Hello, dear participants of the WellMax international system, clients, partners and investors of IFC company!

We continue informing you on the results of our activity and the IFC specialists` perspective on the situation and processes in the world and regional economies.

In November 2016, the assets value of the WellMax investment portfolio increased by 1.02% in USD and EUR, which is equivalent to 12.24% per annum. The annual yield amounted to 14.76% in rubles and to 11.28% in yuans.

From November 10^th till December 10^th, 2016, the assets value of the WellMax Premium investment portfolio increased by 7.46% in dollars, which is equivalent to 87.84% per annum.

The last month turned out to be full of information. In the USA and Europe there was a whole spate of citizens` wills important for both, the world economies in general and markets in particular.

On December 4, in Europe there were two important votings: a constitutional referendum in Italy and presidential elections re-run in Austria. Both of them attracted close attention of markets since they are extremely significant for the whole European Union. Despite Austria`s little political and economic weight in the EU, the presidential elections re-run was of great significance. A victory of Norbert Hofer, a member of the far-right Freedom Party of Austria could have reinforced positions of right European politicians. In its turn, such a reinforcement could have deepened the rift inside the European Union outlined after the referendum in Great Britain regarding the future of united Europe and processes of European integration. In this respect, news on Alexander van der Bellen`s victory who is the former leader of the Austrian Green Party, were greeted with relief. While the same cannot be said of the referendum results in Italy.

The constitutional draft reform which was put to the vote, contemplated alterations to procedures for forming the Senate and reauthorization of the central administration that could have allowed the country`s government to take necessary measures and effect reforms for stabilization of economy.

However, on December 4, the Italians raised voices against the draft reform suggested by the Prime Minister of Italy Matteo Renzi. After the vote counting Signor Renzi sent in his resignation, since the vote considered among others as a vote of confidence in the government. This resignation is aggravating the political turmoil: though the latter has already become permanent for the Italian Republic (since 1947 there have been 63 changes of government), it may trigger a bank crisis in the third-largest economy of the euro region.  

The falling state of the Italian financial sector is a consequence of a 3-year recession and 10 years of economic stagnation. According to estimates of the IMF, the volume of problem loans on books of Italian banks amounts to 360 billion euro – 18% of the total loans. This is three times more than the EU`s average (6%) that is comparable to a level “bad debts” in Albania and Burundi. There is another system risk for the country due to excessive government bonds in portfolios of Italian banks. Government securities of a variety of countries account for 10% of Italian banks` assets. The figure is twice higher than the Euro zone`s average and this is enhancing connection between bank and sovereign risks. Thus, a collapse of Italian banks will lead to a European-wide bank and economic crisis.

The news from the USA continue effecting great influence on markets. Despite Mr. Trump`s victory and Mrs. Clinton recognizing the defeat, still there is a chance that the Democrats` candidate may be elected the US president. According to the Constitution of the USA, the winner is officially selected by the Electoral College on December 19 but not after the general election held on November 8. While just half the States prohibit electors from casting their vote for the defeated candidate, though if the elector does it, they will only pay a small fine. The other part of the States do not prohibit disregarding the results of the general will at all.

At the present moment Clinton`s supporters are persuading the electors from the States where Trump is the winner to vote contrary to a pledge. In order to influence the results of the presidential elections the Democrats have to convince 38 electors to do it. Reportedly, some of them are ready to do it. However, this outcome seems to be hardly possible, still there is a chance of poll reviewing that may provoke political instability in the US.

Unpredictable appointments made by the new president elect also cause higher volatility in markets. The future Executive Office hasn`t been formed yet but it may safely be said that there will be some people diametrically opposed each other. Besides, many key positions of the Executive Office will be taken by people with no political experience that also makes difficult to forecast future politics of the US.

Mr. Trump`s sharp statements regarding the relations of the US and China raise great concerns of investors. Hardening rhetoric and stepped-up mutual complaints open the door for serious confrontation between two leading world economies and may result in a large-scale trading war with strong consequences for the world economy.

Additionally, investors worldwide pay special attention to the meeting of the US Federal Reserve System scheduled for December 13 where a possible increase of interest rates will be discussed. The increase could both, negatively influence the market of corporate securities, especially companies with high leverage, and lead to strengthening USD that in its turn would keep down prices for raw commodities.

Considering the high level of incertitude in markets and volatility factors mentioned above, the IFC team decided to refrain from purchasing the assets heavily depending on political climate, and acted with discretion effecting trade operations in November – early December.  

Thus, for example, we didn`t earn from rising copper and nickel quotations determined by Donald Trump`s election victory who had promised to devote 500 billion USD for infrastructure projects. Our decision was motivated by unpredictable outcome of the Electoral College voting mentioned above. At the same time, the increase in assets value of our investment portfolios was promoted by the UC RUSAL quotations growth followed the aluminum price rise. 

However, we effected several successful trade operations in the energy sector where significant price movements were observed, particularly as regards the oil market. In the recent months, the black gold quotations have been extremely volatile – first they fall beyond the price range of 45-52 USD per Brent barrel (as we had forecasted) and then soar.

The Brent black gold has risen almost 7% for one day as soon as the news appeared that the OPEC members had agreed to decrease oil extraction. While the shares of Oasis Petroleum Inc. (an LTO company) have risen 27.7% in November and 56% since we purchased them in August. The prices are keeping a relatively high level due to several reasons: the oil extraction decrease agreed by the OPEC members on November 30 and readiness of independent oil producers including Russia to join the agreement. However, it`s necessary to prove for the market that all members to the agreement observe it in order to have the prices reserved for the future growth. Thus, the following dynamics depends on the real volume of oil that will come into the market in the near months together with the consumption dynamics of oil and oil products.

It should be mentioned that the Russian ruble have recently strengthened against the black gold price growth. It also should be mentioned that Russian export-oriented companies are not interested in keeping this trend for a long time in future since they need the cheap ruble to preserve low expenses and thereby their competitiveness in the world market, along with the government that uses the devaluated ruble to keep the budget deficit at a relatively low level.  Due to this, it is highly possible that the currency strengthening will slow down or even cease at all soon.

Besides, we have managed to earn from the increased natural gas price in the USA primarily related to a forecast of cold winter provoked by the La Niño climatic phenomenon forming in the eastern part of the Pacific Ocean. In future the dynamics in the US natural gas market will depend both on the weather influencing a gas extraction level  from underground storages, and on price level for the competing fuel types such as stove fuel in the private sector and coal in power generation. Most probably that closer to early spring there will be a price reduction for natural gas in the US, however we don`t exclude a possible growth of quotations in late 2016 and early 2017 in case of hard frost in the continental part of the US, especially off the east coast of America. 

The used caution didn`t prevent us from increasing the assets value of both, WellMax and WellMax Premium investment portfolios. At the same time, we compensated for a low trade activity with large-scale analytical research that let us define prospect assets to get high profit both in late 2016 and early 2017 and make happy investors and partners of International Financial Community.