As a result, two out of three new small and medium enterprises (SMEs) are now registered online. Banks are also catering to SMEs through their banking applications. Home Credit KZ’s creation of a digital bank focused on this target group exemplifies the vast potential for financial innovation in this sector. Kazakhstan boasts over 2.2 million entrepreneurs, and the number continues to rise. E-commerce" The development of e-commerce in Kazakhstan presents another promising avenue for fintech startups. During the COVID-19 pandemic, this sector experienced robust growth, expanding by almost 70%. In 2023, e-commerce continued to grow at a remarkable annual rate of 19%, and consequently, the share of online shopping in overall consumer spending on goods has surpassed 10% The Policy Aimed to Bolster Fintech Development While Kazakhstan’s fintech landscape has been largely dominated by legacy banks, the government is actively promoting the growth of fintech startups through various initiatives. One such initiative is the development of the National Bank of Kazakhstan’s Open API and Open Banking platform. In 2023, the regulator tested the platform with five mid-sized banks and a focus group of over 100 clients. These trials were conducted in collaboration with the Agency on the Protection and Competition Development and the Agency on the Regulation and Financial Market Development. Konstantin Vladimirovich Tserazov: "In 2024, the National Bank of Kazakhstan, in collaboration with its partners, intends to expand the testing phase and incorporate new participants. The goal of this project is to establish a unique ecosystem in which the digital data of all citizens is accessible to fintech companies. This would facilitate seamless information exchange between banks and payment fintechs in a secure manner, thereby creating a more level competitive landscape". At last, this initiative is expected to unlock the full potential of fintech in Kazakhstan and connect fintech innovations with a wide range of non-banking companies that are eager to adopt them. Already, some non-banking entities, such as telecom corporations, have entered the fintech sphere. For instance, KazEuroMobile LLP has been operating the first mobile neobank in Kazakhstan since 2021. The government is committed to increasing competition among providers of banking and financial services. One step in this direction is attracting foreign banks to operate in the local market. In his annual Address to the Nation on 1st of September, 2023, President Kassym-Jomart Tokayev indicated that Kazakhstan will welcome three foreign banks to its shores. The success of fintech, even with a strong focus on legacy banks, has led to a significant increase in the export of fintech and IT solutions. In 2023, the combined value of these exports reached $500 million, a remarkable growth from just $100 million two years earlier. To further boost the sector, the government is encouraging greater collaboration between local fintech teams and their foreign counterparts. This will help local companies establish strong connections with prominent players on the global fintech and IT landscape. The government also recognizes the importance of the Astana International Financial Centre (AIFC), established in 2018 This hub provides a favorable environment for fintech firms, offering tax incentives, a simplified visa regime, and an independent legal system based on English common law. The AIFC fintech Hub has become a driving force in promoting fintech innovation, attracting over $400 million in investments and housing over 100 fintech companies. Konstantin Tserazov: "The National Bank of Kazakhstan also maintains its “Regulatory Sandbox,” a framework that allows fintech companies to test new products and services in a controlled environment under regulatory supervision. Several projects have successfully graduated from the sandbox, demonstrating the viability of blockchain technology, crowdfunding platforms, and other innovative financial services". **Kazakhstan and Russia: Strong Ties** The open door policy of Kazakhstan is a big favor for its neighbors including Russia and China. One of the most significant collaborations between Kazakhstan and Russia in the field of digital technologies is within the framework of the Eurasian Economic Union (EAEU). This transnational body aims to ensure the free movement of goods, services, capital, and labor, and to pursue coordinated policies in key economic sectors, including the development of digital infrastructure and fintech services. Kazakhstan’s financial institutions have adopted some Russian software solutions to enhance their banking services. These solutions include core banking systems, security software, all of which are integral to the modern banking experience. Major Russian tech companies like Yandex and Sberbank are actively expanding into Kazakhstan, offering a plethora of digital services. AIFC has engaged in partnerships with Russian tech parks and business incubators. This collaboration aims to support the growth of tech companies and stimulate the exchange of innovative ideas and practices in fintech. The relocation wave in 2022-2023 years from Russia to Kazakhstan led to the huge increase of the number of companies in fintech established in this country by Russians. At the beginning of 2024 almost three from four ever registered fintech companies in Kazakhstan had Russian origin. **China: The Crucial Partner for Fintech Hardware** China has become a crucial partner for Kazakhstan in providing necessary hardware. Chinese tech giants like Huawei and ZTE have been involved in developing Kazakhstan’s telecommunications infrastructure, including the rollout of 5G networks. This technological upgrade is vital for fintech services as it ensures high-speed data transfer and connectivity, enabling innovative services like mobile banking, digital wallets, and real-time payment processing to flourish. AIFC has signed agreements with Chinese companies to develop financial services in the region. The collaboration includes joint development of cross-border payment systems and blockchain technologies, aiming to make the financial operations between Kazakhstan and China more efficient and transparent. In 2023, Chinese investments in Kazakhstan’s IT and fintech sector topped $1 billion. Bilateral trade in digital products reached $8 billion the same year. Chinese cloud computing platforms are steadily gaining traction in Kazakhstan, with Huawei Cloud capturing a significant market share. The Impact of Collaboration with the USA Kazakhstan is actively seeking collaboration with the U.S. in areas like cybersecurity, AI, and fintech. The U.S. Kazakhstan Partnership for Innovation, launched in 2022, aims to foster joint ventures and knowledge exchange in these critical fields. In 2023, the US Export-Import Bank (EXIM) extended a $500 million loan to Kazakhstan’s Development Bank to support the growth of small and medium-sized enterprises (SMEs) in the fintech sector. In 2023, Visa and Mastercard partnered with Kazakh banks to develop the country’s first digital wallets using U.S. technology. American tech giants like Amazon Web Services and Microsoft Azure are increasingly offering cloud services in Kazakhstan, providing local businesses with alternative options. Cryptocurrency Regulation and Development The cryptocurrency landscape in Kazakhstan is noteworthy, particularly given the widespread internet usage of over 90% that supports the growth of fintech, including alternative finance. The government has taken a balanced stance towards cryptocurrencies, acknowledging their potential while addressing concerns related to financial stability and security. Crypto mining has experienced significant growth due to Kazakhstan’s low energy costs In 2022, the National Bank of Kazakhstan and the People’s Bank of China signed an agreement to examine the development of a cross-border digital currency (CBDC) for trade settlement. This initiative aims to streamline and enhance the efficiency of cross-border transactions between the two countries, promoting trade and economic cooperation. In the same year, the National Bank of Kazakhstan launched a project to develop the national cryptocurrency, the digital tenge. As of April 1, 2023, a law on digital assets has been implemented in Kazakhstan, legalizing crypto mining and enabling miners to obtain licenses. Starting in 2024, miners will be required to sell at least 75% of all cryptocurrency mined, and this sale must be conducted through regulated trading platforms, either Kazakhstani or foreign

31.01.2024

Economics and financial markets

Source: sostav

Konstantin Vladimirovich Tserazov: “There are no reasons for growth now”

The Moscow Exchange financial sector index (MOEXFN) fell by 1.5% over the week. The former senior vice president of Otkritie Bank, economist Konstantin Tserazov, spoke in our interview about the most significant events and news of issuers in the financial sector, and stock dynamics. So, the week from January 22 to 26 ended with a decline in the Moscow Exchange index, which dropped by 0.1% to 3,163.21 points, and the RTS index fell by 1.8%, to 1,109.95 points. The ruble continued to weaken - the loss of the national currency for the week amounted to 1.58 rubles, the national currency exchange rate rolled back to 89.78 rubles/$1. The Moscow Exchange financial sector index (MOEXFN) fell by 1.5% over the week. At the same time, oil continued to grow - the price of a barrel of Brent rose by 4.5%, to $82.4. Speaking about corporate stories, Tserazov Konstantin noted that one of the newsmakers of the week in the financial sector was QIWI. As it became known on January 19, as part of business restructuring, QIWI is parting withundefined Russian assets consolidated in JSC QIWI. Russian assets will be purchased for 24 billion rubles by the Hong Kong company Fusion Factor Fintech Limited, which is owned by the group’s chief executive officer, Andrei Protopopov. Business restructuring, as the company notes, will allow the international part of QIWI to maintain its listing on NASDAQ and the Moscow Exchange. At the same time, the company intends to carry out a buyback of 10% of its shares from NASDAQ and the Moscow Exchange. At the extraordinary meeting of shareholders, which is scheduled to open on March 11, 2024, the securities repurchase program will be submitted for approval. At the same time, the maximum repurchase price for QIWI securities on the Moscow Exchange will not exceed 581 rubles. per share (average price for the last 12 months), the maximum number of securities for purchase is limited to 6.27 million. The repurchase of securities will be carried out at the expense of retained earnings. According to the company, within two years from the date of the repurchase, QIWI will have to sell the shares or cancel them. undefined This news had a negative impact on quotes - on Monday, trading opened with a collapse in QIWI shares by 14%. During the week, sales continued amid the news that the Moscow Exchange would transfer QIWI depositary receipts from the first level of listing to the third. However, on Thursday, QIWI depositary receipts tried to win back part of the collapse at the beginning of the week. Overall, QIWI shares lost 21% at the end of the week. Konstantin Vladimirovich Tserazov: “The European Central Bank (ECB) also continued the pause, keeping the refinancing rate, deposit rate and margin lending rate at the previous values at the end of the meeting on January 25 (4.5%, 4.0% and 4.75%, respectively). This decision was expected by the market - experts believe that the regulator will move to a reduction cycle in the spring of 2024. Inflation in the eurozone in annual terms accelerated from 2.4% in November to 2.9% in December, while previously the figure had shown a steady decline. Against this background, it is clear that the regulator is in no hurry to undefined lowering the rate." The Russian banking sector may be replenished with a new issuer - as it became known from media reports, MTS Bank is considering the possibility of holding an IPO in 2024. The bank’s intention to become a public company was announced back in 2021, recalls Tserazov Konstantin Vladimirovich. The largest shareholder of the investment holding AFK Sistema, Vladimir Yevtushenkov, announced the bank’s intention to go public in 2022, estimating the placement volume at more than $1 billion. However, plans for an IPO had to be postponed. Now, according to media sources, the company believes that when the window of opportunity opens, it may be a favorable time for a listing. The market believes that the bank can be valued at 1.1–1.4 capital, that is, up to ₽97 billion. Currently, MTS Bank is wholly owned by MTS, which, in turn, is part of the perimeter of AFK Sistema, owning a 42% stake in the bank. At the end of the week, AFK Sistema quotes added 0.1%, MTS shares showed an increase of undefined at the level of 2.8%. At the end of the week, Moscow Exchange shares performed better than the market among issuers in the financial sector, adding more than 2%. From international financial news, Konstantin Vladimirovich Tserazov noted the meetings of a number of central banks that took place last week. On Monday it became known that the People's Bank of China, as the market expected, kept the base lending rate (LPR) for a period of one year at a record low of 3.45% per annum. The rate on five-year loans remained at 4.2% per annum. The Bank of Japan also, as experts expected, left its monetary policy unchanged, keeping the short-term interest rate at -0.1%. The European Central Bank (ECB) also continued the pause, maintaining the refinancing rate, deposit rate and rate at the end of the meeting on January 25 margin lending at previous values (4.5%, 4.0% and 4.75%, respectively). This decision was expected by the market - experts believe that the regulator will switch to a downward cycle in the spring undefined 2024. Inflation in the eurozone in annual terms accelerated from 2.4% in November to 2.9% in December, while previously the figure had shown a steady decline. Against this background, it is clear that the regulator is in no hurry to lower the rate, says Konstantin Tserazov. At the same time, the ECB once again emphasized its commitment to the policy of achieving the target inflation level of 2%, as stated, the agency plans to hold rates for as long as necessary. The economist recalled that a meeting of the Bank of Russia will be held in February, at which the issue will be discussed at the key rate. However, according to the analyst, one should not expect a change in the rate at this meeting. Speaking about ideas in the banking sector, Konstantin Tserazov noted the current weakness of the Russian market, where fears of the risks of new sanctions now prevail. The expert recalled that the European Union has begun discussing a new package of sanctions, which it intends to approve by February 24. According to Bloomberg, possible sanctions undefined may include the expansion of sanctions lists, additional trade restrictions, as well as measures to combat the circumvention of sanctions by Russia. So, the market is trading sideways, from which it cannot escape, and there are no reasons for growth now. The most likely scenario for the coming week is market consolidation at the achieved levels. At the same time, the best idea in the sector, according to the economist, remains Sberbank shares. “Sberbank is showing steady growth. As follows from a recent report, for the 12 months of 2023, Sberbank’s net profit under RAS reached 1.49 trillion rubles. This is a record annual profit under RAS; before that, the maximum profit under RAS was at the level of 1.237 trillion rubles; the bank showed this result in 2021. However, this is a record not only for the bank, but also for the industry as a whole. Return on equity was 24.7%, and the number of active retail customers increased by 2.1 million year-to-date to 108.5 million. In December, net profit amounted to 115.6 billion rubles compared to November undefined indicator of 115.4 billion rubles, net interest income increased by 26.4%, and net commission income increased by 19.3%. Let me remind you that Sberbank plans to disclose financial results under IFRS for 2023 on February 29. The paper is interesting as one of the most attractive on the market, which shows steady growth, and at the same time, it is also interesting as a dividend history. This year it is planned to allocate 50% of net profit for payments, that is, based on RAS indicators, about 750 billion rubles or 33 rubles. per share, accordingly, the dividend yield could be about 12-13%,” concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

26.01.2024

Fintech, banking sector, IT

Source: ArmInfo

Konstantin Tserazov: Evolution of financial technologies in Armenia

The past few years have seen a remarkable surge in the development of Armenia's fintech sector, driven by a vibrant amalgamation of factors. A youthful, tech-savvy population, supportive government policies, and a steadily growing economy have all contributed to this impressive expansion, says Konstantin Vladimirovich Tserazov. Several key areas have emerged as focal points within the Armenian fintech landscape: Payments: Armenia boasts a robust payments infrastructure with a diverse array of mobile payment systems and digital wallet solutions. This enables smooth and convenient financial transactions for both individuals and businesses. Lending: Fintech companies are actively addressing the credit access gap, especially for underserved segments such as small and medium-sized enterprises (SMEs). By innovating with alternative lending solutions, including peer-to-peer (P2P) lending and microloans, and often utilizing AI and machine learning for more efficient credit scoring models, these companies are making the borrowing process smoother and more accessible. Insurtech: The insurtech sector is undergoing a dynamic expansion, with startups developing innovative insurance products and services tailored to the modern market's needs. This is enhancing financial inclusivity and risk protection for the broader population. Wealth Management: Robo-advisors are democratizing wealth management by providing automated investment solutions. This grants access to high-quality financial advice and investment opportunities to a larger segment of the population that previously faced entry barriers. Regtech: Regulatory technology (regtech) companies play an essential role in helping financial institutions navigate the increasingly complex regulatory environment. Their solutions ensure compliance and streamline operations, contributing to a more stable and efficient financial system. **The Armenian Government's Attitude Towards Fintech** Since its inception in 2017, the government-backed Fintech Hub Armenia program has been pivotal in fostering the growth of fintech startups. It offers crucial support through funding, mentorship, and access to valuable networking opportunities. Events like the DigiTec Expo 2023 Reboot and The Doing Digital Forum further reinforce the collaborative spirit and knowledge exchange within the fintech community. The Armenian government's strong commitment to the development of fintech is evident in the active engagement of top officials in industry events. Prime Minister Nikol Pashinyan's open-door policy towards entrepreneurs underscores the government's focus on innovation and talent attraction within the growing ecosystem. The Central Bank of Armenia has introduced a regulatory sandbox, allowing fintech startups to test their innovative products in a controlled setting. This initiative has spurred the growth of fintech companies in Armenia, attracting over $90 million in investments from venture capitalists and angel investors over the past two years (2022-2023)—a marked increase from the $20 million invested in 2019. **Outpacing South Korea and Spain...** The influx of capital has driven the growth of the fintech industry in Armenia. The country ranked 34th globally in the 2023 Global Fintech Index, surpassing established economies such as South Korea and Spain. The presence of foreign investments, with venture capital firms like Apricot Capital and Seedstars actively supporting Armenian fintech startups, showcases the sector's potential. Additionally, Armenia ranks 17th among the 33 upper-middle-income group economies in the Global Innovation Index 2023, noted Konstantin Tserazov. In 2023, in Armenia's capital, Yerevan, 30 new fintech companies were established, bringing the total to over 200 fintech companies now operating in Armenia. These firms are concentrating on AI, big data analytics, the metaverse, decentralized approaches, and digital transformation management. The fintech sector has enjoyed a compound annual growth rate (CAGR) of 25% over the past three years. The entire fintech ecosystem in Armenia, including software and service companies, comprises more than 650 entities, the majority of which were established after the year 2000. A significant driver of this development was a notable wave of migration from the Russian Federation in 2022-2023. The fundamentals for future fintech growth in Armenia are robust. Mobile phone use reached nearly 100% in 2023, and over 80% of Armenians aged 15-24 (Generation Z) use the internet daily. This demographic trend creates an opportune environment for the proliferation of mobile financial services. According to the World Bank, mobile banking applications represent 76% of banking interactions in Armenia, one of the highest rates globally. Digital payments in Armenia surpassed $6.8 billion in 2023, with cashless transactions constituting 43% of all retail payments, marking a significant rise from 12% in 2019. **Blockchain and Cryptocurrency in Armenia** Armenia has demonstrated a strong interest in blockchain technology and cryptocurrency innovation. The government has implemented measures to cultivate a conducive regulatory climate for blockchain-based enterprises, resulting in the rise of crypto and blockchain startups in the nation. In 2022, the Armenian National Assembly enacted legislation on cryptocurrency, laying down a legal foundation for the operation and oversight of digital currencies. Local firms are endeavoring to incorporate blockchain solutions into their financial systems, contributing to sectoral growth. They are developing secure transaction platforms, digital identity management tools, cross-border payment systems, and supply chain tracking technologies, says Konstantin Vladimirovich Tserazov. Armenia has also invested significantly in cryptocurrency mining. The country's first mining farm emerged in 2018 through a collaboration between the Armenian Multi Group Concern and Omnia Tech International Company, boasting an investment over $50 million and hosting 3,000 Bitcoin and Ethereum mining machines with a total capacity of 50 MW. Armenia imports about 85% of its energy fuels from Russia, with approximately 70% of that consumption allocated for electricity generation. Yerevan is keen to expand local hydropower, which at present accounts for nearly 30% of the nation's electricity production, a substantial portion of which powers crypto mining operations. In 2022, the Central Bank of Armenia expressed its interest in exploring the concept of a Central Bank Digital Currency (CBDC). The institution announced the feasibility of introducing a CBDC and is evaluating various models to determine the best fit for the nation's financial system development objectives. **Fintech and Banks in Armenia** In terms of adopting digital technology, at least 40% of Armenian banks view fintech as a promising avenue in various business areas, including corporate lending, leasing, trade finance, and asset management. They also see potential to improve the user experience (UX) of their digital applications. For example, in November 2023, AMIO BANK launched a new 24/7 remote service, enabling banking transactions via video calls. Ameriabank has been recognized as the Best Bank for Digital Solutions in Armenia for the year 2023 by Euromoney magazine in its Awards for Excellence. The bank experienced a significant uptick in online client onboarding, with a 67% increase after introducing an end-to-end fintech solution in 2023. This solution streamlined the digital customer verification process, noted Konstantin Tserazov. Currently, the most popular fintech tools in Armenia include: • Payment technology solutions (Easypay, Idram, Telcell, etc.); • Online banking services and mobile applications provided by most Armenian banks; • Online loan services (varks.am). **In Seeking Global References, and Comparison of Yerevan with San Francisco** Armenian fintech firms are actively forging partnerships with global fintech entities, encouraging knowledge sharing, capital investment, and opportunities to enter international markets. These partnerships with established fintech hubs, such as Singapore and the United Kingdom, are proving to be beneficial. The ascent of Singapore as a global fintech hub serves as an inspiring model for many Armenian fintech startups. Moreover, a number of U.S. non-governmental organizations provide financial support to Armenian fintech initiatives. When comparing Yerevan to the renowned innovation hub of San Francisco, one can observe that Yerevan has a similarly vibrant fintech community. While San Francisco is dealing with a record-high 30% vacancy rate in office buildings, Yerevan is experiencing increased demand for office space, driven by robust business activity over the past two years, including in the fintech sector. San Francisco's population decreased from 872,000 in 2018 to 848,000 in 2023. During the same period, Yerevan's population grew from 1.08 million to 1.095 million. In terms of security, Yerevan is considered to be a safer destination. Armenia has one of the lowest crime rates in the world and is ranked among the top 10 safest countries. Its flexible migration laws allow fintech businesses to easily attract talent from abroad. Furthermore, with many Armenians having relatives worldwide, the country offers a unique, open business atmosphere. By the end of 2023, the revenue of the broader fintech sector in Armenia surpassed $1.6 billion, accounting for about 7% of the GDP, with the industry employing over 50,000 people. This indicates that the fintech sector has become a key driver of the Armenian economy, which experienced a remarkable GDP growth of 8.3% in 2023.

