HEAVENS FOR RETIREES

European pensioners resident abroad are in constant increase in recent years and this trend it is likely to last for a while. The reasons why this exodus are different and mainly related to: the best cost of living; lower taxation of the country of entry, health care acceptable; various types of facilitations such as free transportation and reserved preferential routes, pleasant temperature and enjoyable stays.

The transfer of residence generally involves two economic sectors: real estate and banking. From the first, every pensioner will move to purchase or to rent an apartment, while the second one must necessarily transit for the pension credit account. The above considerations represent the essence of the choice of residence in the case of two countries characterized by the same currency but if we are different country with different currency, then even the most prudent person will eventually be interested in the exchange rate risk.

Of course, we refer to the currency exchange rate of the country of origin usually defined “strong” in the currency of the friendly country, which can often be as an emerging or frontier currency. Therefore, we will consider this second aspect, one European pensioner that decides to move his residence, at least six months every year, to another country with a different currency.

We then entered the Inch platform (https://datascollector.inchcapital.com/index.php) to list by force the reports of EURO versus all available currencies (thirty-one) and then compare the best results with preferred countries Migrant retirees for the above reasons. For a pensioner who receives a pension in EURO, the country at the time offering the best real appreciation opportunities is the Philippines.

 

The daily bar chart shows currency Euro vs Philippine Peso. The trend is bullish.

InchCapital Platform – Data Source: Fida

 

The EUR / PHP – Euro Philippine Peso cross ranks first in this survey in terms of trend / momentum for the short / medium term, whereas it is ranked fifth in a medium/long perspective. What does all this mean?

That the pensioner obliged to transit for the local real estate and banking / financial sector will inevitably have the risks involved in the fluctuation of the exchange rate between the two currencies. Risks that with the due financial culture can turn into opportunities especially considering the cyclical trends, which can have substantial variations.

 

The weekly line chart shows the long/term trend of Euro vs. Philippine Peso.

InchPlatform – Data Source: Fida

 

For example, if you decide to make a real estate purchase you will have to wait until the end of the bullish phase of the euro against the Philippine Peso, as it will have to proceed to a sale, and then make the operation diametrically opposed if you are to attend the exhaustion of the bearish trend of the EURO.

The same is true for other more speculative investment types such as those relating to local stock exchanges: gains and losses related to the home currency (that of retirement) may amplify or depress the equity performance of the local market.

Against this latter point, it is essential to check before if there is a black market in the local currency as in that case equity risk would actually be aggravated by the retirement component towards the real economy with a speculative bubble risk (see case Of Venezuela and the Caracas stock index). Read more: EURPHP