This month I opened a Swiss bank account for the first time in my life. It was not very difficult, and I will get to that later. But this seemed a very logical progression from the argument in this column in recent months about where individual investors ought to be stashing their cash at the moment.
Last month there was a 10 per cent correction in US stocks and a very strong rebound back to fresh all-time highs. The intelligent investor would note that such volatility at high prices is generally a danger signal and the rebound is a good point at which to sell. If you look at the way the leadership of the market is concentrated into fewer and fewer stocks, then it is clear that this is exactly what is happening. The majority of US shares are actually already on the way down. The rest will follow the others. It is just a matter of time.
Locally it is hard not to be concerned about the 30 per cent fall in oil prices since the summer for two reasons. First because it means that the global economy is slowing down and going into a recession. Japan is already there. The euro zone is not far behind, and China too.
Secondly, of course oil prices matter for the UAE. Sure, this country’s economy is one of the richest and most diversified in the region. So it was too in 2008, and that did not prevent a vicious recession in 2009 after the oil price plunged from $147 to $32 in a matter of months.
Would it really be so different this time around? True the economy is not overheating to quite the same degree. But there is still plenty of room for a meaningful slowdown.
If you are an investor in UAE stocks then you’ve also had a wake-up call from recent market movements, in particular the 20 per cent correction of May-June. Remember what I just said about US volatility and all-time highs?
Eight years ago I did a private equity deal in Dubai and managed to sell my company before the global financial crash. It was interesting to meet one of the partners in the private equity firm that pulled off that deal recently and learn that he could not find a single worthwhile investment at the moment.
So what do you do with your money now? You always have to do something with it.
Even if the cash is just going to sit in a bank account you want to be sure that you have the best interest rate in the very safest banking location, preferably removed from the one you currently inhabit just in case. Even if you feel most comfortable with your money closer to where you live, there is still a good case for geographical diversification of assets.
For most people that country would be Switzerland. It’s politically rock solid and safe from invasion. It’s hugely rich with strong banking laws and has a reputation it can’t afford to lose.
The first $110,000 in all bank accounts is guaranteed by a federal deposit insurance scheme. Of course, there are a large number of Swiss banks that take deposits from foreigners, but this has not generally been available for the smaller investor without fees and charges that make it uneconomic.
There seems to be one exception to this rule and that is Swissquote.com, a Zurich stock market-quoted online bank that has recently set up an office in the Dubai international Financial Centre. It doesn’t charge for opening an account and the interest rate is 0.75 per cent on deposits up to $50,000. The downside was a lengthy form to complete to comply with the Dubai Financial Services Agency regulations that are actually more onerous than Swiss rules these days.
It wasn’t really just a matter of filling out a small form online.
But you do get a bank account, Swiss Iban number and deposit insurance. You take money in and out like any other internet bank account with a secure key number generated by looking at a small table rather than an HSBC-style electronic fob.
Its UAE portal is set up especially for users here and that’s quite an innovation for a Swiss bank. Then again, don’t bother if you are a US citizen and remember that Swiss banks always cooperate with your national tax authority. Still if you want to keep your money in Switzerland, this is an easy way to do it.
Peter Cooper is editor of ArabianMoney.net
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