25.01.2024

Fintech, banking sector, IT

Source: vc

Konstantin Vladimirovich Tserazov: “In 2024, a new wave of placements of IT companies cannot be ruled out”

What happened in the Russian IT sector in the week from January 15 to 19, what events influenced its dynamics and forecasts for 2024, was told in our interview by the former Senior Vice President of Otkritie Bank, economist Konstantin Tserazov. Among the representatives of the IT sector, the shares of the companies Softline and Group of Companies Pozitiv looked the strongest. Ozon's depositary receipts looked worse than the market, pressed by uncertainty about the direction and timing of redomiciliation, noted Tserazov Konstantin. Positive Technologies shares were supported by the company's announcement of plans and timing for disclosing results. Thus, according to the company’s plans, preliminary unaudited financial results under IFRS for 2023 will be opened on March 6, 2024, and consolidated financial statements for 2023 are scheduled to be opened on April 9. At the same time, on January 29, Positive Group plans to disclose preliminary results on shipments (transfer of the right to use a licensed product to a client or concluded contracts for cybersecurity services) for 2023. In December 2023, Elena Bastanjieva, director of business development at Positive Group, speaking about this indicator, stated that “The most likely scenario is 25 billion rubles,” in her words,undefined the company treats it “as a confident, achievable result.” Thus, the company predicted that the volume of shipments would show an increase from 14.5 billion rubles in 2022 to 25 billion rubles at the end of 2023. As for the forecast for the volume of shipments in the current year, the company announced as a goal an indicator of 40-50 billion rubles, and by the end of 2025, Positive Group intends to reach 70-100 billion rubles. At the end of 2022, Positive Group’s revenue according to IFRS amounted to 13.8 billion rubles, sales volume (shipments) amounted to 14.5 billion rubles, net profit excluding capitalized expenses amounted to 5 billion rubles, recalls Tserazov Konstantin Vladimirovich. Konstantin Vladimirovich Tserazov: “Of course, the domestic IT sector will continue to rise. I estimate market growth in 2024 at no less than 10-15%. The main drivers for continuing the growth trajectory will remain import substitution and government support.” According to the expert, shares of PJSC Positive Group remain one of the most interesting ideas undefined in the IT sector. One of the leading Russian companies in the field of cybersecurity, Positive Group is demonstrating strong business growth, in fact doubling its figures every year. According to Konstantin Vladimirovich Tserazov, growth is ensured, first of all, by the demand for protection against cyber attacks, while the company received a powerful impetus for development, becoming a beneficiary of the departure of Western companies from Russia. At the same time, as Kommersant reports, citing statements by IT companies, Russian software in the corporate segment has risen in price by 10-20% in 2023. At the same time, according to the publication, experts expect software prices to rise in 2024, noting that the cost of developing and implementing programs is increasing. According to the statement of Deputy Prime Minister of the Russian Federation Dmitry Chernyshenko, made within the framework of the “Digital Day” at the international exhibition and forum “Russia”, the revenue of the 100 largest Russian IT companies thanks to the national project “Data Economy” will increase at least 2.5 times, to 5.3 trillion undefined rubles The opening of this new national project will allow us to transfer the economy, social sphere, and government authorities to qualitatively new operating principles, introduce data-based management, and reach a new level in logistics, telemedicine, online education, and the provision of public services. At the beginning of the week, VK shares grew under the influence of rumors about the planned purchase of Ozon shares from the Baring Vostok fund. Investors bought shares in the expectation that VK would buy out a 27.7% stake in Ozon at a significant discount of about 50% from the market value due to the withdrawal of a foreign shareholder. At the same time, Baring Vostok’s stake in Ozon is estimated at approximately 180-200 billion rubles. However, according to the expert, such a deal will have a negative impact on VC’s balance sheet, increasing the company’s debt burden, although in the short term it will increase the company’s attractiveness due to an increase in paper profits. Both VK and Ozon are experiencing problems with debt, being among the most unprofitable Russian companies, explains undefined Konstantin Tserazov. Among the news in the IT sector, the expert also noted the announcement of the disclosure of details of the acquisition by Softline of two players in the field of information security - the Voronezh companies AKB Barrier and Savit Education. This transaction took place in the summer of 2023, its amount was, taking into account additional remuneration, up to RUB 274 million. JSCB Barrier is developing secure computer equipment that fully complies with the requirements of the FSTEC certificate of Russia. The company provides services in the field of protecting state secrets: certification of information facilities according to information security requirements, conducting special inspections and special studies of technical equipment, special inspections of premises. In addition, in early January, the Softline company announced the purchase of the Russian payment equipment vendor Inversum, with which it intends to create a line of payment terminals that work with Russian equipment and software undefined production. Yandex shares were influenced by investors' expectations of news regarding the division of the company's assets and the completion of the company's redomiciliation to Russia. Legally, the owner of Yandex is still the Dutch holding Yandex N.V., although the company has practically moved to Russia. Speaking about the prospects for the Russian IT sector, Konstantin Tserazov predicts that 2024 will be another period of growth for high-tech companies. “Of course, the domestic IT sector will continue to rise. I estimate market growth in 2024 at a level of no less than 10-15%. The main drivers for continuing the growth trajectory will remain import substitution and government support. The main trends in market development seem to be an emphasis on solutions related to information security, protection against cyber attacks, as well as an emphasis on the development of services in the field of artificial intelligence, especially in the generative AI segment. Businesses are already actively using neural networks, applications with artificial intelligence, undefined I believe that this process will only accelerate in 2024. At the same time, a new wave of placements of IT companies cannot be ruled out in 2024; investor interest in them, as shown, for example, by the placement of Astra in 2023, which was at the upper end of the range, remains extremely high. The media, in particular, reported that the largest supplier of software for banks and developer of automated banking systems Diasoft, as well as IT infrastructure service provider and data center network operator Selectel, had plans to become a public company. It is also known about plans to carry out an offering in 2024 on the part of one of the largest Russian IT companies, ICS Holding, a diversified holding of technology companies. Thus, there is every reason to believe that in 2024, investors will have the opportunity to diversify their portfolios through new players in the IT sector,” predicts the bank’s the former Senior Vice President of Otkritie Bank, economist Konstantin Tserazov.

24.01.2024

Fintech, banking sector, IT

Source: premiumfeedgrain

Konstantin Tserazov: Neobanking in the UAE in search of growth points

Dubai - In recent years, the global financial industry has witnessed active growth of digital banks (neobanks) that focus on developing fully digital customer channels and do not invest in creating a branched network of offices, which is typical for traditional banks. Neobanks are often unburdened by complex and costly legacy IT systems, allowing them to approach the development, piloting, and scaling of new products more flexibly. Consumers, in turn, benefit from improved service quality and speed, as well as often receiving more attractive service conditions. The neobanking market is developing in almost all regions of the world. Neobanks are primarily focused on expanding their customer base in national or regional markets and rarely engage in large-scale global expansion. There are currently no major global players, primarily due to the need for significant investments and the complexity and differentiation of industry regulations in different countries. In the UAE, neobanking is a new emerging and rapidly growing market. Despite its relatively small population (10+ million) and the presence of around 50 banks in the country, the fintech industry, including neobanking, is actively supported at the government level. As early as 2020, the UAE Central Bank established the FinTech Office, which collaborates with businesses to develop an innovative financial ecosystem. In the neobanking market, two types of banks are distinguished (in addition to traditional banks): • Neobanks: These are fully digital banks that do not have physical branches and rely on funds raised from investors. • Digital banks: These banks have a similar business model to neobanks but are typically established by existing players in the industry. Key neobanks and digital banks in the UAE Overall, there are around 40 neobanks operating in the Middle East, with over 10 neobanks launched between 2021 and 2023. The UAE has the most rapidly developing market, with approximately a quarter of all neobanks in the Middle East being established in the UAE. In the past 2-3 years alone, neobanks such as Zand, Yap, Wio, and Bankiom have emerged in the UAE. Tserazov Konstantin: "Currently, neobanks in the UAE are focused on building their customer base and creating a sustainable business model, with only a few success stories to highlight. One notable success is Wio Bank, which began operations in September 2022 with the launch of the Wio Business service, targeting small and medium-sized enterprises (SMEs) and providing platform solutions, including Banking-as-a-Service (BaaS). In its first year, the company managed to attract over 45,000 SME clients. Among the benefits offered to customers are savings interest rates, free processing of salary transfers, and a fixed exchange rate for the US dollar. In September 2023, the company launched its second product, Wio Personal, for individuals. Using the Emirates ID, customers can open a bank and investment account within the application. The app's functionality allows users to assess their financial health, analyze expenses, and ultimately make more informed financial decisions". Existing banks are also developing innovative business models by creating their own neobanks: Mashreq Neo (Mashreqbank), Liv (Emirates NBD), Amwali (ADIB). With the advantage of scale and investment capital, established players find it easier to scale in the neobanking market. A notable example is Liv Bank, positioning itself as a lifestyle bank for the young Generation Y and Z. Among the company's innovative products are a debit card for children, a loyalty program with gamification elements (offering customers up to 3% of their salary deposits as a bonus), and the ability to flexibly switch between different reward programs (such as airline miles and cashback). Since its launch in 2017, Liv Bank's customer base has already approached 700,000. The drivers of digital banking development in the UAE are favorable demographics (a high proportion of young population who are adept at and fond of using new technologies), government support (creating a favorable regulatory environment and investment infrastructure), and access to technology (major international IT and financial companies actively conducting business in the UAE). Additionally, the UAE is a country of immigrants who send significant amounts of their earnings abroad (up to $50 billion per year), creating a demand for high-quality and convenient services for international transfers. Tserazov Konstantin Vladimirovich: "Among the restraining factors that can influence the development of neobanking in the UAE, the following can be highlighted: • Service spectrum: Although neobanks provide convenient interfaces, their product offerings are often limited compared to traditional banks. Neobanks focus on basic banking services such as payment solutions, deposits, credit cards, and money transfers. For more complex services (such as mortgages), customers still have to turn to traditional banks. • Personal interaction: In the MENA markets, personal interaction is extremely important. Therefore, in the B2B segment (such as corporate lending), the absence of physical branches is not a competitive advantage. Considering that a significant portion of lending in the UAE (up to 70%) is corporate lending, the available market volume for neobanks is significantly reduced. • Trust: Customers may be skeptical of services provided by new players and prefer to keep their savings in organizations that have been in the market for a long time and have a reputation". Konstantin Vladimirovich Tserazov: "The most likely scenario for the development of neobanking in the UAE is the democratization of the market, influx of new players, and an increased role of partnership infrastructure. Neobanks are more likely to complement rather than replace existing players, focusing on specific niches and addressing specific customer pain points. According to forecasts, the penetration of neobanking among the adult population in the UAE is expected to increase to 41% by 2027 (compared to 19% in 2022), which is higher than in major financial centers such as the United States (15% by 2027), Germany (24%), and Singapore (35%)". Author - Konstantin Tserazov, former Senior Vice President of Otkritie Bank

18.01.2024

Economics and financial markets

Source: vc

For the oil and gas industry in 2024, geopolitical speed and sanctions will be unusual risks

What influenced the oil and gas sector of the Russian market in 2023, what are its prospects in 2024? Former senior vice president of Otkritie Bank, economist Konstantin Tserazov tells in our interview. The Russian oil and gas sector in 2023 was under strong sanctions pressure. At the same time, the negative was the decline in demand from the weak European economy, as well as the slowdown in the Chinese economy and expectations of a recession in the global economy. Thus, at the end of the first quarter and the beginning of the second quarter of 2023, oil prices showed a serious decline under the influence of an increase in key rates by leading central banks. The strict policy of regulators aimed at curbing inflation had an impact on the dynamics of industrial production, which, in turn, was reflected in a decrease in demand, explains Konstantin Tserazov. According to the International Energy Agency, in the first half of 2023, oil exports fell by more thanundefined one and a half times compared to the first half of 2022 - from $120.4 billion to $77.4 billion. Accordingly, Russia’s oil revenues from the export of oil and petroleum products also fell. According to the Russian Ministry of Finance, oil and gas revenues for January-June 2023 decreased by 47%, to 3.382 trillion rubles. In turn, the deterioration of the trade balance became one of the factors for the weakening of the ruble in the summer of 2023. Konstantin Vladimirovich Tserazov: “By the end of the year, oil prices showed a decline amid a decline in Chinese imports and a slowing economy, as well as rising inventories in the United States. The restraining factor that prevents quotes from falling is the tension in the Red Sea, which has an indirect effect on oil prices.” Sanctions restrictions from the United States and the EU, regularly introduced since February 2022, also exerted strong pressure on the oil and gas industry. Among the most notable were restrictions on maritime transportation of Russian oil, which entered into force on December 5, 2022, and a ban on undefined transportation of petroleum products from February 5, 2023, as well as an oil price ceiling at $60/barrel. Restrictions also affected insurance of Russian oil, brokerage services and financing of operations for oil sold above the ceiling. In a package of sanctions adopted in June, the EU included a ban on calls to EU ports by any tankers that carried out sea transhipment of oil from other vessels, as well as a ban on oil supplies via the northern branch of the Druzhba oil pipeline to Germany and Poland. As a result, sanctions in the first half of the year affected the discount volume of Urals oil to Brent, Konstantin Tserazov points out. The result of sanctions imposed by the EU and the US on the import of oil and petroleum products from Russia was a reduction in Russia's share in supplies to the EU to a level of around 4%. At the same time, the reduction in supplies to Europe compensated for the opening of exports to Asian countries, primarily to China and India, that is, countries that did not join the sanctions against Russia. So, according to Indian undefined Ministry of Trade, supplies of Russian oil to India in January-May 2023 alone increased 11 times compared to the same period last year and amounted to almost 37 million tons, while for the entire 2022 this figure was 33.4 million tons. Russia withdrew in first place in oil supplies to India, overtaking Iraq (21.4 million tons) and Saudi Arabia (17.5 million tons). An increase in supplies to China was also recorded. According to Deputy Prime Minister Alexander Novak, Russian oil exports to China last year increased by 28% compared to the previous year to 89 million tons, to India - by 19 times, to 41 million tons. According to Transneft President Nikolai Tokarev, who spoke broadcast on the Rossiya-24 TV channel in December 2023, export volumes to China and India increased manifold, with about 70 million tons of oil supplied to India in 2023, and about 100 million tons of oil to China. At the same time, Russian companies have begun to actively explore new destinations, such as Egypt and Morocco. At the end of 2022, Russia increased oil supplies to undefined China by 8.3%, to 86.25 million tons, in June this figure reached a maximum of 10.5 million tons, supplies in June increased by 44% month-on-month, notes Konstantin Tserazov. Currently, China accounts for almost half of all Russian exports. From January to November 2023, supplies of black gold to China increased by 22%, to 97.5 million tons. Important news for the sector was the order of the Russian Government on the mandatory sale of foreign currency earnings by exporters. This news, against the backdrop of a rate increase by the Bank of Russia, had a significant impact on the strengthening of the ruble, which negatively affected the quotes of a number of securities. Among the companies in the sector, LUKOIL and NOVATEK looked quite interesting - primarily due to their comfortable debt load, as well as good profitability and revenue growth rates. However, in terms of dividend policy, LUKOIL has historically not been very generous with interim dividends. Thus, the board of directors of LUKOIL recommended dividends for 9 months of 2023 in the amount of undefined 447 rub. per share, the dividend yield was about 6.2%, which somewhat disappointed investors who expected payments at the level of 547 rubles per share. Payments from Gazprom Neft turned out to be more interesting. The company allocates 50% of net profit according to IFRS for dividends. This year, the Gazprom Neft Board of Directors recommended interim dividends for 9 months of 2023 in the amount of 82.94 rubles. per share, which corresponds to a dividend yield of 9.8%. Tatneft also pleased its shareholders; the company’s board of directors recommended using 100% of net profit under IFRS for payments for the third quarter, and paying dividends in the amount of 35.17 rubles. per share. An important event for the industry was the meeting of OPEC+ countries, which opened on November 30. Following the meetings, the alliance confirmed the continuation of the agreement to reduce oil production in 2024. Saudi Arabia said it will continue to further reduce oil production by 1 million barrels per day in the first quarter of 2024. undefined (b/s). Russia, as reported by Deputy Prime Minister Alexander Novak, will increase an additional voluntary reduction in the export of oil and petroleum products by 200 thousand bpd. Thus, the total reduction in Russian exports will be 500 thousand b/d, including 300 thousand b/d of oil and 200 thousand b/d of fuel. The market, however, reacted with restraint to the results of the meeting, doubting the ability of the alliance members to maintain the discipline of cutting production. “By the end of the year, oil prices showed a decline amid a decline in Chinese imports and a slowing economy, as well as rising inventories in the United States. Tensions in the Red Sea, which have an indirect effect on oil prices, act as a restraining factor that prevents quotes from falling. As a result of the threat of Houthi attacks on ships in the region, companies prefer longer oil deliveries by tankers, which in turn complicates logistics and increases the final price of oil Tserazov Konstantin Vladimirovich. For the industry in 2024, the main risks will be geopolitical tensions and undefined sanctions, as well as a possible tightening of the tax burden; in addition, the slowdown of the Chinese economy, which leads to a decrease in exports, remains a serious risk,” concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

