Saturday 13th February 2016
NEWS TICKER: FRIDAY, JANUARY 12TH: Morningstar has moved the Morningstar Analyst Rating™ for the Fidelity Global Inflation Linked Bond fund to Neutral. The fund previously held a Bronze rating. Ashis Dash, manager research analyst at Morningstar, says, “The fund’s rating was placed Under Review following the news that co-manager Jeremy Church was leaving Fidelity. Lead manager, Andrew Weir, who has managed the fund since launch in May 2008, remains in charge and is further supported by the new co-manager, Tim Foster. While we acknowledge Weir’s considerable experience in the inflation-linked space, some recent stumbles and below-benchmark returns over time have led us to lower our conviction in the fund. This is currently reflected by our Neutral rating.” - Italian GDP growth looks to have stalled to 0.1pc in the last quarter of 2015, falling below analyst expectations of 0.3% growth. The Italian economy grew by just 0.6% last year having come out of its worst slump since before the pyramids were built. The slowdown will put further pressure on reforming Italian prime minister Matteo Renzi, who has been battling to save a banking system lumbering under €201bn (£156bn) of bad debt, equivalent to as much as 12% of GDP. It is a serious situation and one which threatens Italy’s traditionally benign relationship with the European Union. The EU’s bail in rules for bank defaults seeks to force creditors to take the brunt of any banking failures. Italy suffered four bank closures last year, which meant losses of something near €800m on junior bond holders (with much of the exposure held by Italian retail investors). No surprise perhaps, Italian bank stocks have taken a beating this year, Unicredit shares are currently €3.06, compared with a price of €6.41 in April last year. In aggregate Italian banking shares are down by more than 20% over the last twelve months. Italian economy minister Pier Carlo Padoan told Reuters at the beginning of February that there isn’t any connection between the sharp fall in European banking stocks, as he called on Brussels for a gradual introduction of the legislation. He stressed that he did not want legislation changed, just deferred - Is current market volatility encouraging issuers to table deals? Oman Telecommunications Co OTL.OM (Omantel) has reportedly scrapped plans to issue a $130m five-year dual-currency sukuk, reports the Muscat bourse. Last month, the state-run company priced the sukuk at a profit rate of 5.3%, having received commitments worth $82.16m in the dollar tranche and OMR18.4m ($47.86m) in the rial tranche. Meantime, Saudi Arabia's Bank Albilad says it plans to issue SAR1bn-SAR2bn ($267m-$533m) of sukuk by the end of the second quarter of 2016 to finance expansion, chief executive Khaled al-Jasser told CNBC Arabia - The US Commodity Futures Trading Commission (Commission) announces that the Energy and Environmental Markets Advisory Committee (EEMAC) will hold a public meeting at the Commission’s Washington, DC headquarters located at 1155 21st Street, NW, Washington, DC 20581. The meeting will take place on February 25th from 10:00 am to 1:30 pm – Local press reports say the UAE central bank will roll out new banking regulations covering board and management responsibilities and accountability – Following yesterday’s Eurogroup meeting, Jeroen Dijsselbloem, says that “Overall, the economic recovery in the eurozone continues and is expected to strengthen this year and next. At the same time, there are increasing downside risks and there is volatility in the markets all around the world. The euro area is structurally in a much better position now than some years ago. And this is true also for European banks. With Banking Union, we have developed mechanisms in the euro area to bring stability to the financial sector and to reduce the sovereign-banking nexus. Capital buffers have been raised, supervision has been strengthened, and we have clear and common rules for resolution. So overall, structurally we are now in a better position and we need to continue a gradual recovery”. Speaking at the press conference that followed the conclusion of the February 11th Eurogroup, Dijsselbloem also acknowledged that “good progress” has been made in official discussions between Greece and its officials creditors in the context of the 1st programme review. Yet, he noted that more work is needed for reaching a staff level agreement on the required conditionality, mostly on the social security pension reform, fiscal issues and the operation of the new privatization fund. On the data front, according to national account statistics for the fourth quarter of 2016 (flash estimate), Greece’s real GDP, in seasonally and calendar adjusted terms, decreased by 0.6%QoQ compared to -1.4%QoQ in Q3. The NBS Executive Board decided in its meeting today to cut the key policy rate by 0.25 pp, to 4.25%. - Today’s early European session saw an uptick in energy stocks, banking shares and US futures. Brent and WTI crude oil futures both jumped over 4% to $31.28 a barrel and $27.36 respectively before paring gains slightly; all this came on the back of promised output cuts by OPEC. That improving sentiment did not extend to Asia where the Nikkei fell to a one-year low. Japan's main index fell to its lowest level in more than a year after falling 4.8% in trading today, bringing losses for the week to over 11%. Yet again though the yen strengthened against the US dollar, which was down 0.1% ¥112.17. Swissquote analysts says, “We believe there is still some downside potential for the pair; however traders are still trying to understand what happened yesterday - when USD/JPY spiked two figures in less than 5 minutes - and will likely remain sidelined before the weekend break.” Japanese market turbulence is beginning to shake the government and may spur further easing measures if not this month, then next. Trevor Greetham, head of multi asset at Royal London Asset Management, says “When policy makers start to panic, markets can stop panicking. We are seeing the first signs of policy maker panic in Japan with Prime Minister Abe holding an emergency meeting with Bank of Japan Governor Kuroda. We are going to get a lot of new stimulus over the next few weeks and not just in Japan. I expect negative interest rates to be used more in Japan and in Europe and I expect this policy to increase bank lending and weaken currencies for the countries that pursue it”. Greetham agrees that both the yen and euro have strengthened despite negative rates. “Some of this is due to the pricing out of Fed rate hike expectations; some is temporary and to do with risk aversion. In a market sell off money tends to flow away from high yielding carry currencies to low yielding funding currencies and this effect is dominating in the short term”. Australia's S&P ASX 200 closed down 1.2%. In Hong Kong, the Hang Seng settled down 1.01. in New Zealand the NZX was down 0.89%, while in South Korea the Kospi slid 1.41%. The Straits Times Index (STI) ended 1.25 points or 0.05% higher to 2539.53, taking the year-to-date performance to -11.91%. The top active stocks today were DBS, which declined 0.91%, SingTel, which gained 1.13%, JMH USD, which declined 1.39%, OCBC Bank, which gained 0.13% and UOB, with a0.34% advance. The FTSE ST Mid Cap Index declined 0.50%, while the FTSE ST Small Cap Index declined0.31%. Thai equities were down 0.38%, the Indian Sensex slip 0.71%, while Indonesian equities were down another 1.16%. The euro was down 0.3% against the dollar at $1.1285, even after data showed Germany's economy remained on a steady yet modest growth path at the end of last year. Gold fell 0.7% to $1238.80 an ounce, after gold gained 4.5% Thursday to its highest level in a year. Greetham summarises: “Like a lot of people, we went into this year's sell off moderately overweight equities and it has been painful. What we have seen has been a highly technical market with many forced sellers among oil-producing sovereign wealth funds and financial institutions protecting regulatory capital buffers. However, economic fundamentals in the large developed economies remain positive, unemployment rates are falling and consumers will benefit hugely from lower energy prices and loose monetary policy.”

