Press release: Effects of the COVID-19 pandemic and KPST measures

Prishtina, 20 March 2020 – The Kosovo Pension Savings Fund, through this Press Release, informs all contributors, the media and the general public about the status of KPST investments before and after the outbreak of the COVID-19 pandemic, as well as the measures taken by the decision-making authorities of the institution on the investment positioning, but also on the protection of contributors who will retire in the short term as the crisis continues and the markets are at a negative level.

EFFECTS OF THE PANDEMIC
The pandemic caused by the COVID-19 virus has already created an extremely severe crisis for global financial markets. The adverse effects had begun on the economy with the highest production activity in the world, China, from the closure of production lines and outlets as early as January and February 2020. Those effects were immediately reflected in the financial markets, without the virus being globally spread yet.

As the spread of the virus expanded globally and passed into a pandemic, production activity was shut down even in more advanced economies (a process that is ongoing). In addition, there were restrictions and prohibitions on air traffic, tourism, a sharp decline in investment, production, consumption and sales, a sharp decline in oil prices, difficulties (and now even impossibilities) to meet financial obligations (from businesses and individuals), eventual job losses, service cuts, rising incidence of new infections and an increasing number of deaths every day, and as a result of all this tremendous increase in uncertainty and fear globally. The economic damage of this pandemic is still incalculable, both in financial and human terms. However, there is hope that the stimulating and auxiliary effects that governments and global financial organizations are undertaking (for businesses and citizens) will have a positive effect on overcoming this emergency.

KPST INVESTMENT MEASURES
KPST’s governing bodies have repositioned investments before the beginning of the most severe effects (so far) on the financial markets, massively withdrawing investment from the stock market and directing them mostly to the cash market, but also to multi-portfolios. Almost half of all investments are already in Kosovo and in the cash market, where risk is currently considered the lowest possible. KPST thus reduced its stock market exposure to a historic low level of only about 6%.

These measures have produced an effect by protecting KPST investments from a very severe decline in financial markets. By comparison, from the beginning of the year 2020 until March 18, the main indices have experienced deep depreciation. The American Dow Jones Industrial (DJI) Index dropped by -30%, and the S & P500 by -26%, while indexes in Europe, such as Germany’s DAX, dropped by -37%, while England’s FTSE index dropped by -33%. For the same period, KPST’s investment performance was reduced by about -7%. On the other hand, in order to create a post-crisis investment advantage, the institution is looking at the opportunity to begin reallocating funds into financial instruments, which presents rapid growth opportunities at the moment markets recover.

PROTECTION OF CONTRIBUTORS RETIRING DURING THE CRISIS
The key news at the moment is for all contributors who will retire through 2020. The Governing Board has established a conservative portfolio that will not be affected by the drop of financial markets. Thus, no contributor retired during 2020 will be affected by the drop of financial markets.

Implementation of this portfolio was supposed to take place during the second half of the year, but due to the state of emergency we are facing, and in order to protect contributors, the launch of this portfolio has been accelerated.

The creation of this portfolio was also the only legal way KPST currently has available to protect persons who will retire throughout the year. At the same time, this decision goes in the spirit of the relief and mitigating measures that governments and organizations around the world (but also in Kosovo) are taking to protect their citizens.

KPST believes that this situation will be overcome and that the world will find the energy and ideas to return to normality and prosperity. Currently, the health and lives of the contributors are paramount, and we urge everyone to take extra care and follow the guidelines of the country’s institutions.