Tuesday 28th June 2016
NEWS TICKER: JUNE 28TH: This morning the story is about keeping calm even as the West European political landscape looks set to change forever. The aftershocks from the UK’s decision to leave the EU last week will continue for some time. This morning however the focus is on the UK Chancellor’s statement that was designed to calm the markets and set out a marker for the Leave camp in the ruling Conservative Party to keep him in a unity government if the divorce from the EU is to proceed unimpeded. Expect lots of posturing, but the reality is a deal will be wrought between prominent Remainers and Leavers, so that they can ‘sell’ to a clearly divided population that a reasonable outcome for the UK can be achieved. Expect also that many Leaver will now renege on many of the pledges and charges levelled against the EU, as they were plangently either not achievable or true. Politically, the fallout is far from over: Nicola Sturgeon, whose reputation has been enhanced by the referendum will now seek ways for Scotland to exit the Union; a clever move as firms looking to locate overseas to keep long term free access to Europe will now seriously consider Edinburgh and Glasgow as alternatives to Ireland or Luxembourg. There are areas of concern however: one is in Northern Ireland, where a call for a Border Poll by leader Martin McGuinness could reignite old political divisions and moves by many MPs in the Opposition Labour Party to oust the party’s leader Jeremy Corbin is distracting attention from the main question: how does the UK extricate itself from Europe with the most gain and least pain to all sides. While Leave campaigners and television commentators look to try to reassure the British public that they should not be worried by short term movements in sterling and the stock market. According to brokerage Clear Treasury: “Sterling this morning has drifted lower again since Friday’s close which saw the pound depreciate 9%. The worst may not be over for the pound either as the Brexit fallout is by no means over. We will likely see aftershocks in the market for the foreseeable future. The difficulty here will lie in anticipating these shocks, and for this reason it’s hard to justify many traders being able to justify holding or purchasing additional sterling. This is why we feel that the pound may not have reached its bottom just yet. Keep a close eye on economic data from the UK with GDP, market sentiment, retail figures etc all likely to be impacted going forward” – The world’s top central bankers meet in Brussels today for a three-day summit; no doubt Brexit is on the agenda and they will certainly be talking measures to calm the markets. On Tuesday, European leaders meet and following the inimitable Angela Merkel’s admonition to all Europeans to treat with the UK kindly and well will help defuse what could have been a rancorous meeting – St Louis Missouri-based Stifel Financial Corporation today announced that it has entered into a definitive agreement to sell Sterne Agee's legacy independent brokerage, clearing, and RIA businesses to INTL FCStone Inc. (NASDAQ: INTL). Following a financial restructuring of the combined businesses, consideration will approximate the tangible net asset value of the entities. The transaction is expected to close immediately after regulatory approval, which is anticipated in July. As part of the agreement, Stifel has agreed to sell: Sterne Agee Financial Services, Inc.; Sterne Agee Clearing, Inc.; Sterne Agee Leach, Inc.; Sterne Agee Asset Management; and Sterne Agee Investment Advisory Services. To support these businesses, INTL FCStone has agreed to hire substantially all of the Birmingham, Alabama-based support professionals. Ronald J. Kruszewski, chairman and CEO of Stifel, says, "Last year we successfully integrated the Private Client Group branches and institutional fixed income business from our Sterne Agee acquisition. We are pleased to have found an acquirer in INTL FCStone who is committed to these businesses and the professionals in the Birmingham community." -

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  • Tuesday, 28 June 2016 MEPs call for swift Brexit and deep EU reform
    As Europe’s leaders meet today, the European Parliament has called for a swift exit by the UK from the Union. “The UK must respect the wish of a majority of its citizens, entirely, fully and as soon as possible, by officially withdrawing from the EU before any new relationship arrangements can be made,” says the European Parliament in a resolution voted after an extraordinary plenary debate on Tuesday. MEPs also stress the urgent need for reforms to ensure that the EU lives up to its citizens’ expectations. Read more...
  • Monday, 27 June 2016 S&P lowers UK ratings to 'AA' on Brexit vote
    As Project Fear turns into Project Realism, S&P Global Ratings has lowered its unsolicited long-term foreign and local currency sovereign credit ratings on the United Kingdom to 'AA' from 'AAA'. The outlook on the long-term rating is negative. We affirmed the unsolicited short-term foreign and local currency sovereign credit ratings on the UK at 'A-1+'. It also lowered to 'AA' from 'AAA' our long-term issuer credit rating on the Bank of England (BoE) and the ratings on the debt programs of Network Rail Infrastructure Finance PLC. We affirmed the short-term ratings on the BoE and Network Rail Infrastructure Finance debt programs at 'A-1+'. The outlook on the long-term rating on the BoE is negative. Read more...