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  • Friday, 12 February 2016 SEC affirms OCC’s capital plan
    OCC, the US equity derivatives clearing organization, says it is pleased with the announcement by the Securities and Exchange Commission (SEC) that, following an independent review, it has approved its capital plan. “We are pleased the SEC has granted final approval of OCC’s capital plan,” says Craig Donohue, OCC Executive Chairman. “The SEC has confirmed that strengthening OCC’s capitalisation is a compelling public interest and has acknowledged OCC’s importance to the US financial markets as a systemically important financial market utility”. Read more...
  • Friday, 12 February 2016 Only one in three CEOs are confident of revenue growth in 2016 says PwC Global CEO Survey
    Business confidence among industrial manufacturing CEOs has fallen to the lowest levels since 2013 according to PwC’s 19th Annual Global CEO Survey. In the report, CEOs rated geopolitical uncertainty (82%), exchange rate volatility (77%), the availability of key skills (76%), and fluctuating commodity prices (64%) among their top business risks over the next 12 months. However, when asked to consider the potential for economic and revenue growth over a three year period, the picture is brighter with half of the CEOs confident of growth - the highest level since 2010 Read more...
  • Friday, 12 February 2016 Bank of England issues consultation on Shari’a compliant central bank liquidity
    The Bank of England has published a consultation paper on establishing Shari’a compliant liquidity facilities and presents preliminary findings of its recent feasibility study. The move is an acknowledgement that a broader range of firms now tap the central bank’s balance sheet; however, Islamic banks still cannot utilise the central bank’s facilities as some of them are not deemed compliant with Islamic requirements. Read more...
  • Friday, 12 February 2016 US mortgage rates down again, hovering just above 2015 lows says Freddie Mac
    The downward trend in mortgage rates continued for the sixth consecutive week amid ongoing market volatility, according to the latest results of Freddie Mac’s Primary Mortgage Market Survey. The 30-year fixed-rate mortgage dipped to 3.65% for the week ending February 11th, down from last week when it averaged 3.72%. The average 30-year fixed is now hovering just above its 2015 low of 3.59%. Read more...
  • Friday, 12 February 2016 UK DMO will issue new 2065 index linked gilt in week beginning February 22nd
    The United Kingdom Debt Management Office (DMO) says it has appointed a syndicate to sell by subscription a new index-linked gilt maturing on November 22nd 2065. The DMO expects that this sale will take place in the week commencing 22 February. Barclays, Citigroup Global Markets, Goldman Sachs International and RBS will be joint book runners on the transaction. Read more...
  • Friday, 12 February 2016 Fannie Mae Prices latest Connecticut Avenue Securities risk sharing transaction, worth $945.1m
    Fannie Mae says it has priced its latest credit risk sharing transaction under its Connecticut Avenue Securities (CAS) series. To promote additional liquidity, Fannie Mae for the first time sought a credit rating for the M2 bonds in a CAS transaction. In addition, the company is selling a portion of the first loss position, which it says will reduce taxpayer exposure to credit losses. Read more...
  • Friday, 12 February 2016 The forensics of FCA v Achilles Macris
    Earlier this week (on February 9th) the UK market regulator the FCA published a Final Notice in settlement of its investigation of Achilles Macris, a former senior manager employed by JP Morgan Chase (JPM). Macris, it was reported, agreed to pay a fine of £792,000 in respect of his breach of Statement of Principle 4. This requires an approved person to deal with the FCA in an “open and co-operative way and [to] disclose appropriately any information of which the Authority would reasonably expect notice.” Kim Potts, Associate at Corker Binning, which specialises in business crime and fraud, explains the circumstances of the prosecution and its implications. In particular, argues Potts, that Macris’ disputation of some of the elements of the prosecution, highlights more than ever a need for the FCA to ensure that individuals are properly considered before agreeing a corporate settlement and why S393 rights which FSMA vested in individuals are important. Read more...
  • Friday, 12 February 2016 Estonian exchange will use Nasdaq’s blockchain e-voting technology
    Nasdaq and the Republic of Estonia have announced that Estonia's e-Residency platform will be facilitating a blockchain-based e-voting service to allow shareholders of companies listed on Nasdaq's Tallinn Stock Exchange, Estonia's only regulated securities market, to vote in shareholder meetings. The country's e-Residency platform is an electronic identity system used by both Estonian residents and those with business interests in the country to access government services through e-Residency digital authentication. Read more...
  • Friday, 12 February 2016 Gold and Indonesian equities dominate ETF trading on SGX