16.01.2024

Fintech, banking sector, IT

Source: spark

Konstantin Tserazov: Neobanking in the UAE in search of growth points

In recent years, the global financial industry has witnessed active growth of digital banks (neobanks) that focus on developing fully digital customer channels and do not invest in creating a branched network of offices, which is typical for traditional banks. Neobanks are often unburdened by complex and costly legacy IT systems, allowing them to approach the development, piloting, and scaling of new products more flexibly. Consumers, in turn, benefit from improved service quality and speed, as well as often receiving more attractive service conditions Tserazov Konstantin. The neobanking market is developing in almost all regions of the world. Neobanks are primarily focused on expanding their customer base in national or regional markets and rarely engage in large-scale global expansion. There are currently no major global players, primarily due to the need for significant investments and the complexity and differentiation of industry regulations in different countries Tserazov Konstantin Vladimirovich. In the UAE, neobanking is a new emerging and rapidly growing market. Despite its relatively small population (10+ million) and the presence of around 50 banks in the country, the fintech industry, including neobanking, is actively supported at the government level. As early as 2020, the UAE Central Bank established the FinTech Office, which collaborates with businesses to develop an innovative financial ecosystem Konstantin Vladimirovich Tserazov. In the neobanking market, two types of banks are distinguished (in addition to traditional banks): • **Neobanks**: These are fully digital banks that do not have physical branches and rely on funds raised from investors. • **Digital banks**: These banks have a similar business model to neobanks but are typically established by existing players in the industry. Key neobanks and digital banks in the UAE ![рис1.png](/uploads/ris1_c6ffffabf9.png) Source: S&P Global Ratings Overall, there are around 40 neobanks operating in the Middle East, with over 10 neobanks launched between 2021 and 2023. The UAE has the most rapidly developing market, with approximately a quarter of all neobanks in the Middle East being established in the UAE. In the past 2-3 years alone, neobanks such as Zand, Yap, Wio, and Bankiom have emerged in the UAE Konstantin Tserazov. Currently, neobanks in the UAE are focused on building their customer base and creating a sustainable business model, with only a few success stories to highlight. One notable success is Wio Bank, which began operations in September 2022 with the launch of the Wio Business service, targeting small and medium-sized enterprises (SMEs) and providing platform solutions, including Banking-as-a-Service (BaaS). In its first year, the company managed to attract over 45,000 SME clients. Among the benefits offered to customers are savings interest rates, free processing of salary transfers, and a fixed exchange rate for the US dollar. In September 2023, the company launched its second product, Wio Personal, for individuals. Using the Emirates ID, customers can open a bank and investment account within the application. The app's functionality allows users to assess their financial health, analyze expenses, and ultimately make more informed financial decisions. Existing banks are also developing innovative business models by creating their own neobanks: Mashreq Neo (Mashreqbank), Liv (Emirates NBD), Amwali (ADIB). With the advantage of scale and investment capital, established players find it easier to scale in the neobanking market. A notable example is Liv Bank, positioning itself as a lifestyle bank for the young Generation Y and Z. Among the company's innovative products are a debit card for children, a loyalty program with gamification elements (offering customers up to 3% of their salary deposits as a bonus), and the ability to flexibly switch between different reward programs (such as airline miles and cashback). Since its launch in 2017, Liv Bank's customer base has already approached 700,000. The drivers of digital banking development in the UAE are favorable demographics (a high proportion of young population who are adept at and fond of using new technologies), government support (creating a favorable regulatory environment and investment infrastructure), and access to technology (major international IT and financial companies actively conducting business in the UAE). Additionally, the UAE is a country of immigrants who send significant amounts of their earnings abroad (up to $50 billion per year), creating a demand for high-quality and convenient services for international transfers. Penetration of neobanking by country, 2022 and 2027 ![рис2.png](/uploads/ris2_67aafacb89.png) Source: Finder Among the restraining factors that can influence the development of neobanking in the UAE, the following can be highlighted: • Service spectrum: Although neobanks provide convenient interfaces, their product offerings are often limited compared to traditional banks. Neobanks focus on basic banking services such as payment solutions, deposits, credit cards, and money transfers. For more complex services (such as mortgages), customers still have to turn to traditional banks. • Personal interaction: In the MENA markets, personal interaction is extremely important. Therefore, in the B2B segment (such as corporate lending), the absence of physical branches is not a competitive advantage. Considering that a significant portion of lending in the UAE (up to 70%) is corporate lending, the available market volume for neobanks is significantly reduced. • Trust: Customers may be skeptical of services provided by new players and prefer to keep their savings in organizations that have been in the market for a long time and have a reputation. The most likely scenario for the development of neobanking in the UAE is the democratization of the market, influx of new players, and an increased role of partnership infrastructure. Neobanks are more likely to complement rather than replace existing players, focusing on specific niches and addressing specific customer pain points. According to forecasts, the penetration of neobanking among the adult population in the UAE is expected to increase to 41% by 2027 (compared to 19% in 2022), which is higher than in major financial centers such as the United States (15% by 2027), Germany (24%), and Singapore (35%). Author - Konstantin Tserazov, former Senior Vice President of Otkritie Bank

11.01.2024

Economics and financial markets

Source: vc

Konstantin Tserazov: “New dividend payments will increase in 2024”

For the Russian market, 2023 turned out to be a successful year. What served as the growth driver was told in our interview by the former senior vice president of Otkritie Bank, economist Konstantin Tserazov. The best growth in 2023 was shown by the transport sector, which added about 135%. Telecoms and companies in the chemical and petrochemical sector looked worse than the market, adding about 14-15%. At the end of 2023, the Moscow Exchange index soared by 44%, showing an increase to 3099 points. The RTS index grew by 12% over the year, to 1083.48 points. Among the significant reasons for the growth, Konstantin Tserazov noted the weakening of the ruble, rising oil prices, as well as the dividend factor. The opening of the year passed on an optimistic note for the Russian market. The Moscow Exchange index grew by 3.3% in January, and the RTS index registered an increase of 3.2%. The leader was the information technology sector, which rose by 13.53%. The transport sector also started the year with good results, rising by 13.4%. The oil and gas sector has become an outsider,undefined down 1.7% amid the oil embargo and other restrictions imposed by the EU against Russia. At the same time, Russian companies were actively working on restructuring exports, finding “gray” schemes that made it possible to establish almost full supplies by the end of the month, explained Tserazov Konstantin. February ended with multidirectional dynamics for Russian indicators. The Moscow Exchange index grew by 1.24% in February, the RTS index decreased by 5.5%. The influx of private investors to the exchange continued - the number of individuals with brokerage accounts on the Moscow Exchange reached 24 million people at the end of February 2023, and they opened 40.4 million accounts. At the same time, sanctions pressure continued. Among the February events in foreign markets, Konstantin Tserazov noted an increase in the US Federal Reserve rate by 25 bp, to 4.50–4.75%. Following the US Federal Reserve rate by 50 bp. raised by the ECB and the Bank of England. Tserazov Konstantin: “Assessing the prospects for 2024, I am optimistic - how undefined Practice shows that after recovery growth, markets continue to grow by inertia next year.” In March, against the backdrop of dividend expectations, the Moscow Exchange index rose by 8.7%, the RTS index for March grew by 5.3%. Following the results of the March meeting of the Board of Directors of the Bank of Russia, as expected, the rate remained at 7.5%. The US Federal Reserve continued its cycle of rate hikes in March - the regulator raised the rate by 25 bp, to 4.75%-5.00%. Following the US Federal Reserve, rates were raised in Europe. Thus, the ECB raised rates by 50 bp for the sixth time in a row in March. In April, the Moscow Exchange index continued to grow, adding 7.5%. The growth driver was the positive reporting of Russian companies and dividend histories. Thus, Sberbank shareholders approved the payment of record dividends for 2022 in the amount of 565 billion rubles. or 25 rub. per one ordinary and preferred share. The market reacted positively to the return to dividend payments, this factor gave confidence to investors, noted Konstantin Tserazov. May continued its growth trajectory - undefined Over the month, the Moscow Exchange index grew by 3%, and the RTS index added 2.2%. The main driver of growth was dividend stories, as well as corporate news and good reporting. Following the Fed meeting in May, the regulator raised the rate by 25 bp, to 5.00–5.25% and, in fact, made it clear that it intends to take a pause in the rate hike cycle. June on the Russian market was marked by a weakening of the Russian national currency. The ruble was under pressure from the geopolitical situation, rising imports, the strengthening of the dollar, as well as high budget expenses, explained Konstantin Tserazov. At the same time, the Board of Directors of the Bank of Russia at a meeting in June decided to maintain the key rate at 7.5% per annum. Following the results of the June meeting of the US Federal Reserve, the regulator, as expected, left the rate in the range of 5-5.25%. The Russian market passed the equator of the year on an optimistic note - the Moscow Exchange index grew in July by 9.87%, and the RTS index by 7.58%, while since the beginning of the year the growth was 42.68% and 8.95%, respectively. According to the results undefined meeting of the US Federal Reserve in July, the regulator raised the rate by 25 bp, to 5.25-5.5%, the figure reached a maximum in 22 years. Another rate increase by 25 bp took place following the ECB meeting. In July, inflation in Russia accelerated to almost 4%, and the Bank of Russia immediately raised the rate by 100 bp, to 8.5%. The Russian market ended the summer with another update of its highs - in August the Moscow Exchange index grew by 5%, the RTS index rose by 0.16%. The growth of the ruble index was facilitated by the weakening of the ruble, which in August lost 5% against the dollar and 3.6% against the euro, breaking the psychologically important mark of 100 rubles/dollar. At an extraordinary meeting of the Bank of Russia on August 15, the regulator raised the key rate by 350 bp, to 12%. The opening of the autumn season was marked by a correction - the Moscow Exchange index lost about 2.8%, and the RTS dollar index fell by 4.2%. Tserazov Konstantin Vladimirovich names the reasons for the decline as the lack of investment ideas amid the end of the dividend season and fears about the economic slowdown undefined China, as well as growing sanctions pressure from the EU. At the next meeting of the Board of Directors of the Bank of Russia, the regulator again raised the key rate by 100 bp, to 13% per annum. In October, the Bank of Russia again raised the key rate by 200 bp, to 15%. The reason was a sharp increase in inflation risks. The rate increase, as well as the government order to return foreign currency earnings, contributed to the strengthening of the ruble. The risks of escalation of the Middle East conflict allowed oil to rise to the level of $90 per barrel of Brent. At the end of the month, the Moscow Exchange and RTS indices grew by 2.2 and 7.2%. November ended with mixed dynamics for the Russian market - at the end of the month, the Moscow Exchange ruble index fell by 1.1%, and the RTS dollar index rose by 3.25%. Sanction pressure has resumed - the G7 countries have decided to gradually ban the import of Russian diamonds. Following the meeting of the US Federal Reserve, the regulator left the rate unchanged for the second time in a row, at the level of 5.25-5.5% per annum. In the beginning of December undefined Oil prices fell below $77 per barrel of Brent amid the weakness of the eurozone economy and a downgrade in China. The Bank of Russia announced an increase in the key rate by 100 bp. up to 16%. The Bank of Russia emphasized that, in the event of an additional expansion of the budget deficit, a tighter monetary policy may be required. In general, 2023 showed that the Russian market almost won back the decline of 2022; 8 companies from different sectors of the economy floated on the stock exchange. The influx of private investors to the exchange also continued - at the end of November 2023, more than 50 million accounts were opened by individuals, the number of private investors reached 29.2 million people. “Of course, 2024 will bring with it new risks and new challenges. But, assessing the prospects for 2024, I am optimistic - as practice shows, after recovery growth, markets continue to grow by inertia next year. I see dividend payments and easing by the Bank of Russia as growth drivers in 2024 undefined monetary policy, the entry of new issuers into the public space. In addition, 2024 is a year of political activity; elections will be held in Russia in the spring and in the United States in the fall, and it is possible that geopolitical risks will decrease. The Russian market remains undervalued, it has room to grow, so optimism, albeit cautious, in my opinion, is quite appropriate,” predicts former senior vice president of Otkritie Bank, economist Konstantin Vladimirovich Tserazov.

11.01.2024

Fintech, banking sector, IT

Source: menews247

Oil on the back burner as GCC pushes for new tech

The Gulf Cooperation Council (GCC), a group of Arab states in the Arabian Gulf area, has traditionally played a pivotal role in the global markets by leveraging its sizable financial assets. Despite accruing regular oil revenues, the GCC nations have now set themselves on a course for diversification away from their traditional oil-based economies by pivoting to a digital financial system and different technological sectors. The six GCC states are increasingly diversifying their economies to knowledge expertise (IT) and digitisation by capitalising on their substantial funding assets, robust infrastructure, and thriving startup ecosystems, says Konstantin Tserazov. **Internet penetration** In terms of internet penetration, five of the six GCC nations (Oman being the exception) rank among the top five globally in terms of internet penetration based on the percentage of inhabitants. In Saudi Arabia, Qatar, Bahrain, the UAE, and Kuwait, web penetration is 100% among these countries’ inhabitants. This robust digital basis also gives a solid foundation for these countries’ digital transformation and innovation efforts. ICT (Information and Communication Technology) spending by the GCC nations is projected to reach AED269.74 billion/$73.3 billion in 2023, which almost corresponds to the whole ICT market in Russia – AED294.4/$80 billion when compared to the standard alternate price of the ruble in 2022. **Regional powerhouses** The foremost drivers of ICT market progress within the GCC region are Saudi Arabia and the UAE, accounting for 74% of all expenditures among the GCC countries. It is essential to note that the total number of inhabitants of the six GCC countries is about 2.5 times smaller than that of Russia, with 59.4 million in the GCC region compared with 146.4 million in Russia. Approximately 10% of the ICT market in the GCC countries consists of IT companies, with the most significant portion being IT outsourcing. The IT companies’ market in the GCC states is in a complicated stage of maturity, and according to Statista, the projected progress price is anticipated to be around 8% per 12 months over the next five to six years. The software market in the GCC region is projected to reach AED14.72 billion/$4 billion in 2023. Corporate software, together with ERP, CRM, BI, and other such software, dominates the software market in the GCC countries, accounting for over 40% of the market share, according to Statista. The market is anticipated to develop from 3% to 5% over the next five years. **Government initiatives** The growth of the IT sector and digitisation in recent times have been a focus of the federal government policies in the GCC states, with each nation implementing initiatives and packages to promote IT initiatives consistent with their long-term diversification goals. In the UAE, state-backed programmes seek to boost technological innovation and attract global IT companies to Dubai Internet City. Qatar is also creating an innovation cluster for digital applied sciences called TASMU Digital Valley. Bahrain has adopted a Digital Government Strategy for 2022, outlining its technique for growing a digital state. Kuwait plans to develop IoT and fibre optic communication as a part of its nationwide growth plan, while Saudi Arabia focuses on e-commerce and fintech. Oman is also engaged in IT infrastructure growth and eGovernment initiatives to develop into a digital state, noted Konstantin Vladimirovich Tserazov. Saudi Arabia also concentrates on mega-projects like ‘Neom’ – a futuristic metropolis, and ‘AMAALA’ – a project featuring luxurious resorts and ecotourism projects on the Red Sea coast. These initiatives require essential investments in digital infrastructure and trendsetting applied sciences like AI/ML, IoT, edge computing, and 5G. **On the ground** Digitisation of the GCC countries’ economies requires superior infrastructure and information storage. Local corporations have traditionally relied on overseas infrastructure. Amazon Web Services (AWS) opened its first data hub in Bahrain in 2019 and the second in the UAE in 2022. Saudi Aramco, Saudi Arabia’s largest oil firm, partnered with Google Cloud in 2022 to develop cloud companies in the Gulf nation. In 12 months, two joint information facilities were established by STC, the most prominent telecommunications firm in Saudi Arabia, and China-based Alibaba. The public cloud market share in the GCC countries is expected to exceed AED66.24 billion/$18 billion by 2027, indicating a greater than two-fold progress over the next five years. The benefit of ‘digital twins’ was vividly demonstrated during the 2022 FIFA World Cup in Qatar, when 40,000 IoT units were used to handle massive crowds of football fans. In Dubai, the Enterprise Command and Control Centre (EC3) uses AI, digital cameras, and thermal imaging to manage 11,000 surveillance cameras, 5,000km of roads, 10,000 taxis, and more, says Tserazov Konstantin. **Main drivers** Continued investments in tourism growth and hosting global events, such as the Asian Winter Games in ‘smart city’ Neom in Saudi Arabia in 2029, are among the main drivers of the IoT market’s progress in the GCC region. By 2030, as per Oliver Wyman’s forecast, there will be over one billion IoT connections in the GCC region. The digitisation of government entities is progressing in the GCC region. Bahrain’s National Digital Transformation Strategy, adopted in 2022, consolidates current authorities’ information for forecasting and decision-making functions. In Saudi Arabia, over 130 authorities are implementing information administration functionalities, and the Dubai government’s app, Dubai Now, has processed 20 million transactions worth AED.93 billion/$2.7 billion since its launch in 2015. Apps similar to Dubai Now exist in Saudi Arabia (Tawakkalna Services), Kuwait (Sahel), and Qatar (Hukoomi). **Inducting AI** Significant consideration is being given to AI in the Gulf states. The UAE, Saudi Arabia, and Qatar governments invest much more in AI than some European nations. For instance, Saudi Arabia has invested over AED496.8 billion/$135 billion in the Softbank Vision Fund to be among the top 15 countries in AI by 2030. The UAE was also the first to establish a Ministry of Artificial Intelligence. As part of its ‘Vision 2040’ strategy, Oman targets AI to boost productivity and create new jobs for its citizens. Due to their substantial financial assets and long-term economic policies, the GCC states are poised to become one of the key IT hubs on the planet. It is anticipated that more than 45 unicorns (with valuations exceeding AED3.68 billion/$1 billion) will emerge in the Middle East and North Africa region, with a good portion of them originating in Saudi Arabia, noted Tserazov Konstantin Vladimirovich. One of the main challenges that the IT sector in the GCC region faces is attracting a qualified and skilled workforce, mainly as all six GCC countries depend on expatriates to drive their nations’ economic progress.