  • Monday, 27 June 2016 BREXIT II - the impact on UK companies
    What are the implications of the UK voting to leave the EU on the corporate sector? According to Mark Quinn, partner in Mercer’s Talent business, “The immediate implications for companies and employees will depend on their circumstances. In the short term, companies should be analysing exposure they have to the UK and Europe in respect of their workforce’s organisational profiles and their reward plans. While we don’t know yet what restrictions will be imposed on, say, the free movement of people, it is evident that political, economic, legislative and market uncertainty is unlikely to clear any time soon. Strong employee communications will be critical for companies over the coming months.” Read more...
  • Monday, 27 June 2016 BREXIT - I: No quick political fix – but will Brexiteers be given sufficient time to effect change?
    It is now clear that the Remain camp was more prepared for the possibility of Brexit than the Leave camp; following statements by Bank of England governor Mark Carney on Friday and UK chancellor George Osborn today, it looks increasingly like the Leave leaders are making policy on the hoof. It is a good thing then that any effective policy towards Europe and the rest of the world will rely on the cooperation (and it has to be said, leadership) of the Remain camp and the Scottish and Northern Ireland devolved parliaments which nonetheless remain antipathetic to divorce from the Europe. At the same time, the UK Labour Party looks to be intent on suicide and is sidetracked attention from the main question Read more...
  • Friday, 24 June 2016 The morning after the night before: treating with the revolution
    Following the UK electorate’s decision to reject membership of the European Union, the assumption now has to be that there will be an orderly progression that preserves what the UK deems to be the best elements of its relationship with Europe, while ditching the rest. A smooth management of the transition - which could take up to two years to finalise - will be a key factor in determining the impact of change (both negative and positive). Of course, it won’t work out quite as smoothly as the Leave campaign suggested and according to them, “we shouldn’t talk down the UK and succumb to Project Fear.” So, what does this mean for companies, pensions, personal income, the markets and people? segments: it is too soon perhaps to be entirely prescriptive, but here is a round-up of the more salient predictions. Read more...
  • Thursday, 23 June 2016 EBRD lays out strategy for Greece
    The European Bank for Reconstruction and Development (EBRD) has adopted a strategy for Greece which sets out its priorities for its investment activities in the country. The EBRD started to invest in Greece in 2015 on the basis of a temporary mandate until the end of 2020. Read more...
  • Thursday, 23 June 2016 High net worth wealth accumulation surges in Asia-Pac, but slows in North America says Cap Gemini report
    While globally in 2015 High Net Worth Individual (HNWI) wealth saw only a modest growth of 4%, wealth in Asia-Pacific grew at an aggressive 10% propelling Asia-Pacific into the lead position as the region with the most HNWI wealth globally according to the 20th edition of the World Wealth Report (WWR), released today by Capgemini. This is the first time that Asia-Pacific is ahead of North America for both HNWI wealth and population. In 2015, Asia-Pacific held $17.4trn in wealth with a 5.1m HNWI population in comparison to North America’s $16.6trn in HNWI wealth and 4.8m in population. Read more...
  • Wednesday, 22 June 2016 Rightsizing of African power projects will enable faster development says Standard Bank
    The combination of a challenging business environment, liquidity constraints as well as a limited number of financially credible off-takers in many jurisdictions indicates that there may be a need for right-sizing some of Africa’s planned power projects, according to Jeannot Boussougouth, executive, power & infrastructure at Standard Bank. Read more...
  • Tuesday, 21 June 2016 EU Referendum: for asset managers and campaigners it’s a numbers game
    With George Soros and other market analysts and experts predicting a market meltdown should the UK decide to leave the European Union, our analysis for today looks at some of the issues that the UK will have to face whether it remains or leaves the European Union. Today we look at the impact on the asset management industry. Clearly there will be winners and losers whichever way the country votes. Speculators who have backed Brexit will make a killing and, as George Soros told The Guardian it will be the poorer people in Britain that will pay the cost. That’s because, in more macro terms, as Threadneedle Investments noted in a market paper this morning, “Simply put, the referendum is a binary event: if we Leave, equity markets fall; if we Remain, they bounce. But post-referendum, global economic challenges remain.” Read more...