    Amidst continued market turbulence and rising risk aversion, haven assets like gold have been in focus. Indonesian stocks have also grabbed the spotlight on the back of improving domestic economic fundamentals, making the Jakarta Composite Index Asia’s best-performing benchmark so far this year. In terms of turnover, SPDR® Gold Shares was the most active Exchange Traded Fund (ETF) in both the month-to-date and year-to-date periods, with MTD turnover surging more than five-fold year-over-year. The db x-trackers MSCI Indonesia Index UCITS ETF was ranked the eighth most active in the MTD. Read more...
  • Friday, 12 February 2016 16 global corporate defaults so far this year; overtaking 2015 says S&P
    The 2016 global corporate default tally continued its rise this week with five US-based defaults, boosting the year-to-date tally to 16 issuers, says Standard & Poor's Global Fixed Income Research. Two of the additions were metals and mining companies, two oil and gas companies, and the remaining one was a confidential utility company. The commodity-related sector has accounted for nearly half of the defaulters this year followed by the metals and mining sector with four defaults and three in the oil and gas sector. Of these, 14 are in the US. The tally is three more than the same time last year and then, only five defaulters were in the US. Read more...
  • Friday, 12 February 2016 Clearstream assets under custody up 1%; but settlement transactions down 13% on YoY basis
    A slower month than usual for Clearstream, one of Europe’s post trade pillars. In January, the overall value of assets under custody held on behalf of customers registered an increase of 1% to €13trn (compared to €12.8trn in January last year). Securities held under custody in Clearstream’s international business as international central securities depository (ICSD) increased by 4% from €6.8trn in January 2015 to €7.1trn in January 2016. Securities held under custody in the German central securities depository (CSD) decreased by 2% from ¥6trn in January 2015 to €5.8trn in January this year. Standard & Poor’s earlier in the month, in a very upbeat review, confirmed Clearstream’s ratings. Read more...
  • Thursday, 11 February 2016 BBVA increases fintech fund to $250m
    Scratch a bank these days and they will tell you that fintech is high on their agenda. Investing in new start-ups is one way of ensuring that you stay ahead of the game: look for instance at the level of investment undertaken by Goldman Sachs and Morgan Stanley (for example, as well as others) in new fintech start up, in the hope of developing market disruptive technology allowing them competitive advantages in an increasingly technically oriented global financial market. In Spain, BBVA says it has increased the size of its financial technology fund to $250m and extended its partnership with Propel Venture Partners (Propel). BBVA will invest its $250m in Propel's funds as a limited partner, and Propel will manage the investment independently in a move designed to ensure the capital continues to be invested in the best digital financial services startups. Read more...
  • Thursday, 11 February 2016 BNYM Internal study claims bank now has 52% market share in cat bonds trust services
    BNY Mellon’s market share of the catastrophe bond trust market has risen to 52% according to an internal survey, up from 36% in 2014. Catastrophe bonds are financial instruments that provide reinsurance capacity for catastrophic events such as earthquakes, wind damage and floods. The bank says it acted as trustee for the bulk of the $7.8bn in cat bonds issued globally last year. Read more...
  • Thursday, 11 February 2016 Repo market outstandings in Europe stable despite decline in G-SIFIs repo books says ICMA
    A new survey sets the baseline figure for the European repo market at €5,608bn at December 9th last year, broadly unchanged over the previous six months, according to the European Repo and Collateral Council of the International Capital Market Association (ICMA). The relative stability of outstandings between the two surveys is down to the expansion of non-EU banks' European repo books. Meanwhile, the study notes a decline in the activity of Global Systemically Important Financial Institutions (G-SIFIs), the banks most affected by new regulation. The reduction in repo activity from its pre-crisis highs is widely attributed to the impact of new regulation, which banks have been implementing ahead of the official schedules. Most major banks already conform to the new liquidity and leverage regulations, although there is some uncertainty still about the precise impact of the Net Stable Funding Ratio (NSFR). Read more...
  • Thursday, 11 February 2016 Moody’s looks at SOCAR, following Azerbaijan downgrade, as credit negative
    Moody's is looking at Azerbaijan State Oil Company of the Azerbaijan Republic (SOCAR, Ba1 review for downgrade) as credit negative, particularly given the recent downgrade of the Government of Azerbaijan's bond and issuer ratings to Ba1 from Baa3. The downgrade is credit negative primarily because of the firm’s strong links to the sovereign. However, Moody’s says the action has no immediate impact on SOCAR's ratings. Read more...

