The coronavirus pandemic has wreaked havoc on the global economy, and as more and more countries go into lockdown, the financial markets have taken their biggest hit since the 2008 Recession, if not ever. The uncertainty caused by COVID-19 has resulted in hordes of fearful investors simultaneously selling off their holdings, and either diversifying their portfolios or throwing in the towel altogether. For those investors who have hung in there, diversifying to “safer” investments is imperative, and we’re already starting to see alternative investment trends take shape.
Increased interest in citizenship by investment schemes
More individuals are looking to citizenship by investment as an avenue of reallocating their finances. These programmes offer investors citizenship rights to a particular country in return for a financial contribution to that nation’s economy, with the global citizenship by investment industry worth an estimated to be worth around $25 million overall. And as noted by Paul Singh, Director of London-based CBI agency CS Global Partners, interest in citizenship has gone up since the coronavirus situation unfolded. Singh said that: “There has been a significant increase in demand for information on how to obtain second citizenship from the Caribbean specifically”, pointing to the region’s fast processing procedures and unrivalled experience as some of the main reasons for this.
These schemes provide investors with an all-important safety net in these uncertain times, diversifying their opportunities for investment, and shielding them from volatile markets and political instability in their own country. By having citizenship to another nation, individuals can also launch new business ventures, or expand their existing operations into the country, giving them even greater financial security. This also applies to their families, as they can generally all apply to obtain citizenship together.
More investors look towards gold
Long considered a classic “safe” asset, investors have been flocking towards gold in their droves. When coronavirus cases began to surge at the end of February, the price of gold actually hit a seven-year high, rising to $1,689 per troy ounce. This came after the metal increased in price during 10 of the preceding 12 weeks, with the likes of The Royal Mint and The World Gold Council experiencing unprecedented levels of demand, with the latter’s holdings boosted to an all-time high of 2,947 tonnes.
Gold is considered a safe bet for its ongoing importance to the global economy. Though it no longer backs currencies like the US dollar, many central banks keep a significant percentage of their monetary holdings in gold, making it incredibly valuable regardless of what is happening in the world. For example, 76.98% of the US Central Bank’s holdings are in gold reserves, while in Germany this figure is 73.48%. Indeed, gold often outperforms other investments during times of financial or political disquiet, such as when there were fears that the UK would leave the EU without a deal. As such, investors’ decision to switch to gold makes sense.
Chinese investments are proving popular
The rising number of investors looking towards Chinese stocks and government bonds may initially seem counterintuitive. Despite being where COVID-19 is believed to have originated, and as one of the countries worst hit by the virus until recently, China’s rapid containment of the virus through draconian measures by the government have led to lockdown measures being lifted swiftly as a result.
Due to China’s relative stability in relation to coronavirus, the country’s investment markets have begun to bounce back. While the Shanghai Composite Stock index dropped by less than 1%, and the Shenzhen Composite gained a mere 0.28% on March 19th, this is in stark contrast to the massive downturns experienced in other countries. For example, the Dow Jones Industrial Average saw a 6.3% drop just the day before. China’s upturn in fortunes has been further demonstrated by a surge in foreign demand for sovereign renminbi bonds during March.