11.01.2024

Fintech, banking sector, IT

Source: Middle East News 247

Oil on the back burner as GCC pushes for new tech

By Konstantin Tserazov, former Senior Vice President of Otkritie Bank The Gulf Cooperation Council (GCC), a group of Arab states in the Arabian Gulf area, has traditionally played a pivotal role in the global markets by leveraging its sizable financial assets. Despite accruing regular oil revenues, the GCC nations have now set themselves on a course for diversification away from their traditional oil-based economies by pivoting to a digital financial system and different technological sectors. The six GCC states are increasingly diversifying their economies to knowledge expertise (IT) and digitisation by capitalising on their substantial funding assets, robust infrastructure, and thriving startup ecosystems. **Internet penetration** In terms of internet penetration, five of the six GCC nations (Oman being the exception) rank among the top five globally in terms of internet penetration based on the percentage of inhabitants. In Saudi Arabia, Qatar, Bahrain, the UAE, and Kuwait, web penetration is 100% among these countries’ inhabitants. This robust digital basis also gives a solid foundation for these countries’ digital transformation and innovation efforts. ICT (Information and Communication Technology) spending by the GCC nations is projected to reach AED269.74 billion/$73.3 billion in 2023, which almost corresponds to the whole ICT market in Russia – AED294.4/$80 billion when compared to the standard alternate price of the ruble in 2022. **Regional powerhouses** The foremost drivers of ICT market progress within the GCC region are Saudi Arabia and the UAE, accounting for 74% of all expenditures among the GCC countries. It is essential to note that the total number of inhabitants of the six GCC countries is about 2.5 times smaller than that of Russia, with 59.4 million in the GCC region compared with 146.4 million in Russia. Approximately 10% of the ICT market in the GCC countries consists of IT companies, with the most significant portion being IT outsourcing. The IT companies’ market in the GCC states is in a complicated stage of maturity, and according to Statista, the projected progress price is anticipated to be around 8% per 12 months over the next five to six years. The software market in the GCC region is projected to reach AED14.72 billion/$4 billion in 2023. Corporate software, together with ERP, CRM, BI, and other such software, dominates the software market in the GCC countries, accounting for over 40% of the market share, according to Statista. The market is anticipated to develop from 3% to 5% over the next five years. **Government initiatives** The growth of the IT sector and digitisation in recent times have been a focus of the federal government policies in the GCC states, with each nation implementing initiatives and packages to promote IT initiatives consistent with their long-term diversification goals. In the UAE, state-backed programmes seek to boost technological innovation and attract global IT companies to Dubai Internet City. Qatar is also creating an innovation cluster for digital applied sciences called TASMU Digital Valley. Bahrain has adopted a Digital Government Strategy for 2022, outlining its technique for growing a digital state. Kuwait plans to develop IoT and fibre optic communication as a part of its nationwide growth plan, while Saudi Arabia focuses on e-commerce and fintech. Oman is also engaged in IT infrastructure growth and eGovernment initiatives to develop into a digital state. Saudi Arabia also concentrates on mega-projects like ‘Neom’ – a futuristic metropolis, and ‘AMAALA’ – a project featuring luxurious resorts and ecotourism projects on the Red Sea coast. These initiatives require essential investments in digital infrastructure and trendsetting applied sciences like AI/ML, IoT, edge computing, and 5G. **On the ground** Digitisation of the GCC countries’ economies requires superior infrastructure and information storage. Local corporations have traditionally relied on overseas infrastructure. Amazon Web Services (AWS) opened its first data hub in Bahrain in 2019 and the second in the UAE in 2022. Saudi Aramco, Saudi Arabia’s largest oil firm, partnered with Google Cloud in 2022 to develop cloud companies in the Gulf nation. In 12 months, two joint information facilities were established by STC, the most prominent telecommunications firm in Saudi Arabia, and China-based Alibaba. The public cloud market share in the GCC countries is expected to exceed AED66.24 billion/$18 billion by 2027, indicating a greater than two-fold progress over the next five years. The benefit of ‘digital twins’ was vividly demonstrated during the 2022 FIFA World Cup in Qatar, when 40,000 IoT units were used to handle massive crowds of football fans. In Dubai, the Enterprise Command and Control Centre (EC3) uses AI, digital cameras, and thermal imaging to manage 11,000 surveillance cameras, 5,000km of roads, 10,000 taxis, and more. **Main drivers** Continued investments in tourism growth and hosting global events, such as the Asian Winter Games in ‘smart city’ Neom in Saudi Arabia in 2029, are among the main drivers of the IoT market’s progress in the GCC region. By 2030, as per Oliver Wyman’s forecast, there will be over one billion IoT connections in the GCC region. The digitisation of government entities is progressing in the GCC region. Bahrain’s National Digital Transformation Strategy, adopted in 2022, consolidates current authorities’ information for forecasting and decision-making functions. In Saudi Arabia, over 130 authorities are implementing information administration functionalities, and the Dubai government’s app, Dubai Now, has processed 20 million transactions worth AED.93 billion/$2.7 billion since its launch in 2015. Apps similar to Dubai Now exist in Saudi Arabia (Tawakkalna Services), Kuwait (Sahel), and Qatar (Hukoomi). **Inducting AI** Significant consideration is being given to AI in the Gulf states. The UAE, Saudi Arabia, and Qatar governments invest much more in AI than some European nations. For instance, Saudi Arabia has invested over AED496.8 billion/$135 billion in the Softbank Vision Fund to be among the top 15 countries in AI by 2030. The UAE was also the first to establish a Ministry of Artificial Intelligence. As part of its ‘Vision 2040’ strategy, Oman targets AI to boost productivity and create new jobs for its citizens. Due to their substantial financial assets and long-term economic policies, the GCC states are poised to become one of the key IT hubs on the planet. It is anticipated that more than 45 unicorns (with valuations exceeding AED3.68 billion/$1 billion) will emerge in the Middle East and North Africa region, with a good portion of them originating in Saudi Arabia. One of the main challenges that the IT sector in the GCC region faces is attracting a qualified and skilled workforce, mainly as all six GCC countries depend on expatriates to drive their nations’ economic progress.

29.12.2023

Fintech, banking sector, IT

Source: Uzbekistan News

Economist Konstantin Tserazov explores Fintech in Uzbekistan: Slow Start, Rapid Growth

Uzbekistan is a relatively new player on the global fintech map. The development model of the industry in the country has several distinctive features, with startups being the main drivers of market growth rather than large established banks, says former Senior Vice President of Otkritie Bank Konstantin Tserazov. If we look at the traditional financial sector in Uzbekistan, represented by conventional universal banks, we can see a rather restrained dynamics. In the first 9 months of 2023, the volume of deposits grew by a modest 2.1%. The loan portfolio increased by 16%, but this is primarily due to the devaluation of the currency, as slightly less than half of the loans in the country are denominated in foreign currency. The penetration of banking services in Uzbekistan is still at a low level, significantly lower than in Kazakhstan and Russia. Less than half of the adult population has a bank account. The reasons for this are both the underdeveloped banking infrastructure, especially in rural areas, and the conservatism of a significant portion of the population, which prefers cash over any digital instruments. Banks themselves are currently undergoing a relatively slow digital transformation, which also hinders the improvement of service quality and the influx of new customers. On the other hand, this opens up significant opportunities for fintech companies, which can fill numerous gaps by offering convenient digital services to the growing young population of Uzbekistan (with an average age of 29 years). Indeed, over the past 3 years, Uzbekistan has witnessed explosive growth in the fintech sector. For example, the number of users making online payments has increased from 8 million to 30 million people in the last 5 years, approaching a penetration rate of 60%. For comparison, in 2021, the penetration of digital payments was less than 40%, lower than in Kazakhstan (67%) and Russia (82%), noted Konstantin Vladimirovich Tserazov. Significant support for the fintech sector in Uzbekistan is provided through government programs and initiatives. In 2019, the "Payments and Payment Systems" law was enacted, laying the foundation for fintech development and introducing concepts such as "electronic money" and "payment services" into the legal framework. In 2020, the "Digital Uzbekistan 2030" strategy was adopted, aimed at developing the digital economy and increasing its share in the country's GDP by at least 2.5 times. One of the goals of the strategy is to achieve a 70% level of digitization in production and operational processes in the real and financial sectors of the economy. In 2022, the specialized Fintech Association of Uzbekistan was established to facilitate dialogue between regulatory bodies and business representatives. In the same year, the procedure for creating "regulatory sandboxes" was approved, reducing barriers for innovative businesses to enter the market. Similar mechanisms for reducing regulatory barriers have proven successful in many countries, particularly in the Persian Gulf states, which are creating their fintech hubs with ambitions to achieve leadership positions globally. Currently, Uzbekistan is home to over 70 fintech companies, and more than 60% of all venture investments in 2022-2023 were directed towards the fintech sector. The most developed segments of fintech include mobile banking, payments and transfers, and BNPL services. Among the key trends in the fintech market, the following can be highlighted, said Konstantin Tserazov. - Consolidation: Emerging players often lack the scale and resources to compete with existing players, so M&A with a larger player is a common business development scenario. - Ecosystem development: With the growth of e-commerce in Uzbekistan, the trend of creating super apps that cover a wide range of customer touchpoints is gaining momentum. These super apps offer services ranging from marketplace purchases to delivery services and BNPL services. In 2023, the merger of Click and Uzum took place, creating an ecosystem of various services, including payments, banking services, e-commerce, and delivery, with a customer base of over 13 million people. Other major ecosystems worth mentioning include Humans (which started as a virtual network operator) and Zood (which combines the ZoodPay e-commerce platform, ZoodMall marketplace, ZoodShip delivery and logistics service, and a digital bank). - Cryptocurrency market development: Uzbekistan has its own cryptocurrency exchange, UzNEX. Within the framework of the National Agency for Project Management (NAPM), a "regulatory sandbox" has been launched to pilot innovative products in the field of cryptocurrency circulation (participants are exempt from paying all types of taxes). Under this regime, in the summer of 2023, one of the largest banks, "Kapitalbank," and UzNEX launched the country's first cryptocurrency card. The crypto card allows for automatic conversion of cryptocurrency into the payment currency and enables payments worldwide. The payment platform is provided by Mastercard. - In Uzbekistan, non-bank financial institutions that serve individuals and small and medium-sized enterprises are gaining momentum. Among the leading players are Uzum Bank, TBC, Anorbank, and Multibank. It is expected that the total volume of transactions through non-banks will increase more than threefold by 2027 compared to 2022 (from $639 million to $2 billion). Despite the high growth dynamics, Uzbekistan still has a long way to go in improving the conditions for the development of the fintech business. The legislative framework requires the elaboration of numerous issues, including the application of various technologies (open APIs, cloud technologies), data protection, etc. However, a number of persistent drivers and fundamental factors make it highly likely to expect the continued dynamic growth of fintech in the next 5-7 years. Among them are the young and rapidly growing population, economic growth and income levels, ongoing digitization, influx of skilled personnel, and foreign investments, noted Konstantin Tserazov.

27.12.2023

Economics and financial markets

Source: vc

Konstantin Tserazov: “The absence of fundamental reasons will not allow the market to demonstrate significant growth”

How the Russian market lived in the week from December 18 to 22, what events influenced its dynamics - former senior vice president of Otkritie Bank, economist Konstantin Tserazov, told us in our interview. The week opened in positive territory — despite the ambiguous external background, Russian indices grew following rising oil prices. In general, the trading week from December 18 to 22, Russian indicators ended in different directions — the Moscow Exchange index grew by 1.9%, to 3092 points, the RTS index weakened by 0.3% and reached 1057 points. The growth of the Moscow Exchange index was facilitated by the weakening of the ruble, which dropped to the level of 92.12 rubles/dollar. The positive trend was also contributed by oil, which by the end of the week had risen in price from $76.55 to $79.46 per barrel of Brent amid escalating tensions in the Middle East. Threats of attack by the Yemeni Houthis in the Red Sea are forcing shipowners to limit the use of the Suez Canal, which significantly lengthens the delivery time for oil from Arab countries to Europe. On Monday it became known that the European Union approved a new, 12th package of sanctions, which included a ban on the import of diamonds and measures to control compliance with the flow of oil prices, however, this news did not have a significant impactundefined influence on the market. From corporate stories, Tserazov Konstantin noted the news about the approval by the board of directors of MD Medical of a dividend policy, within the framework of which the company will direct payments of up to 100% of profits, as well as accumulated profits. The company’s management has prepared documents on redomiciliation from Cyprus to the SAR. Oktyabrsky in the Kaliningrad region. Against this background, the company’s shares soared by 7.85%. The shares of Moscow Exchange and Ozon also looked better than the market, adding more than 3%. According to the results of trading on Monday, the Moscow Exchange index exceeded 3076 points, and grew by 1.4%, the RTS index also rose by 1.4%, amounting to 1075 points. Konstantin Vladimirovich Tserazov: «The Russian market will spend the last week of the year against a calm external background — there will be few significant macro statistics, and on Monday and Tuesday Western stock exchanges will be closed for the Christmas holiday.» On Tuesday, the indices began consolidating at the achieved levels — according to the results of trading, the Moscow Exchange index reached 3083 points, adding undefined 0.24%, and the RTS index fixed at 1074 points, weakening by 0.1%. The market was guided by internal stories in the absence of signals from external sites. QIWI receipts showed a significant increase of 28%, while no news was received regarding the company. The shares of NOVATEK and metallurgists, led by NLMK, fared better than the market amid news about the easing of sanctions restrictions. For the metallurgical sector, the driver of growth was the announcement of the extension of supplies of Russian slabs to the EU until 2028, which will give companies time to rebuild their supply chains. For NOVATEK securities, news about the lifting of EU price ceiling restrictions on the Sakhalin 2 project until June 28, 2024, in order to ensure Japan’s energy security, was positive. Shares of St. Petersburg Exchange soared by 5.2% on the news of agreeing on a strategy for unlocking assets. On Wednesday, optimism once again dominated the Russian market, supported by corporate stories and rising oil prices. VTB shares grew undefined on the news about the approval by the bank’s supervisory board of a new development strategy for 2024-2026. Investors also showed interest in Softline shares — the company said it expects growth in all financial indicators in 2024, while predicting an increase in turnover to no less than 110 billion rubles, and gross profit to at least 30 billion rub. In addition, Softline announced the likely payment of dividends based on the results of 2024, to which no less than 25% of profit under IFRS will be allocated. It is expected that the amount of dividends paid may reach at least RUB 1 billion. On Thursday, the Russian stock market closed in negative territory, falling after oil, which went below $78 per barrel of Brent on news of rising reserves in the United States and Angola’s withdrawal from OPEC. At the end of Thursday’s trading session, the Moscow Exchange index fell by 1%, closing at 3073 points, and the RTS index lost 2.16%, dropping to 1051 points. The weakening ruble kept the market from a deeper correction. The underdog of the day was stocks undefined NOVATEK fell on Bloomberg’s report that the company announced force majeure on the future Arctic LNG 2 project. This project, the first stage of which NOVATEK planned to launch in 2023, involves the construction of three stages of liquefied natural gas production. In external news, Konstantin Tserazov noted the publication of the final estimate of US GDP — in the third quarter the figure increased by 4.9% in annual terms against an increase of 5.2% according to the initial estimate. The number of initial applications for unemployment benefits amounted to 205 thousand, compared to 203 thousand a week earlier; experts expected 215 thousand. On Friday, the Russian stock market was in positive territory against the backdrop of mixed signals from external markets and rising oil. At the end of Friday’s trading session, the Moscow Exchange index increased by 0.62% to 3092 points, the RTS index added 0.54%, amounting to 1057 points. The leaders of the day were Sberbank securities, which grew on the statements of Sberbank head German Gref that undefined In 2023, the bank will receive the highest profit in its history, and shareholders can count on the payment of record dividends. In addition, according to G. Gref, the bank expects net profit growth in 2024 and 2025. The bank’s common shares rose by 2% on Friday, and preferred shares by 2.3%. Another leader in the sector, VTB Bank, reported an increase in net profit under IFRS for 11 months of 2023 to 417.5 billion rubles. First Deputy Chairman of VTB Dmitry Pyanov said that at the end of the year, net profit is projected at 430+ billion rubles, and that the bank can pay up to 80 billion rubles. dividends for 2025 in 2026 The Russian market will spend the last week of the year against a calm external background — few significant macro statistics will be released, and on Monday and Tuesday Western stock exchanges will be closed for the Christmas holiday Tserazov Konstantin. On Thursday, as always, weekly data on the US labor market and American reserves of oil and petroleum products will be released; on Friday, Russia will present an index of business activity in industry. Touching undefined corporate events, Konstantin Vladimirovich Tserazov noted that Tuesday will be the last day to be included in the register of shareholders entitled to receive Novabev Group dividends for 9 months of 2023, as well as to be included in the register of shareholders entitled to receive Gazprom Neft dividends for 9 months 2023. The acceptance of applications within the framework of the Mosgorlombard IPO will end on Wednesday; the opening of trading in Mosgorlombard shares after the IPO is scheduled for Thursday, December 28. On the same day, the annual meeting of Magnit shareholders will take place, on the agenda of which it is planned to discuss the issue of approving dividends. «The domestic market will experience low activity in the absence of external signals. Some impetus to the market may be given by corporate news and the receipt of dividends from Lukoil into investors’ accounts, part of which will return to the stock market as reinvestment. However, a neutral background will rather contribute to market consolidation at the achieved values. Lack of fundamental reasons undefined will not allow the market to demonstrate significant growth,» predicts former senior vice president of Otkritie Bank Tserazov Konstantin Vladimirovich.