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Key Stories from FTSE Global Markets

Set against a dynamic business backdrop in its own backyard, the European Energy Exchange (EEX) has adopted a confident and bold strategy to establish its global footprint within the exchange industry. Last year’s move into new commodity focused asset classes marks a new dimension in EEX’s growth and its continued transition from Europe’s leading energy exchange towards a global, multi-commodity exchange group. It has provided EEX and its parent company, Deutsche Börse Group, a growing competitive edge, given that it can also provide the vertical post trade support infrastructure required to back its expansion plans. Why has EEX been so successful in Europe, and how does that translate into its plans for global growth?

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Wednesday, 21 October 2015

Egypt opts for development funds

For the third time this year, the Central Bank of Egypt (CBE) has depreciated the Egyptian pound against the dollar in a foreign exchange auction in mid-October, taking the currency's decline for the year to 9.8%. The pound fell 1.3%(10 piasters) to 7.93 per dollar sell side and 7.88 buy side according to a report by the state-owned Middle East News Agency, which announced that the CBE offered $40m at a regular dollar sale to local lenders. Can the country pick its way out of the blues?

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The make-up of shareholders in Turkey’s banking segment has always been a touchstone of wider market change. The country has always been a swing market and the banking system has remained vulnerable, even with an improved capital base, as it has an ultra-high dependency on foreign funding of lending. That vulnerability has resulted in some significant changes in the investment in the country’s banking segment by foreign financial firms who have shown little stickiness in the country when the going gets tougher.

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Wednesday, 21 October 2015

Political uncertainty weighs on Turkey

A survey of 947 respondents in Turkey by Washington think tank PewCentre Research suggests Turks are dissatisfied with the direction of their country. Rising prices, crime and inequality are concerns. Moreover after years of quasi-Islamic rule that has been antipathetic to the military; survey respondents say the military is the only group with a “good influence on the country”. Opinions of the police, national government, religious leaders and the courts are mixed, while views of the media tilt to the negative. More pertinently perhaps, 52% of Turks think their children will be worse off financially in the future. The findings come as voters are scheduled to revisit national government elections on November 1st after the AKP party failed to form a coalition government in June. The upcoming elections will be closely watched, both as a bellwether of wider change in the eastern Mediterranean and as an indicator of the near term prospects for a lynchpin emerging market.

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In September, FTSE Group announced that Qatar will be upgraded from frontier to secondary emerging markets within the FTSE Global Equity Index Series in two equal tranches in September 2016 and March 2017, after the index provider confirmed that the country had now passed its key liquidity criteria for Secondary Emerging Market inclusion. Despite the plunge in oil prices, Qatar has held up relatively well in the current rout in emerging market stocks. Although with the exception of the FTSE upgrade, there remains a lack of immediate catalysts for Qatari stocks, even so Qatar maintains its edge as the government continues to spend freely, even as energy prices remain depressed. Does positive thinking about the kingdom’s prospects have legs?

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