  • Tuesday, 21 June 2016 ESMA calls for applications to its Group of Economic Advisors (GEA)
    ESMA has launched an appeal for applications to market experts and academics to its Group of Economic Advisers (GEA) for its Committee for Economic and Markets Analysis (CEMA) covering the period October 2016 to October 2018. ESMA says it has set up GEA to benefit from the expertise of stakeholders who are specialised in the analysis and risk assessment related to the markets under its remit (securities markets, market infrastructures, institutional and retail investors) and with a view to help promote investor protection, orderly markets and financial stability. CEMA meanwhile looks to this group to provide expert advice regarding ESMA’s market analytical activities. Read more...
  • Tuesday, 21 June 2016 German RMBS 90+ day delinquencies improve Feb to April
    The 90+ day delinquencies of the German prime RMBS slightly decreased to 1.85% in April 2016 from 1.96% in January 2016, according to the latest indices published by Moody's. The index consists of two sub-indices of low to medium and high loan-to-value (LTV) transactions. The high LTV transactions include the E-MAC DE series, Eurohome Mortgages 2007-1 plc, Kingswood Mortgages 2015-1 plc and PROVIDE GEMS 2002-1 PLC. The 90+ day delinquency index for high LTV transactions rose to 9.82% in April 2016 from 9.48% in January 2016. The 90+ day delinquency index for low to medium LTV transactions remained stable at 0.12% in April 2016 compared to January 2016. Read more...
  • Tuesday, 21 June 2016 Euroclear and Fullgoal AM launch RMB bond ETF
    Euroclear Bank, the Brussels-based international central securities depository (ICSD), and Hong Kong based fund manager, Fullgoal Asset Management (HK) Limited say they are collaborating on issuing an international RMB-denominated ETF: Fullgoal FTSE China Onshore Sovereign and Policy Bank Bond 1-10 Year Index ETF. The ETF, using the international issuance structure will be domiciled within Luxembourg, a market first in Europe. It will be listed and traded in RMB, USD and EUR on the London Stock Exchange, and settle directly in the ICSD – Euroclear Bank. Read more...
  • Tuesday, 21 June 2016 Selling Guernsey’s expertise to Asia’s growing asset pool
    The pool of investable assets in Asia is predicted to reach $U14.5trn by 2020. Surpassing the United States for the first time, China is currently home to 596 billionaires—an 80% increase since 2013. Motivated by others’ success, entrepreneurs and VCs in China are more ambitious than ever. Guernsey Finance’s recent visit to Asia to open Guernsey’s representative office in Hong Kong highlighted two unique sets of needs. Kate Clouston, director of International Business Development at Guernsey Finance, reports on the Asian market landscape and its perception of offshore finance centres such as Guernsey. Read more...
  • Monday, 20 June 2016 MPI survey asks if hedge funds are worth another look
    At their high watermark back in the fall of 2014 investments into some 10,000 hedge funds (globally) peaked at $2.8trn. However, then the California Public Employees Retirement System decided to call a halt to pull back its allocation, worth $4.5bn in hedge funds. The reason cited was a strategy to reduce investment complexity and costs. CalPERS move highlighted the fact that hedge funds were among the world’s most expensive investment vehicles, with performance fees usually set at 20% plus a 2% cut of assets under management; and compared with low cost index funds (averaging less than 0.2%), the hedge fund fee structure looked ridiculously expensive. CalPERS reported that it spent $135m in hedge fund fees in the 2013/2014 fiscal year. Moreover, returns on hedge funds simply have not justified the expense of maintaining an allocation to them, particularly since 2009 when over the same period equity markets have provided returns (in some markets) of more than 170%. Now comes a survey by MPI which asks, is now really the right time to pull out of hedge funds? Read more...
  • Monday, 20 June 2016 Average UK DB pension buy-in/buyout more than doubles since 2010 says Mercer
    The estimated average size of pension scheme buy-ins and buyouts in the UK increased from £114m in 2010 to £262m in 2015, says Mercer. The change represents an increase of 2.3 times over the six years and highlights that UK pension plans of increasingly larger size are turning to pension buy-ins and buyouts to manage defined benefit pension risk. Mercer’s analysis also shows that the UK market in pension buy-ins and buyouts continues to show resilience to market volatility with the number of transactions holding steady at broadly 150 to 200 in each of the last six years. Moreover, aggregate annual premiums paid in respect of smaller transactions (up to £50m each in size) and medium-sized transactions (between £50m and £500m) have stayed at the same levels from year to year, at around £1.5bn and £4bn, respectively. While the size of the market overall has varied from year to year, most of this variation has come from the larger deals, above £500m each. 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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