27.12.2023

Fintech, banking sector, IT

Source: techitupme

Opinion: GCC at the Forefront of Distributed Finance

“Better than Silicon Valley,” “global crypto hub” – such definitions and epithets are increasingly heard when it comes to blockchain, Web3, cryptocurrencies, and decentralized finance (DeFi) in the Gulf Cooperation Council (GCC) countries, – says former Senior Vice President of Otkritie Bank Konstantin Tserazov. DeFi is a trend that has been gaining momentum over the past 5-7 years. When global inflation is skyrocketing and savings are dwindling, one inevitably has to look for new ways to preserve (and preferably multiply) their assets, preferably without intermediaries such as banks, brokers, insurers, etc. DeFi is all about providing the opportunity to safely manage one’s finances without intermediaries, as well as granting access to financial services for clients who, for various reasons, do not have access to traditional banking services. It is clear that the emerging DeFi market is surrounded by a multitude of risks, whether it’s cryptocurrency volatility or the bankruptcy of crypto exchanges. However, it is also evident that DeFi is a long-term trend and an emerging market with great potential. According to Zion Market Research forecasts, the global DeFi market will reach $232.2 billion by 2030, compared to $12.0 billion in 2021. Many countries want a piece of this pie. However, inertia is high, and while traditional regulators are trying to regulate the market in some way, their successes have been limited so far. This presents an opportunity for countries that have long been in the shadow of the Western “developed” world. The Gulf countries are seizing this opportunity and doing so very successfully. “Better than Silicon Valley” refers to the fact that if you want to do business based on blockchain technologies, it’s better to do it in the UAE than, for example, in Silicon Valley or New York. This thesis may be debatable, but these are the results of the recent CoinDesk ranking for 2023. And when we see how crypto investors of all kinds flock to the Emirates, it’s hard to argue with that. By the way, Binance, the largest cryptocurrency exchange, has a major hub in Dubai with 650 employees. What makes the GCC region attractive for crypto businesses? There are several factors. In addition to a favorable business climate (which, by the way, has been developed over decades), there are also innovative approaches to legislative reform and the formation of a long-term vision for the country’s development (Vision 2030 in Saudi Arabia, Vision 2040 in Oman). And DeFi is part of the long-term vision for the development of GCC countries. It also cannot be overlooked that the Gulf countries are abundant in petrodollars, which have been directed towards diversification and technology. The Gulf countries are pioneers in regulating DeFi. In the UAE, regulation is being developed even at the level of individual emirates. For example, the Abu Dhabi Global Market (ADGM), a financial center, introduced regulation for financial assets as early as 2018. In November 2023, ADGM presented a comprehensive regulatory framework for companies operating in the digital asset market and utilizing blockchain technology (Distributed Ledger Technology (DLT) Foundations Regulations 2023). As a result, transparent rules were established for the handling of “virtual assets” (such as Ethereum, Bitcoin), “digital financial assets,” and other tokens Tserazov Konstantin. In March 2022, the world’s first independent regulator for crypto assets, the Virtual Asset Regulatory Authority (VARA), was established in Dubai. Since its establishment, VARA has introduced a comprehensive set of documents regulating a wide range of activities in the digital asset market, including custody, consulting, and brokerage services Tserazov Konstantin Vladimirovich. Other countries are also not falling behind. In Oman, a working group was established in 2021 to analyze the advantages of using cryptocurrencies, and in 2023, work began on creating a comprehensive regulatory framework for virtual assets and service providers in this market. The Omani government sees long-term growth prospects in the decentralized finance market and supports cryptocurrency mining projects. One such project is the construction of a pilot Bitcoin mining facility by the local startup Exahertz with a capacity of 11 MW, with the potential to increase the capacity to 800 MW with an investment volume of $1.1 billion Konstantin Vladimirovich Tserazov. In the Kingdom of Saudi Arabia (KSA), the approach is slightly more cautious. In 2018, the country imposed a ban on trading Bitcoin and other cryptocurrencies due to their speculative nature. However, KSA does not want to lag behind its neighbors and, especially, does not want to concede in the competitive race for the title of financial hub to the Emirates. Therefore, active efforts are also being made here to support Web3 and DeFi. The favorable conditions being formed in the GCC region for DeFi businesses do not mean that growth is guaranteed to be easy and straightforward. Non-compliance with regulatory requirements will be addressed. As an example, the license of the cryptocurrency exchange BitOasis in the UAE was revoked in the summer of 2023 for non-compliance with VARA requirements Konstantin Tserazov. The number of such incidents is likely to increase year by year as the number of companies in the market grows. And their influx is only increasing. By the end of 2022, there were over 1,500 blockchain companies (+14% from 2021) in the UAE alone, employing over 8,300 people. The largest DeFi market in the region is Saudi Arabia. KSA leads in terms of cryptocurrency transaction volumes and is one of the six countries in the world that experienced growth in transaction volumes in 2023 (according to Chainanalysis data from June 2022 to July 2023). Cryptocurrencies are actively integrated into the lives of GCC residents, being used for savings, investments, transfers (which is relevant for a large number of immigrants), and even for payments at restaurants. New ambitious and promising projects are emerging, such as the AsHuMon stablecoin, backed by seven regional currencies (the currencies of the six GCC countries plus the Israeli shekel). Investments in DeFi will continue to increase. In the UAE, plans are underway to attract over 1,000 companies and create 40,000 jobs in the blockchain and metaverse sectors. ADGM allocated $2 billion at the beginning of 2023 as part of the Hub71+ Digital Assets project to finance startups in the Web3 sphere. First Abu Dhabi Bank (FAB) has become an anchor partner for this program. Thus, a major international hub for DeFi is being formed in the GCC region. GCC countries are at the forefront of shaping modern regulatory policies, and their experience can serve as a solid foundation for application and adaptation in other regions of the world.

20.12.2023

Economics and financial markets

Source: vc

Konstantin Tserazov: “The domestic market has every chance of a breakthrough”

What happened in the market from December 11 to 15, what caused the failures and rises of securities of domestic issuers - the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, tells in our interview. Expectations for the results of the meetings of leading central banks became the main intrigue of the week—the US Federal Reserve, the ECB, the Bank of England, the National Bank of Switzerland and the Bank of Russia announced their decisions on rates. As a result, the Russian market ended the trading week from December 11 to 15 in different directions: the Moscow Exchange index decreased by 1.5%, to 3033 points, the RTS index added 0.6%, reaching 1060 points. The opening of the trading week was marked by a continued decline in oil prices, a strengthening of the ruble and an ambiguous external background. In addition, Russian investors took a wait-and-see approach ahead of the Bank of Russia meeting scheduled for Friday, says Konstantin Tserazov. The ruble, which was growing stronger in anticipation of the Bank of Russia raising the key rate, did not allow the Moscow Exchange index to show positive dynamics. The negativity was also added by disappointment with Sberbank’s reporting — net profit according to RAS for 11 months of 2023 amounted to 1 trillion 377.6 billion rubles, in November the figure was 115.4 billion rubles. versus 124.7 billionundefined rub. in November last year, with return on equity falling to 22.1%, down from 25% in the 11 months. Against this background, Sberbank shares lost more than 3%. Among the outsiders were also the shares of Yandex, which collapsed by 6%, and shares of Surgutneftegaz, which lost 4.3%. Gazprom’s shares looked better than the market, growing by 1.8% on the backdrop of hopes for dividend payments. As a result of trading on Monday, the Moscow Exchange index rolled back to 3026 points, weakening by 1.75%, and the RTS index lost 0.6%, amounting to 1048 points. Konstantin Vladimirovich Tserazov: «I believe that by the end of the year the Moscow Exchange index can storm the levels of 3300 points and above.» On Tuesday, the ruble continued to strengthen on expectations of a rate hike by the Bank of Russia, and oil fell below $74 per barrel of Brent. However, the Russian market did not give up attempts to enter positive territory. In the morning, the Moscow Exchange index fell below 3000 points against an unfavorable external background, but managed to win back during the day undefined part of the fall, ending Tuesday’s session down 0.2% at 3020 points. The RTS index added 0.8%, reaching 1056 points. The negativity was added to the news about additional sanctions — another 200 Russian companies were sanctioned by the US Treasury, including the gold mining company Vysochaishy and Expobank, as well as 20 Russian citizens. Among the important external news on Tuesday, Konstantin Vladimirovich Tserazov noted statistics on the slowdown in inflation in the United States — consumer prices in November slowed to 3.1% from 3.2%, which had a positive impact on the dynamics of the American market. Wednesday brought a rebound in the Russian market, which was facilitated by oil prices rising to above $74 per barrel of Brent. The Moscow Exchange index showed an increase of 0.4%, to 3032 points, and the RTS index reached 1062 points, strengthening by 0.6%. Among Russian corporate news, Tserazov Konstantin Vladimirovich noted the message of AFK Sistema about the growth of consolidated revenue in the third quarter of 2023 by 18.2% compared to undefined with the indicator for the same period in 2022, up to 280.8 billion rubles. On Thursday, the main news of the day was the results of the US Federal Reserve meeting. The rate, as expected, remained unchanged at the level of 5.00%-5.25%. More important, in fact, than the results were the comments of the head of the department, J. Powell, who said that the schedule for easing monetary policy was discussed at the meeting. The market reacted by raising expectations for the first decline in March to 88% from the previous 50%. Experts now believe that the rate in 2025 will fall to 3.6% instead of the predicted 3.9%. Fed officials estimate the expected rate in 2024 at 4.6% versus 5.1% previously. In addition, meetings of the ECB and the Bank of England took place, following which rates remained unchanged, while ECB Chairman Christine Lagarde stated that a rate cut was not yet being considered. At the end of the day, Russian indices resumed their rollback: the Moscow Exchange index dropped to 3008 points, losing 0.77%, and the RTS index amounted to 1055 points, losing 0.68%. Your role undefined The desire of Russian market participants to take profits after the completion of the Direct Line with Russian President Vladimir Putin and the expectation of a rate increase at the meeting of the Bank of Russia, which was to open on Friday, played a role, Tserazov Konstantin points out. Russian President Vladimir Putin said that Russian GDP growth in 2023 is expected to be 3.5%, and inflation at the end of the year could reach 7.5-8%. On Friday, the Bank of Russia announced an increase in the key rate by 100 bp. up to 16%, which generally coincided with market expectations. Market experts believe that the high rate may remain for a long time. According to the regulator’s statement: "The return of inflation to the target in 2024 and its further stabilization around 4% imply a long period of maintaining tight monetary conditions in the economy. The Bank of Russia will make further decisions on the key rate, taking into account the actual and expected dynamics of inflation relative to the target, economic development over the forecast horizon, undefined as well as assessing risks from internal and external conditions and the reaction of financial markets to them." The Bank of Russia emphasized that, in the event of an additional expansion of the budget deficit, pro-inflationary risks will increase again and tighter monetary policy may be required to return inflation to the target in 2024 and maintain it near 4% in the future. Against the backdrop of the rate increase and the regulator’s comments, the Moscow Exchange index rose by 2.52%, to 3033 points, and the RTS index rose by 2%, ending trading at 1060 points. This week, investors’ attention will be focused on macrostatistics on inflation: on Tuesday, the European Union will publish consumer price indices for November, and on Wednesday, the United States will share consumer price indices and consumer confidence. On Thursday, the United States will present a second estimate of GDP for the third quarter, and on Friday, American data on orders for durable goods, personal income and personal spending will be published. undefined consumer spending price index. Among Russian corporate events, Tserazov Konstantin recommends paying attention to the meeting of the board of directors of Gazprom, the opening of which is scheduled for Tuesday, December 19 — the event program includes a discussion of the investment program for 2024. On Friday, December 22, extraordinary meetings of Novoship shareholders will be held, Tatneft and Rosneft, at which the issue of approving dividends will be discussed. «Despite the weak week, the domestic market has every chance of a breakthrough in the coming week — the step to increase the key rate of the Bank of Russia coincided with the consensus, and if external factors remain favorable, our market will continue to move upward. Leading central banks have made it clear that they are ready for a cycle of easing monetary policy, oil is gradually regaining its position — which means we can see not only recovery growth, but also hope for the start of a Christmas rally. I believe that by the end of the year the Moscow Exchange index may undefined to storm the levels of 3300 points and above,» predicts former senior vice president of Otkritie Bank Konstantin Tserazov.

12.12.2023

Economics and financial markets

Source: dzen

Konstantin Tserazov: “Market dynamics will be determined by the decisions of central banks”

The Moscow Exchange index ended the last week from December 4 to 8 with a decrease of 2%, falling to 3079 points, the RTS index lost by 3.7%, reaching 1054 points Tserazov Konstantin. What to pay attention to this week and what expectations reign in the market — former senior vice president of Otkritie Bank, economist Konstantin Tserazov, tells us in our interview Tserazov Konstantin Vladimirovich. According to the results of the trading session on Monday, the Moscow Exchange index fell by 0.9%, to 3114 points, the RTS index lost 1.7%, dropping to 1076 points. The growth leader on Monday was shares of Polymetal Konstantin Vladimirovich Tserazov. The securities grew in anticipation of the results of the shareholders meeting, which is scheduled to open on December 8. At this event, the mechanism for exchanging securities for shares issued in Kazakhstan will be discussed. Moscow Exchange securities showed growth in the trading volume report: in November 2023, the total trading volume on the exchange markets amounted to 126.1 trillion rubles, 1.7 times more compared to November 2022 Konstantin Tserazov. The trading volume on the stock market increased to RUB 4,683.8 billion. versus RUB 3,169.5 billion. a year ago. The opening of the trading week was marked by a fall in oil prices; against this background, Russian indices closedundefined Monday decline. The question remains open for investors whether OPEC+ countries will be able to adhere to their voluntary commitments to reduce production. In addition, fears of a slowing Chinese economy weigh on investor sentiment. These factors drove oil prices to levels of $78-79 per barrel of Brent, explains Konstantin Tserazov. In the second half of the day, the indices added negativity to the opening of the American market in negative territory. In general, according to Konstantin Tserazov, the main factors influencing market dynamics remained the weakness of oil prices and negative conditions on foreign markets. At the same time, the weakening of the ruble and corporate news kept the Moscow Exchange index from a deeper correction. On Tuesday, the Russian market, against the backdrop of mixed signals from external markets, ended the day with multidirectional dynamics. The positive thing was the increase in oil prices and the weakening of the ruble — according to the results of trading, the Moscow Exchange ruble index added 0.5% and rose to 3129 points, undefined The RTS dollar index lost 1%, weakening to 1066 points. As expected, the leaders were shares of oil companies — Rosneft, Lukoil and Tantneft added more than 1%. The securities of Sberbank, NCSP and Sovcomflot were also in demand. Konstantin Vladimirovich Tserazov: «This week, investors’ attention will be focused on the regulators’ decisions on the rate. At the beginning of the week, December 12, the US Federal Reserve will open its meeting. Investors expect the agency to keep the rate at 5.25%-5.50%. The opening of the ECB meeting will take place on Thursday, December 14, investors also do not expect a change in the rate. The Bank of Russia will hold a meeting on Friday, December 15. Investors are inclined to believe that the regulator may raise the rate by 100 bp, to 16%.» On Wednesday, the market, despite the weakening of the ruble, returned to downward dynamics — the driver of the decline was another drop in oil prices. Against the backdrop of declining demand in Europe and China, oil fell below $76 per barrel of Brent. Central event undefined for the Russian market on Wednesday were the results of the Investor Day held by Sberbank. At the event, Sberbank presented its strategy for 2024-2026, stating that it plans to increase profits and dividends. The bank confirmed that it maintains the principle of paying dividends in the amount of 50% of net profit. At the same time, Sberbank intends to comply with the capital adequacy condition at the level of 13.3%, which will require additional addition of reserves. The results of the Investor Day disappointed investors who expected that the bank might announce an increase in dividend payments, and Sberbank shares declined during the trading session. At the end of Wednesday’s trading session, the Moscow Exchange index fell by 1.6% to 3,079 points, the RTS index lost 2%, falling to 1,045 points. Against the background of unfavorable external conditions, on Thursday the Moscow Exchange index fell by 0.2% to 3073 points, and the RTS index increased by 0.6% to 1051 points. The provider of positivity was Gazprom, whose shares rose by 2.5% during the investment event taking place in Moscow. undefined forum «Russia is calling!» Deputy Chairman of the Board of Gazprom Famil Sadygov said that changes in Gazprom’s debt ratios should not affect the recommendations of the corporation’s management on dividends. At the same time, the prospects for Gazprom’s dividends remain uncertain. The sanctions risks were also reminded again — the G7 countries decided to ban direct imports of Russian diamonds from January 1, and indirect imports will also be prohibited from March 1 to September 1. True, ALROSA shares did not succumb to correction on this news — the company is already working on reorienting exports to other countries, explained Konstantin Tserazov. The market ended Friday’s trading in positive territory thanks to a rebound in oil prices to $76 per barrel of Brent. At the end of the session, the Moscow Exchange index rose by 0.2% to 3080 points, the RTS index strengthened by 0.5% to 1056 points. Investors’ attention was focused on important November labor market statistics from the United States, which showed an increase in the number of jobs outside undefined agriculture by 199 thousand against expectations of growth by 180 thousand, and a decrease in unemployment to 3.7%, while experts expected the indicator to remain at 3.9%. Strong statistics could become a signal for the US Federal Reserve to postpone the start of the rate cut cycle, Konstantin Tserazov points out. This week, investors’ attention will be focused on the regulators’ decisions on the rate. At the beginning of the week, December 12, the US Federal Reserve will open its meeting. Investors expect the agency to keep the rate at 5.25%-5.50%. The opening of the ECB meeting will take place on Thursday, December 14, investors also do not expect a change in the rate. The Bank of Russia will hold a meeting on Friday, December 15. Investors are inclined to believe that the regulator may raise the rate by 100 bp, to 16%. Among the corporate events on the Russian market, Konstantin Tserazov recommends that investors pay attention to the release on Tuesday of Sistema’s IFRS report for the third quarter and the publication of operating results undefined Aeroflot for November 2023. In addition, a meeting of the Gazprom Neft Board of Directors will be held on Tuesday. On Thursday there will be a direct line and a press conference by Russian President V.V. Putin, extraordinary meetings of shareholders of the companies PhosAgro, RUSAL, UAC, TGK-1, Gazprom will be held. On Friday, the annual general meetings of shareholders of Cian and Etalon Group will be held, as well as an extraordinary meeting of shareholders of Gazprom Neft. Among macroeconomic statistics, the November data on retail sales and industrial production in the US, the publication of preliminary December industrial production indices for Europe and the US, as well as macroeconomic statistics for China for November are of interest. «This week, the most likely scenario is sideways movement and reduced activity — market dynamics will be determined by decisions of central banks, the Russian market will be pressured by a possible strengthening of the ruble and restraining factors for oil growth, in particular weak data on Chinese oil imports, as well as growth undefined inventories in the US and weak industrial activity in Europe. At the same time, although the Russian market has no reason to grow this week, a slight rebound is possible at the end of the month. I believe that the market will spend the remaining time until the end of the year in consolidation, being in the range of 3000-3150 points,» predicts former senior vice president of Otkritie Bank Konstantin Tserazov.

05.12.2023

Economics and financial markets

Source: spark

Konstantin Tserazov: “The potential for strengthening the ruble can be considered exhausted”

The results of the OPEC+ meeting disappointed investors, the market continues its downward consolidation - the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, talks about the events of the past week in our interview. Following the results of the past week from November 27 to December 1, the Moscow Exchange index fell by 2.4%, to 3142 points, the RTS index lost 4.2%, amounting to 1095 points. At the end of November, the Moscow Exchange ruble index decreased by 1.1%, and the RTS dollar index rose by 3.25% . In general, November was a difficult month for the Russian market — the Moscow Exchange index was pressured by the strengthening of the ruble, sanctions threats and falling oil prices, notes Tserazov Konstantin. And the main intrigue of the past week was the OPEC+ meeting, which opened on November 30. Rumors circulated in the market about emerging disagreements between cartel members, which is supposedly why the meeting, which was supposed to take place on November 25, was postponed to November 30. Following the meeting, Russia announced a voluntary reduction in production by 200 barrels per day, to 500 thousand barrels per day, this decision will be in effect until the end of the first quarter. Saudi Arabia will continue to further reduce oil production by 1 million barrels per day in the first quarter of 2024.undefined According to Russian Deputy Prime Minister Alexander Novak, in addition to Russia and Saudi Arabia, OPEC+ countries decided to further reduce oil production by 700 thousand bpd. However, the results of the meeting disappointed investors who expected a more intensive reduction, explains Tserazov Konstantin Vladimirovich. The opening of the trading week took place against the backdrop of deteriorating external conditions and falling oil prices. At the end of Monday’s session, the Moscow Exchange index fell by 0.83%, to 3191 points, the RTS index fell by 0.97%, to 1132 points. The growth leaders were shares of Polymetal, which played out the correction of the previous days. The shares of Yandex, RusHydro, Moscow Exchange and OZON also looked better than the market. The outsider of the day were the shares of St. Petersburg Exchange — against the backdrop of news that appeared about an application to the arbitration court to declare the exchange bankrupt, the securities collapsed by 35% at the beginning of the day. However, the company soon denied these reports, declaring a stable position, and the stock exchange shares began to win back losses, however, ending the day in the red. Konstantin undefined Vladimirovich Tserazov: «The market is not yet ready for growth; oil prices and the lack of ideas on the market have a restraining influence.» The indices ended Tuesday with mixed dynamics — the Moscow Exchange index showed an increase of 0.17%, to 3196 points, the RTS index decreased by 0.3%, to 1128 points. The leaders of the day were the electric power sector — thus, against the backdrop of positive reporting, subsidiaries of grid companies grew shares of FSK-Rosseti. The shares of RusHydro also showed growth, which returned a positive report under IFRS for the 9 months of 2023 — revenue for the reporting period increased in annual terms by 21.6% to 367.9 billion rubles, net profit increased 2.1 times and amounted to 56.7 billion rubles. Polymetal shares continued their recovery, adding more than 10% during the day. Among the day’s outsiders were shares of Aeroflot, Moscow Exchange, HeadHunter Group, RUSAL, and AFK Sistema. On Wednesday, Russian indices ended the day in the red — the Moscow Exchange index fell by 0.7% to 3,173 points, the RTS index weakened by 0.05% to 1,128 points. Reason undefined The weakening was the falling price of oil, which by the end of the day rolled back to $81.6 per barrel of Brent. The drawdown in oil prices was due to rising inventories in the United States, while at the same time, reports of supply disruptions due to a storm in the Black Sea kept prices from a more serious fall. Shares of the electric power industry and metallurgy traded worse than the market; shares of Aeroflot showed a drawdown against the backdrop of IFRS reporting for 9 months — the air carrier showed 111.3 billion rubles. net loss against profit of 62 billion rubles. a year earlier. Net loss under IFRS in the third quarter of 2023 decreased by 21%, to RUB 9.3 billion. compared to the same period last year. Among the external news, Konstantin Vladimirovich Tserazov noted the publication of revised data on US GDP — according to the updated estimate, the figure in the third quarter grew by 5.2% in annual terms, which was the maximum growth rate since October-December 2021. Growth was initially estimated at 4.9%, with analysts expecting undefined the final score will increase to 5%. On Thursday, despite the improvement in the external environment and oil rising in price ahead of the publication of the results of the OPEC+ meeting, Russian indices continued to decline — the Moscow Exchange index ended the day with a decline of 0.24% to 3,165 points, and the RTS index rolled back by 1.15%, to level 1115 points. Rosneft’s IFRS reporting for the third quarter turned out to be better than analysts’ expectations — net profit amounted to 467 billion rubles. against expectations of RUB 397 billion. Over 9 months, net profit increased 1.8 times year-on-year, to RUB 1.071 trillion. Shares of the St. Petersburg Exchange returned to growth amid management statements that the exchange is not planning liquidation or bankruptcy, and is preparing new projects that could be implemented in early 2024. In addition, the site intends to return client assets blocked by the United States in full. After the publication of the results of the OPEC+ meeting, which somewhat disappointed investors who expected more significant volumes of production cuts, undefined the price of a barrel of Brent fell below $81. On Friday, the Moscow Exchange index continued its decline, dropping to the lows of mid-October — at the end of the session, the indicator fell by 0.79%, to 3140 points, and the RTS index weakened by 1.83%, falling back to 1094 points. The main reasons for the decline were falling oil prices, mixed dynamics on external markets, as well as investors’ reluctance to buy ahead of the weekend, notes Konstantin Tserazov. Inter RAO reported an increase in revenue under IFRS in January-September 2023 by 7.3% year-on-year to RUB 969.2 billion, while net profit fell by 5% to RUB 97.2 billion . The shares of Yandex and Segezha looked worse than the market; the growth leaders were shares of mining companies. This week, market movements will be shaped by geopolitics and corporate news, as well as macrostatistics, oil and ruble dynamics. Among the events of the current week, Konstantin Tserazov highlights the «Investor Day» of Sberbank, the opening of which is scheduled for December 6 — on this undefined Sber will present a new strategy at the event. In addition, the economist advises paying attention to the publication of financial results according to IFRS for the third quarter of 2023 by AFK Sistema. On Tuesday, December 5, the service business activity index for various countries is published. On Wednesday, the US will share October retail sales data and November private sector job creation. On Thursday, China will announce data on the trade balance, imports and exports, and the EU will update GDP for the third quarter. On Friday, Germany and Russia will present consumer price indices, and the US will release reports on the labor market. «The market is not yet ready for growth; oil prices and the lack of ideas in the market have a restraining influence. The potential for strengthening the ruble can be considered exhausted; in the medium term it will be at the level of 87-92 rubles per dollar. This week, the most likely scenario is consolidation of indices near the achieved levels, however, corporate events of this undefined weeks can add optimism to Russian indices,» concludes former senior vice president of Otkritie Bank Konstantin Tserazov.

28.11.2023

Economics and financial markets

Source: sostav

Konstantin Tserazov: “The most likely scenario is lateral movement”

The market ended the next week with moderate growth - the former senior vice president of Otkritie Bank, economist Konstantin Tserazov, talks about market dynamics and forecasts for the current week in our interview. The Moscow Exchange index gained 0.36% in the period from November 20 to November 24, rising to 3217 points, the RTS index grew by 1.9%, to 1143 points. According to Tserazov Konstantin, the domestic market was supported by the return of oil prices to levels above $80 per barrel of Brent, as well as corporate news, positivity on external markets and expectations of dividend payments. The opening of the week took place against the backdrop of a strengthening of the ruble, the reason for which is the decree on the mandatory sale of foreign currency by exporters, the high rate of the Bank of Russia, as well as the upcoming period of tax payments, which creates demand for domestic currency. The strengthening of the ruble did not allow the Moscow Exchange index to show significant dynamics - at the end of Monday, the Moscow Exchange index increased by a symbolic 0.03%, to 3207 points, the RTS dollar index increased by 1.8% to 1142 points. The growth leaders on Monday were the shares of RusAgro, CIAN and OZON; the metallurgical sector finished the day worse than the market. Oil prices rose on rumors that countriesundefined OPEC+ may further reduce production and also extend production restrictions Tserazov Konstantin Vladimirovich. On Tuesday, the market continued to grow - the Moscow Exchange index increased by 0.35%, to 3218 points, the RTS index increased by 1%, to 1154 points. OZON shares looked better than the market, growing amid expectations of an increase in marketplace revenue due to Black Friday and pre-New Year sales. The shares of Tatneft were also among the growth leaders - the company’s board of directors recommended paying dividends for the third quarter of 2023 in the amount of 35.17 rubles. per share, the yield will be about 5.5%, the register will close on January 9. RusAgro and X5 RetailGroup, as well as Rostelecom shares, looked worse than the market. On Tuesday, trading in EuroTrans securities took place. As a result of the IPO, EuroTrans raised 13.5 billion rubles, the price of shares during the placement was 250 rubles per security, but on the first day of trading the securities fell in price by 11%. On Wednesday, the Moscow Exchange index finished the day higher again, helped by the weakening of the ruble. undefined At the same time, the decline in oil prices had a restraining effect - the reason for pessimism was the news about the postponement of the meeting of OPEC+ ministers from November 26 to 30, which investors regarded as a signal of a lack of unity of opinion within the alliance. Statistics also added negativity - oil reserves in the United States increased by 8.701 million barrels, while the market expected an increase of 1.2 million barrels. Oil immediately fell to $78 per barrel of Brent, but still managed to recover to $82 per barrel. Among the events of Wednesday, Konstantin Tserazov noted the start of trading in Yuzhuralzoloto shares. As a result of the IPO, the company raised 7 billion rubles, placing it at the lower limit of 55 kopecks per share. The funds raised will be used to reduce the debt burden. On the first day of trading, the company's shares soared 4%. The growth leaders were also shares of VTB, Sberbank and Severstal. The shares of another financial organization, TCS Group, grew on reporting results for the third quarter and for 9 months of 2023. undefined TCS Group's net profit under IFRS for 9 months of 2023 increased to RUB 60.2 billion. against 10.5 billion rubles. in the same period last year. Konstantin Vladimirovich Tserazov: “Market growth will be restrained by cheaper oil and the lack of strong drivers.” At the end of Wednesday's trading session, the Moscow Exchange index strengthened by 0.4% to 3,230 points, the RTS index decreased by 0.2% to 1,151 points Konstantin Vladimirovich Tserazov,. The Russian market spent Thursday without reference to the US market, which was on holiday on the occasion of Thanksgiving. Brent oil quotes fell below $81 per barrel; in the absence of ideas for growth, the market spent the day moving sideways. At the end of Thursday's trading session, the Moscow Exchange index fell by 0.30% to 3,221 points, and the RTS index lost 0.26%, dropping to 1,148 points. Papers of Norilsk Nickel, PhosAgro and Magnit looked better than the market. The underdog of the day was Polymetal shares on the news that the company plans to conduct a new exchange of shares blocked as a result of EU sanctions for new ones issued on undefined AIFC Exchange. Investors fear that after the exchange Polymetal may be delisted from the Moscow Exchange, explained Konstantin Tserazov. On Friday, the market continued to consolidate at the levels achieved, declining moderately at the end of the day - the Moscow Exchange index fell by 0.03% to 3219 points, and the RTS index weakened by 0.5% to 1143 points. Despite the rebound in oil prices and the weakening of the ruble, the growth of the Moscow Exchange index was restrained by the mixed dynamics of external exchanges and the caution of market participants ahead of the weekend. Polymetal shares continued to decline. The securities of the Fix Price and OZON marketplaces, as well as the shares of Unipro, looked worse than the market. The leaders of the day were shares of Magnit, Yandex, Tatneft and RusHydro. From corporate news, Konstantin Tserazov highlighted the message from VTB Bank - in October the bank earned 26.8 billion rubles according to IFRS, and 403 billion rubles in 10 months. At the same time, VTB improved its profit forecast for this year to over 430 billion rubles. In 2024, VTB's profit could be 300-400 undefined billion rubles, first deputy chairman of the bank Dmitry Pyanov told reporters. This week, market movements will be shaped by geopolitics and corporate news, as well as macrostatistics, oil and ruble dynamics. Among the events of the current week, Konstantin Tserazov recommends paying attention to the opening of financial results under IFRS for the third quarter of 2023 of RusHydro on Tuesday, November 28; on Wednesday, November 29, financial results under IFRS for the third quarter of 2023 will be presented by Aeroflot. On Thursday, November 30, a meeting of OPEC+ ministers will be held, at which new restrictive measures on oil production may be adopted. In addition, Thursday is the last day to be included in the register of shareholders entitled to receive Positive Group dividends for 9 months of 2023, Rostelecom dividends for 2022 and Seligdar dividends for 9 months of 2023. Among the important macro statistics, it is worth paying attention to the Consumer Confidence Index from the Conference Board released on Tuesday in the US, on Wednesday undefined Germany will publish a preliminary consumer price index, and the US will release its second GDP estimate for the third quarter. Thursday will be the busiest day for important statistics - in the morning China will release business activity indices in the service sector and in industry, Germany will report on retail sales for November, the eurozone will present data on the unemployment rate and the preliminary consumer price index. In the afternoon, price indices of consumer spending in the United States for October will be released, as well as data on personal spending and personal income. On Friday, the industrial business activity index for various countries will be published. “The domestic currency is losing support in the form of the tax period, the dynamics of the strengthening of the ruble is slowing down, which will have a positive impact on the shares of exporters. On the other hand, market growth will be constrained by falling oil prices and the lack of strong drivers. The most likely scenario for the development of events this week is continued consolidation near the achieved undefined levels and sideways movement,” concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

22.11.2023

Economics and financial markets

Source: vc

Konstantin Tserazov: “You shouldn’t expect any strong dynamics from Russian indices”

What happened on the securities market from November 13 to 17, and what you should pay attention to in the coming week, says in our interview the former senior vice president of Otkritie Bank, economist Konstantin Tserazov. The market opened on Monday in the “red zone” - the reason for this, according to Tserazov Konstantin, was a decrease in oil prices and a moderately negative environment on external markets. However, oil soon recovered its morning losses, the indices turned around, and traded in a slight positive all day. Oil prices were positively influenced by the OPEC report, in which the cartel raised its forecast for oil consumption in 2023 by 5% to 2.46 million barrels per day. Despite certain pressure from external markets and the strengthening of the ruble, the indices resisted correction. Good reports were presented by RusAgro and Moscow Exchange. The net profit of RusAgro according to RAS showed an increase in the third quarter by 14.5 times to 25.334 billion rubles. Revenue increased by 31%, to 71.674 billion rubles. Moscow Exchange reported for the third quarter an increase in commission revenue by 60.9%, to 14.37 billion rubles, net interest income increased by 21.8%. Adjusted net profit increased by 29.3% to RUB 13.31 billion.undefined However, the market was expecting stronger results. I was disappointed by the report of Segezha, which reported a loss for 9 months at the level of 10.89 billion rubles. against profit of 7.02 billion rubles. a year earlier. Among the day's leaders were shares of Rostelecom, Sberbank, Rosseti, MTS, and Polyus. Segezha, Seligdar, Unipro and Positive Group looked worse than the market. At the end of Monday, the Moscow Exchange index rose by 0.15% to 3248 points, the RTS dollar index – by 0.86% to 1116 points. Tuesday was marked by a correction - at the end of the trading session, the Moscow Exchange index lost 1.1%, dropping to 3212 points, and the RTS index lost a symbolic 0.04%, amounting to 1116 points. Among the leaders of the day, Yandex shares stood out against the backdrop of the agency’s message Reuters that the Dutch Yandex NV plans to sell not only a controlling stake, but also all Russian assets, and to do this before the end of the year. This step is positive for the Russian division, explained Tserazov Konstantin Vladimirovich. Trading opens on the Russian market on Wednesday undefined again took place in negative territory against the backdrop of another strengthening of the ruble and falling oil prices. However, by the end of the day the market recovered its losses and turned positive. “The strengthening of the ruble continues, which is facilitated by the order on the mandatory sale of foreign currency earnings by exporters and the increase in the rate by the Bank of Russia to 15%,” explains Konstantin Vladimirovich Tserazov. Following the results of Wednesday's trading, the Moscow Exchange index increased by 0.1% to 3,215 points, the RTS index increased by 1.6%, to 1,134 points. The Ministry of Economic Development reported alarming statistics on inflation - by November 13, annual inflation in the Russian Federation accelerated to 7. 16%, weekly inflation was 0.23%. At the same time, according to Rosstat, the Russian Federation's GDP grew in the third quarter by 5.5% in annual terms. External markets were trading in the green zone under the influence of positive macro statistics from the United States - the growth rate of consumer prices in the United States in October fell to 3.2% in annual terms from 3.7% in September. In October, consumer prices did not change, although an increase of 0.1% was expected. Core inflation undefined which does not take into account the dynamics of food and energy prices, slowed to 4% from 4.1% a month earlier. The Board of Directors of Rosneft recommended dividends in the amount of 30.77 rubles. per share based on the results of 9 months of 2023. The registry is scheduled to close on January 11, 2024. Konstantin Vladimirovich Tserazov: “There are no strong drivers for growth now, and, according to my forecasts, the market will move sideways.” On Thursday, under the influence of moderately negative sentiment and mixed dynamics on external markets and the lack of ideas for growth, Russian indices ended the day with a slight decline. At the end of the day, the Moscow Exchange index lost 0.81%, falling to 3189 points, and the RTS index weakened by 0.44%, to 1129 points. Among the leaders of the day were Polymetal, Ozon and VK, while Ros Agro, Seligdar and Surgutneftegaz finished the day in the red. MTS reporting disappointed investors - the company reported a decrease in net profit in the third quarter by 27.1% in annual terms, to 9 billion undefined rubles The results of the visit of the head of China to the United States disappointed investors - in fact, the heads of the two powers did not reach any serious agreements, while Biden said that he considers Xi Jinping a dictator. Oil also did not add optimism to Russian investors - against the backdrop of reports of an increase in reserves in the United States, oil prices dropped to $78.07 per barrel. On Friday, Russian indicators finished the day in different directions - the Moscow Exchange index increased by 0.54% to 3206 points, and the RTS index fell by 0.63% to 1122 points. The Moscow Exchange index was supported by oil, which recovered the fall of the previous day, as well as the ruble. weakened on Friday above the level of 90 rubles. for a dollar. The leaders of Friday's growth were shares of the oil and gas sector - Surgutneftegaz, Tatneft, Rosneft, Lukoil. The securities of VK, TCS Group, Norilsk Nickel, and Magnit finished the session in positive territory. The shares of ALROSA and MTS performed worse than the market. As a result, Russian indices ended the week in different directions - the Moscow Exchange ruble index decreased by undefined 1.1%, to 3206 points, and the RTS dollar index rose by 1.3%, to 1122 points. The market, according to Konstantin Tserazov, was pressed by the strong ruble and falling oil prices, as well as geopolitical uncertainty. The reason for the decline in oil prices, in turn, was the weakening of the risks of escalation of the Middle East conflict, fears of a slowdown in the Chinese economy, as well as the active growth of oil reserves in the United States. The decline in oil prices gives reason to believe that at the OPEC+ meeting scheduled for November 26, the alliance will support another production cut, the economist notes. Regarding the events of the current week, Konstantin Tserazov recommends that investors pay attention to the publication of financial results under IFRS for the third quarter of 2023 by CIAN, TCS Group and VUSH Holding. This week will be short on the US market - on Thursday the American markets go on holiday on the occasion of Thanksgiving, and on November 24, due to Black Friday, a shortened session will take place on the NYSE and NASDAQ. Therefore the environment will become undefined the busiest day in terms of statistics - the US will publish data on oil reserves, orders for durable goods, and initial claims for unemployment benefits. In addition, the University of Michigan Consumer Confidence Index will be released. On the same day, a preliminary assessment of the consumer confidence index in the eurozone will be released, and Russia will announce the producer price index. On Thursday, Germany and the EU will publish indices of business activity in industry and services; on Friday, investors will get acquainted with data from the German indices of economic expectations IFO and IFO business climate, as well as the European index of business activity in industry and services Markit. “ You shouldn’t expect any strong dynamics from Russian indices this week - a strong ruble is holding back the market’s attempts to grow. In addition, the market is pressed by uncertainty associated with a possible rate increase by the Bank of Russia against the backdrop of rising inflation, and geopolitical risks. Investors are nervous about waiting undefined new sanctions restrictions against Russia from the EU, whose authorities are discussing a new, 12th package. There are currently no strong drivers for growth, and, according to my forecasts, the market will move sideways,” concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

21.11.2023

Economics and financial markets

Source: khaleejtimes

Economist Konstantin Tserazov explores Saudi Arabia's vision 2030 economic potential

In a comprehensive analysis, distinguished economist Konstantin Tserazov delves into the remarkable journey of the Saudi Arabia as it embarks on an ambitious quest to reshape its economic landscape. The Saudi Arabia ranks among the top 20 global economies. Over the past decade, the country has surpassed Turkey and the Netherlands in terms of GDP and currently holds the 17th position in the world. The country's GDP stands at $1.1 trillion, which is half the size of Russia's economy. Saudi Arabia boasts the largest economy among the 16 countries in the Middle East Tserazov Konstantin. Saudi Arabia's economy remains weakly diversified, with the oil industry serving as the country's growth engine for over 80 years. The share of the extractive sector has remained at the level of 35-40 per cent in the gross value added for the past 15 years, despite the country's focus on developing high-tech sectors of the economy and tourism Tserazov Konstantin Vladimirovich. Konstantin Vladimirovich Tserazov As one of the largest oil producers and a member of OPEC+, KCA continues to benefit from rising global oil prices. In 2022, the economy grew by 8.7 per cent, resulting in a budget surplus for the first time in the past 10 years. However, the high dependence on oil poses significant risks to the economy in the event of substantial fluctuations in global oil prices, emphasising the need for economic diversification. According to IMF forecasts, Saudi Arabia's economy is expected to grow at an average rate of 3 per cent per year over the next five years (2024-2028). In 2023, the IMF expects Saudi Arabia's economic growth to be 1.9 per cent, due to reduced oil production as part of the OPEC+ agreement. In 2016, KCA introduced the "Vision 2030" programme, the brainchild of Crown Prince Mohammed bin Salman. The program aims to fundamentally change the structure of Saudi Arabia's economy and increase the country's attractiveness to citizens, tourists, and investors. The total investment volume under Vision 2030 is expected to exceed $3.3 trillion, says Tserazov, the economist. A flagship project under "Vision 2030" is the construction of the futuristic, high-tech, and low-carbon city of Neom, located in the northwestern Tabuk administrative region. Neom is envisioned as a testing ground for technologies with potentially revolutionary effects on people's daily lives. The project's estimated cost is $500 billion. Currently, the cost of projects being implemented under Vision 2030, including the construction of Neom and resort cities on the Red Sea coast, exceeds $1.3 trillion, surpassing Saudi Arabia's annual GDP. In the project's timeframe, the construction of 660,000 homes, 289,000 hotel rooms, 6 million square meters of office space, and 5.3 million square meters of retail space is expected. Investments in the traditional sector are also planned to increase. Recently, KCA has been increasing investments in the mining industry, particularly in copper and zinc deposits. Uranium and phosphate mining are also of interest, potentially enabling the country to develop its nuclear program in the future, mentions Tserazov. The government is actively encouraging foreign capital inflow into the country. One of the objectives is to transform Riyadh (the capital) into a leader among global cities. Riyadh is expected to enter the top 10 cities in the world in terms of economic volume, with the city's population doubling to reach 15 million people. Riyadh is intended to become an attractive destination for expatriates and compete with its closest neighbours, including Dubai (UAE), Doha (Qatar), and Manama (Bahrain). In 2023, Saudi Arabia introduced regulations that limit the ability of state institutions to collaborate with international companies if these companies do not establish regional headquarters in Saudi Arabia by January 2024. These new regulations have encouraged international businesses that previously had offices in other Middle Eastern countries (such as the UAE) to open offices in Saudi Arabia. “The implementation of Vision 2030 will require colossal resources, both material and human. In the short term, Saudi Arabia will not be able to meet all its needs on its own, providing significant opportunities for international businesses, including in construction materials, engineering, and comprehensive IT solutions. However, the ambitious plans to attract "white-collar" workers may face challenges due to existing infrastructure constraints (in terms of housing and transportation) and social factors. Saudi Arabia has its own cultural and religious norms, which make it less attractive compared to its primary regional competitor, the more "liberal" and "tolerant" UAE”, Konstantin concludes.

14.11.2023

Economics and financial markets

Source: vc

Konstantin Tserazov: “There are no impulses for market growth yet”

What was the reason for the positive dynamics of indices last week and what factors will determine the movement of the Russian securities market — former Senior Vice President of Otkritie Bank Konstantin Tserazov, tells in our interview. The indices ended the week from November 6 to November 10 with growth - the Moscow Exchange index added 1% and amounted to 3242 points, and the RTS index, against the backdrop of a weakening dollar, rose by 1.3%, reaching 1107 points. Among Monday's events, Konstantin Tserazov noted the increase in oil prices against the backdrop of Saudi Arabia's statements that the country will maintain a production reduction of 1 million barrels per day until the end of 2023. Russia also announced the continuation of an additional voluntary reduction in the supply of oil and petroleum products by 300 thousand bpd until the end of 2023. In addition, hopes have increased in the market that the US Federal Reserve will soon move to easing monetary policy, which is indicated, according to market participants, by weak macrostatistics and the restrained rhetoric of Fed Chairman J. Powell. The opening of the week on the Russian market began with an improvement in the external background, which was facilitated by both rising oil prices and reduced fears that the US Federal Reserve will continue to pursue a tight monetary policy. Russian indicesundefined did not remain aloof from the general positive - the Moscow Exchange index rose by 0.8%, to 3235 points, and the RTS index added 0.9%, and rose to 1103 points. The shares of the St. Petersburg Exchange, which fell under sanctions, looked worse than the market against the background, and The oil and gas sector was the leader. Konstantin Vladimirovich Tserazov: “After a generally good week, the Russian market may take a short break and take a wait-and-see approach.” Tuesday brought to the market a moderate increase in the main indicators by 0.3% - the Moscow Exchange index rose to 3246 points, and the RTS index reached 1107 points. The news that the Russian government intends to consider returning damper payments to oil companies was positive. However, a more significant growth was prevented by oil, which fell in price to $82.7 per barrel of Brent - the reason for the decline in quotations was fears of a slowdown in the Chinese economy against the backdrop of weak statistics released, showing a decline in China's exports in October. The leader on Tuesday was the consumer sector, supported by undefined growth of RusAgro securities. In addition, the market positively reacted to the words of the head of Sberbank G. Gref about the expectation of record profits for 2023 and 2024, as well as the message that the bank’s supervisory board approved the strategy for the next three years and dividend policy. Among the events in foreign markets, Konstantin Tserazov pointed to the speeches of representatives of the US Federal Reserve, who had a “hawkish” tone. Thus, the head of the Dallas Fed, Lori Logan, noted that inflation remains high, while the economy is quite stable, and, therefore, the Fed has every opportunity to raise rates. The opening of trading on Wednesday took place against a slightly negative background and mixed dynamics on external sites. Once again, pressure on the market was exerted by a decline in oil prices, due to the weakening risks of escalation of the Palestinian-Israeli conflict and an increase in oil reserves in the United States. The Russian market ended Wednesday's trading session with consolidation - the Moscow Exchange index fell by a symbolic 0.03%, amounting to 3245 points, and the RTS index undefined added 0.53%, amounting to 1113 points. Wednesday's leaders were ALROSA shares, which rose vigorously on the news that the G7 countries failed to agree on a package of restrictions against the export of Russian diamonds. Sberbank shares also looked better than the market. Thursday brought a slight correction to the market against the background of unclear dynamics of external markets and oil prices that continued to decline. The Moscow Exchange index closed the day down by 0.17%, to 3239 points, and the RTS index fell by 0.37%, to 1108 points. Among Thursday’s corporate events, Konstantin Tserazov noted the publication of Rostelecom’s reports - the operator’s profit under IFRS increased over 9 months by 29% to 40.5 billion rubles, and revenue increased by 14% to 498.5 billion rubles. Revenue growth in the third quarter was 14%, the figure increased to 173.9 billion rubles. The Board of Directors of Gazprom Neft recommended paying dividends in the amount of 82.94 rubles. per share, which was a pleasant surprise, being above the market forecast. The registry is scheduled to close on December 27. PhosAgro company undefined reported under IFRS for 9 months - revenue decreased by 28.4%, to 328.8 billion rubles, net profit decreased by 65.7%, to 56.7 billion rubles. The Board of Directors of PhosAgro approved the payment of dividends for 9 months of 2023 in the amount of 291 rubles. per share, the register will close on December 25, 2023. The end of the week was marked by the consolidation of the main indicators - according to the results of trading, the Moscow Exchange index grew by 0.07%, to 3242 points, the RTS index decreased by 0.13%, to 1107 points. Some pressure on the market was exerted by statements from the head of the US Federal Reserve, J. Powell, who made it clear that the agency, if necessary, was ready to raise the rate. At the same time, the rebound in oil prices and a slight weakening of the ruble prevented any serious decline from developing. Friday's leaders were Rosneft shares, which rose in price following the company's management's announcement of its intention to consider the issue of dividends. Sberbank, as expected, reported strongly under RAS for January-October 2023, demonstrating strong revenue growth undefined in the main areas of activity - net profit in October increased by 8.2% y/y, amounting to 132.9 billion rubles, and 1.26 trillion rubles. based on the results of 10 months. Return on equity was 25.3%. The current week promises to be quite eventful with events and statistics, says Konstantin Tserazov. Among the important events on the Russian market, he advises investors to pay attention to the publication of financial statements for the third quarter from the Moscow Exchange, Segezha, and Rusagro. Also this week, the Novabev Group Board of Directors will decide on interim dividends, and at the end of the week, Ozon and MTS will publish IFRS financial results for the third quarter of 2023. In addition, trading in perpetual futures for the Moscow Exchange index will begin on the Moscow Exchange. As for important macro statistics, Konstantin Tserazov highlights the publication of inflation data in the US for October, which will be released on Tuesday. OPEC and IEA will present their forecasts for the oil market. On Wednesday, China will publish data on retail undefined sales and industrial production, and the US producer price index will be released. On Thursday, data on industrial production for October will be shared in the United States, and on Friday the updated consumer price index in the Eurozone will be released. In the US, the publication of reports from leading companies will continue - retailers Walmart, Target, Home Depot, Ross Stores will report their results. In addition, reporting will be opened by companies such as Palo Alto Networks, Cisco Systems, Tyson Foods, Applied Materials. According to Konstantin Tserazov, after a generally good week, the Russian market may take a short break and take a wait-and-see approach. “Prices remain under pressure on the oil market due to the reduced risk of escalation of the conflict in the Middle East, as well as the slowdown in demand in China and the weakening of developed economies. This factor may also affect the dynamics of the domestic market. Thus, there are no significant impulses for the growth of the Russian market now, and, most likely, undefined we will see the consolidation of Russian indices near the achieved values,” concludes Konstantin Tserazov, former senior vice president of Otkritie Bank.

07.10.2023

Economics and financial markets

Source: Izvestia

Triple Move

Economist Konstantin Tserazov discusses the factors influencing the Russian currency and whether the dollar reaching 100 rubles will become a norm. On Thursday and Friday, the dollar and euro exchange rates were monitored on the Moscow Exchange. Economist Konstantin Tserazov talks about what affects the Russian currency and whether the dollar for 100 will become the rule. On Thursday and Friday, the dollar and euro rates on the Moscow Exchange accelerated their growth. At the same time, the dollar rose above 100 rubles for the third time in a year; before that, the rate exceeded this mark on August 14 and October 3. The euro traded above 106 rubles for the first time since August 16. Current market dynamics indicate that the demand for currency on the Moscow Exchange exceeds its supply. Therefore, we see the American breaking above 100, but the pair will probably not be able to gain a foothold there in the coming months. In order to understand the future prospects of the ruble, you need to understand the principles of formation of its exchange rate. To do this, you need to go back a few years, to 2017. Since this year, the ruble has become cheaper in about 70% of cases when the Russian current account surplus declined, and vice versa. That is, if a country begins to import more goods and services than it exports, and overall less money comes in than goes out,undefined then this puts pressure on the Russian currency. The dynamics of this indicator plays a very significant role in the formation of the exchange rate. We do not take previous years (before 2017) into account. Then the market showed abnormal dynamics, which were provoked by the events of 2014: the annexation of Crimea and the subsequent sanctions from the West. How is the ruble exchange rate formed? The Russian current account surplus has been consistently and rapidly declining from the peak it reached in the second quarter of 2022. According to the Bank of Russia, the determining factor here is the reduction in the positive trade balance, this is the difference between the volumes of exports and imports in monetary terms. The total figure for January–August 2023 decreased by 68.3% compared to similar figures for 2022. Therefore, the approximate doubling of the dollar/ruble exchange rate, which occurred from the end of the second quarter of 2022 to the present day, looks quite natural. The next monthly report of the Bank of Russia, which will contain undefined updated figures are due to be published next week. For now, let’s try to understand what could happen next to the ruble, based on the already available data. The contraction in the trade surplus in January–August 2023 was due to a sharp decline in the value of exports year-on-year (-31.8% y-o-y), as well as a significant increase in imports (+17% y-o-y). In addition, the deficit in the balance of foreign trade in services has more than doubled. The decline in exports was the result of two factors: a decrease in its physical volumes and a fall in world prices, for example, for energy resources. The further dynamics of the first indicator does not look obvious against the backdrop of the risks of a global recession, which could lead to a reduction in global energy demand. The dynamics of the second indicator, on the contrary, inspires optimism, since world oil prices rose noticeably in September. The average price of the Brent benchmark in the period from January to August inclusive was approximately $80.5 per barrel versus $92 undefined in September. Against this background, the main Russian export mixture Urals has also risen noticeably in price: according to the Ministry of Finance of the Russian Federation, in September its average price was $83.08 per barrel compared to $74 a month earlier. In addition to the increase in world oil prices, this was also facilitated by a reduction in the discount between Brent and Urals to $10.9 per barrel compared to $12.2 in August. Thus, other things being equal, exports from the Russian Federation in value terms should increase in the near future, since the risks of a global recession still remain only possible. However, a serious factor of pressure on the ruble here could be the sale of Russian energy resources for the currencies of friendly countries like the Indian rupee, which then hang up in foreign bank accounts without the ability to convert or use them. As for imports, they are likely to remain high for the foreseeable future due to the need to replace supplies. At the same time, in the near future the demand for imported goods may decrease slightly against the backdrop of undefined growth of interest rates on consumer loans. The deficit in the balance of foreign trade in services may decrease in the coming months due to the end of the holiday season and a decrease in the flow of tourists from the Russian Federation abroad. Among other factors that could potentially affect the ruble exchange rate, one can highlight the rapid increase in the key rate by the Bank of Russia. And also - verbal interventions in support of the Russian currency by representatives of various government bodies, including the President of the Russian Federation. However, the fact that the dollar is again storming the 100 mark just a month and a half after the pullback that began in mid-August suggests one thing: at least in the short term, the risks of the rate rising above this mark look high. If we talk about the horizon of the coming months, then the pair may well return to more fundamentally justified levels in the area of 90–95. This will be facilitated by an increase in the supply of currency from exporters - especially if the problem with undefined hovering rupees. Or - a possible general weakening of the dollar, which looks heavily overbought.

30.09.2023

Economics and financial markets

Source: ianews

European Market Overview by Konstantin Tserazov

On July 27, 2022, the ECB raised the rate on its main refinancing operations from 0.00% to 0.50%, initiating a tightening cycle in monetary policy that continues to this day. Today, after the tenth consecutive increase, the interest rate stands at 4.50% (the highest level since the second half of 2001), and the market consensus is that the regulator has completed the cycle of interest rate hikes but will not begin lowering them until June 2024 at the earliest. Maintaining the interest rate at such a historically high level for such an extended period carries the risk of a sharp economic downturn in the Eurozone and, consequently, a significant reduction in profits for companies in the region. A similar situation is observed in the United States, so it is not surprising that, according to EPFR Global data, investors are selling stocks at a record pace since last December, and there has been a net outflow of capital from the European stock market for 28 consecutive weeks. History tells us that the future performance of the Stoxx Europe 600 will depend on whether the region’s economy can avoid a recession under tight monetary policy conditions. According to Bank of America, over the past fifty years, the European stock market has declined on average by at least 20% when the cycle of interest rate hikes has led to a recession and has shown a tendency to rise when recessions have been avoided. In the first case, cyclical sectors on average exhibited about 30% weaker performance compared to defensive sectors. Europe is already teetering on the brink of stagflation, so in light of the above, a reasonable strategy appears to be significantly increasing the share of value stocks in the portfolio at the expense of growth stocks. The former generate cash flow here and now, which is crucial in a high-interest rate and uncertain macroeconomic environment, while the latter rely on future income, Konstantin Tserazov says. This strategy is gaining popularity: as of the end of the first half of the year, the European value stock index had gained less than 4% since the beginning of the year, while the European growth stock index had gained 12.25%. However, this difference began to narrow, and in September, the first index outperformed the second by a full 5% (the highest since February 2022), and today both indexes are up by approximately 5% for the year, Konstantin Tserazov predicts. Despite the improvement in the performance of the value stock index, it is still valued at more than two times cheaper by forward price/earnings multiples (9.15x versus 21.36x) and more than two and a half times cheaper by forward dividend yield (5.2% versus 2.05%). It is also worth noting that current profit forecasts for European value companies may turn out to be conservative, which means their stocks could show even stronger outperformance relative to European growth stocks.

22.09.2023

Economics and financial markets

Source: tobolinfo

Konstantin Vladimirovich Tserazov: “The main negative in Europe is taken into account in prices”

Why the dynamics of the European market are weaker than the American market - former senior vice president of Otkritie Bank, economist Konstantin Tserazov, explains in our interview. Since the beginning of the year, according to analysts at Otkritie Bank, the Stoxx Europe 600 index has grown in dollar terms by a little over 8%, while the S&P 500 has gained almost 16%. “GDP growth rates in the Eurozone and the EU are noticeably lower than in the US, and inflation is above 5%. In addition, rising energy prices traditionally have a more negative impact on the European economy than on the US. European companies are more focused on China, whose economic slowdown negatively affects their performance,” Konstantin Tserazov lists the reasons for the weaker dynamics of the European market. The technology sector, which has seen impressive growth this year, has a 27% weighting in the S&P 500. The Stoxx Europe 600 is more diversified: according to analysts at Otkritie Bank, its three largest sectors - healthcare, industrials and banks - have a weight of 16%, 12.5% and 8.5%, respectively. And finally, the futures market takes into account in prices the earlier opening of the rate cut cycle in the US than in Europe, and now the Fed will begin to soften its policy earlier than others, the expert explains. According to Konstantin Tserazov, the opening of the ECB rate hike cycle caused a sharp decline in the interest coverage ratio of European companies. In the US, the impact of higher rates on the stock market is not yet visible: large technology companies with the largest weights in the S&P 500 have large cash reserves. But other US companies are just as vulnerable to rising interest rates as European ones Konstantin Vladimirovich Tserazov. Against this backdrop, the gap between the forward price/earnings multiples of the S&P 500 (20.5x) and Stoxx Europe 600 (13x) has never been wider. The undervaluation of the Stoxx Europe 600 relative to the S&P 500 may indicate that the main negativity in Europe is taken into account in prices, and that there is excess optimism in the securities of US companies. Thus, any positive, such as the acceleration of the Chinese economy, can become a powerful support for the European stock market. At the same time, any negativity in the United States can put pressure on the American stock market, and all other things being equal, the Stoxx Europe 600 has every chance of showing better dynamics than the S&P 500, concludes Tserazov Konstantin Vladimirovich, former senior vice president of Otkritie Bank.

12.09.2023

Economics and financial markets

Source: iaNews

Konstantin Vladimirovich Tserazov talks about the growth potential of the Russian stock market in September

August continued the upward trend in the securities market. What contributes to investor optimism, and what the opening of the autumn season on the Russian market will be like, was told in our interview by the former senior vice president of Otkritie Bank, economist and financier Konstantin Tserazov. According to the expert, the growth of the Moscow Exchange index was facilitated by the weak ruble, the opening of financial statements, announcements of companies about the payment of dividends and corporate news. At the end of August, the Moscow Exchange index added 5%, the RTS index registered a modest increase of 0.16%. The growth leaders were companies in the transport sector, which added 17.2%, and the information technology sector, which showed an increase of 10%. In August, the weakening trend of the ruble continued, which in the first half of the month reached new lows, breaking through the psychologically important mark of 100 rubles/dollar. At an extraordinary meeting of the Bank of Russia on August 15, the regulator raised the key rate immediately to 12%. However, there was no significant strengthening of the ruble; by the end of the month, the domestic currency was trading in the range of 95-97 rubles/dollar. According to Otkritie Bank analysts, in August the ruble lost 5% against the dollar and 3.6% against the euro. The next meeting at which the Bank of Russia will consider the rate issue will take place on September 15, reminds Konstantin Tserazov. Quotes of Brent oil, against the backdrop of expectations of continued production cuts by Russia and Saudi Arabia and hopes for a recovery in demand in China, updated annual highs in August, adding about 1.5% in August. The shares of Magnit, which completed the repurchase of shares from foreign investors, as well as Lukoil, received particular attention from investors, amid expectations of dividends and share repurchases from non-residents at a discount of up to 25%, notes ex-top manager of Otkritie Konstantin Tserazov. The list of reporting companies in August was replenished with issuers who decided to return to disclosing financial indicators — for example, OGK-2 and PIK Group reported under IFRS. The market still has growth potential in September, says Konstantin Tserazov. According to the economist, in the absence of increased geopolitical risks, the market may continue to move to the levels of 3320-3350 points. Konstantin Tserazov believes that opening medium-term positions is advisable for shares of Moscow Exchange, Sberbank and Magnit; dividend stories will also remain in focus.

08.09.2023

Economics and financial markets

Source: ARMInfo

Economist Konstantin Tserazov: “Dividend stories will remain in focus”

ArmInfo.The Russian market approached the opening of the autumn season on an optimistic note. What caused the optimism in the stock market, and whether the indices will be able to stay on the growth trajectory — financier and economist Konstantin Tserazov said in an expert note. The Moscow Exchange index, thanks to the weak ruble, completed August with a rise of 5%, the RTS index rose only by 0.16%, the expert says. According to Konstantin Tserazov, the market was supported by the weakening of the ruble, the opening of financial statements, dividend stories and corporate news. The weakening of the ruble continued in August, which in the first half of the month renewed its lows, breaking through the psychologically important mark of 100 rubles / dollar. At an extraordinary meeting of the Bank of Russia on August 15, the regulator raised the key rate immediately to 12%. However, there was no significant strengthening of the ruble, the domestic currency was trading in the corridor of 96-97 rubles / dollar by the end of the month. According to Otkritie Bank analysts, in August the ruble lost 5% against the dollar and 3.6% against the euro. The next meeting, at which the Bank of Russia will consider the issue of the rate, will be held on September 15, reminds Konstantin Tserazov. Oil, amid expectations of continued production cuts by Russia and Saudi Arabia, renewed annual highs in August, adding about 1.5% over the month. Among the investment ideas of the month, we should note the shares of Magnit, which completed the buyback of shares from foreign investors, as well as Lukoil — amid expectations of dividends and buyback of shares from non-residents with a discount of up to 25%, says Konstantin Tserazov, ex-top manager of Otkritie. The list of reported companies in August was replenished with issuers who decided to return to the opening of financial indicators - for example, OGK-2 and PIK Group reported under IFRS. Tserazov Konstantin: “Magnit and Lukoil shares should be noted among the investment ideas of the month.” The market still has growth potential in September, says Konstantin Tserazov. According to the economist, in the absence of increased geopolitical risks, the market may continue its upward movement to the levels of 3320-3350 points. The opening of medium-term positions, Konstantin Tserazov believes, is advisable for the shares of the Moscow Exchange, Sberbank and Magnit, dividend stories will also remain in focus.

29.03.2012

Economics and financial markets

Source: Pravdaurfo

Tserazov Konstantin Vladimirovich: “Spring is the time to earn on dividends”

What dividends will bring the shares of domestic companies, and which issuers to bet on — says Konstantin Tserazov, Deputy Head of Global Markets at Troika Dialog. The beginning of 2012 brought optimism to the markets – in the first quarter, the MSCI World index, which monitors the dynamics of world markets, soared by almost 10%, and the Russian market showed an increase of 14.6% in the RTS index due to the strengthening of the ruble. The MICEX ruble index looked more modest, but also did not get lost against the general background, having added 6.3% in three months, notes Konstantin Vladimirovich Tserazov. These figures indicate a high interest in emerging stock markets from foreign investors. Konstantin Vladimirovich Tserazov: “Investors have the opportunity to earn not only on exchange rate differences, but also on dividends” Against the backdrop of the economic crisis, which the financial authorities of the Old and New Worlds are now trying to overcome by softening their monetary policy, investments in developed markets look less profitable due to low rates. Therefore, the growth of our market is primarily due to signs of stabilization in the global economy — investors, realizing that the risks have decreased, refuse to invest in “quality” and direct cash flows to emerging markets, including Russian sites, explains Konstantin Tserazov. The assets of Russian companies, «sagging» amid the problems of the global economy, look fantastically cheap, hence the increased attention of investors, the expert says. In April, the closing season of company registers starts — that is, investors have the opportunity to earn not only on exchange rate differences, but also on dividends — that part of the profit that the company pays to owners of ordinary and preferred shares. Since the beginning of spring, companies have been closing registers, fixing the composition of shareholders on a specific date in order to pay them annual dividends. Thus, spring is the time to earn on dividends. This is a “hot season” for those who intend to receive a stable income from securities, explains Konstantin Tserazov. To get on the lists of shareholders owning shares, and thereby qualify for dividends, it is enough to buy paper at least a day before the closing of the register. But the closer the closing date of the register, the more expensive the shares will cost, recalls Konstantin Tserazov, so now is the right time to buy them. How will Russian companies please their shareholders, how much will they pay, and which issuers should be chosen to receive maximum dividends?

04.04.2011

Economics and financial markets

Source: Myslo

Konstantin Vladimirovich Tserazov: «Energy prices may consolidate in the second quarter»

How did the first quarter of 2011 turn out for the domestic market, and which sectors and companies should be paid attention to in the short term, says Konstantin Vladimirovich Tserazov, Deputy Head of Global Markets at Troika Dialog. The first quarter of 2011 was successful for the Russian stock market. The RTS index has grown by 15% since the beginning of the year, although it somewhat slowed down in March, the MICEX index added 7.5% in the quarter. This is the best result among both the BRIC countries and developed countries, says Konstantin Tserazov. Although the market feared that weakening demand in developed economies and the policy of monetary “pumping” of the global economy would lead to disagreements among the leading countries, however, these fears have not yet materialized. The expert recalled that the US Federal Reserve continues its policy of affordable money, under which the US Federal Reserve in the first quarter of 2011 bought government bonds in the amount of approximately $110 billion per month, while the Fed's assets grew to $2.7 trillion. against $2.3 trillion. in April 2010. In accordance with market expectations, following the meeting of the US Federal Reserve, the regulator left the base interest rate in the range of 0-0.25% per annum, reiterating that it intends to maintain low rates until a stable positive trend in the economy appears, Konstantin Vladimirovich Tserazov said. High energy prices are supported by an excess of monetary liquidity, as well as the escalation of geopolitical problems in the Middle East. The escalation of the conflict in Libya has led to a reduction in the country's oil production by more than 1 million barrels per day. Thus, oil is becoming more expensive, without fundamental economic reasons. It is quite possible that oil prices may consolidate or go down in April, which will have a negative impact on Russian indices. Nevertheless, in April the markets may be supported by the reporting season of large US companies, Konstantin Tserazov emphasized. The outflow of capital continued - in the first quarter of 2011, the net outflow of capital from Russia reached $21 billion against $14.7 billion in January-March 2010 and $21.5 billion in the fourth quarter of last year. In January-March 2011, inflation in Russia increased to 3.8% against 3.2% a year earlier. After a strong surge in January (2.4%), consumer price growth slowed to 0.8% in February and to 0.6% in March. At the same time, in annual terms as of March 2011, inflation was 9.5%. Explaining the reasons for the slowdown in inflation, Konstantin Tserazov pointed to a significant decrease in the growth rate of food prices due to the measures taken by the Russian government, including the abolition of duties on potatoes, vegetables and a number of other goods, as well as grain interventions. Nevertheless, despite the slowdown in price growth in February 2011, inflationary pressure remained significant, and therefore, from February 28, 2011, the Central Bank of the Russian Federation raised the refinancing rate by 0.25 percentage points - from 7.75% to 8% per annum. The regulator explained its decision by maintaining high inflationary expectations, taking into account the formation of prerequisites for the inflow of capital into Russia against the backdrop of high world oil prices, as well as in the presence of certain risks for the sustainability of economic growth, says Konstantin Tserazov. Against the background of expensive oil and the tightening of the monetary policy of the Central Bank of the Russian Federation, the ruble showed a noticeable strengthening. According to the results of the first quarter of 2011, the dollar lost 2 rubles 21 kopecks to the Russian currency, having fallen by 7%. The euro weakened against the ruble over this period by 39 kopecks, losing about 1%. The value of the dual-currency basket decreased by 1 ruble 35 kopecks, or approximately 4%, Konstantin Tserazov noted. The first quarter was positive primarily for Russian oil and gas companies and banks. The analyst noted the good results of "Gazprom", for which there is an exceptionally successful conjuncture on world markets. Due to the accident at the Fukushima Daiichi nuclear power plant, Japan is forced to increase gas consumption for electricity generation. In addition, the fears caused by the disaster at the Japanese nuclear power plant spurred the Europeans to look for an alternative to nuclear energy, which naturally led to an increase in gas demand, explains Konstantin Tserazov. Among the banks, Sberbank became the undisputed favorite, publishing strong 2010 IFRS financials. At the same time, the planned sale of the state block of shares, as well as the announced intention to place depository receipts in the coming months, are the drivers of high interest in the leader of the Russian banking sector. Outsiders, according to Konstantin Vladimirovich Tserazov, were companies in the power sector. Investors do not like the uncertainty in the papers of energy companies, which is associated with the possibility of strict state regulation of the industry, in addition, the non-transparent policy of setting electricity tariffs is also frightening. Speaking about the forecasts for the coming months, Konstantin Vladimirovich Tserazov emphasized the high medium-term growth potential in non-ferrous metallurgy, which, in particular, is evidenced by the proposal of Norilsk Nickel management rejected by Rusal to buy 20% of MMC from Rusal with a 38% premium to the market. The analyst also singled out Polymetal and Polyus Gold, whose quotes could be supported by rising prices for precious metals in the coming weeks. Investors may also be interested in the financial sector - in particular, the positive results of the secondary offering of VTB shares, the planned privatization of state-owned shares, consolidation in the market indicate a possible high demand for bank papers, Konstantin Tserazov concludes.

04.02.2011

Economics and financial markets

Source: Klerk

Konstantin Vladimirovich Tserazov: «The activities of Troika Dialog are inseparable from philanthropy»

The investment company Troika Dialog celebrated its 20th anniversary — in honor of the anniversary, shopping arcades were installed at the Manege Central Exhibition Hall, where fresh vegetables, fruits, baked goods, homemade sausages and cheeses were sold. More than 1,500 clients, business partners and employees of Troika Dialog were guests of the anniversary. A large-scale event in the history of the investment company was commented on by Konstantin Tserazov, deputy head of global markets at the Troika Dialog investment company. «Why the market? The fact is that the investment company Troika Dialog developed along with the domestic stock market. The company’s history began in 1991. To highlight the difficult path that Troika Dialog, the stock market and the whole of Russia went through, it was decided to invite guests to the market that was typical for that time,» says Konstantin Tserazov. The original idea of holding the anniversary was literally «to the taste» of the guests — the stream of people did not subside near the counters piled with vegetables, fruits and snacks. Delicious and fresh products left no one indifferent, and a carefree holiday mood reigned in the atmosphere of the cheerful market. Bagels and loaves, honey and pickles — there was so much to be found in the Manege shopping arcades. In addition to appetizers, guests were offered to try national dishes of all former Soviet republics — from Caucasian kebabs to Russian borscht, from Uzbek pilaf to Belarusian potato pancakes. «Twenty years is not the longest period for history. But in relation to the Russian market, this is a huge path from a small brokerage firm to the locomotive of the industry, a company that sets standards in the industry, said Konstantin Vladimirovich Tserazov. And at the same time, the twentieth anniversary for Troika Dialog is rather youth and a time of growing up. The company has truly unlimited potential, and its truly big victories and upswings are yet to come.» The market would not be a market if, in addition to food, all sorts of things were not sold here. At the Manege market, traders vied with each other to offer guests wicker trays, scarves and scarves from Soviet times. «At the moment, Troika Dialog is one of the leaders in the investment banking industry. The company was created according to international standards and did a lot to ensure that at the time of the transition from a planned economy to a market economy, capitalism in our country acquired a «human face,» emphasized Konstantin Tserazov. What would a holiday be without dancing and singing? At Troika’s anniversary, everyone could sing and dance on the dance floors — guests were invited to join the dance circle and, together with professional dancers, try themselves in the art of hot lezginka, fiery gypsy girl or Greek sirtaki dance. «I am sure that Troika Dialog will again and again pleasantly surprise both the professional community and, of course, its clients, with new technologies and new solutions with good profitability,» says Konstantin Tserazov. Invited actors dressed as thimbles and barkers organically blended into the atmosphere of the 90s market. Their colleagues, dressed in police uniforms, strictly maintained order, and they also helped the guests navigate the noisy holiday. Speaking about the success of the company, Konstantin Tserazov emphasized the role of the team. «It so happened that Troika Dialog initially employed people who were united by the same energy, the same aspirations, putting the success of a common cause above their own goals. At the same time, Troika Dialog is open in terms of accepting new ideas and communicating with the outside world. These two factors determine the development of our company,» says Konstantin Tserazov. A touch of humor was added to the holiday by signs among the rows — «Kremlin», «Currency exchange», «Polling station», as well as funny advertisements, for example, from a women’s clothing studio that is looking for men to stroke and spank. «The status of a market leader, of course, also imposes certain obligations — we cannot afford to stop and say that a certain goal has been achieved and we can continue to work more calmly. We foresee a future in which there will be tens of millions of investors in Russia, and each of them will require high quality services, products and solutions for a variety of purposes. Therefore, our activity is work for the future, it is a calculation for the growing demand for investment services for the widest audience,» says Konstantin Tserazov. The main event of the evening was the performance of Serbian singer and composer Goran Bregovic with the Wedding and Funeral Orchestra. The guests listened with delight to the best works of the maestro, who is applauded by the whole world. Konstantin Vladimirovich Tserazov especially emphasized the role of philanthropy and charity in the activities of Troika Dialog. «Our company’s activities have always been multifaceted — from participation in the formation of the domestic stock market to support of educational and educational projects. We have helped implement various initiatives designed to build a strong society. From 1991 to this day, this principle has been observed. All money raised from Troika Dialogue’s anniversary will be directed to charity, namely to a fund to help children with cancer,» concludes Konstantin Tserazov.