Thursday 21st September 2017
NEWS TICKER September 21st: Portugal's debt agency, Instituto de Gestao da Credito Publico (IGCP) is re-opening a 6-month March 23rd, 2018 T-bill and issue new 12-month Sep 21st, 2018 T-bill for an indicative amount of between €1.5bn to €1.75bn today. Demand should be buoyant. At the last 6-month T-bill auction on July 19th this year, IGCP allotted €500m at an average yield -0.292% and ended up being covered 2.77 times. At the re-opening of the Jul 20th, 2018 T-bill on Aug 16th, IGCP allotted €750m at an average yield -0.291% and bid-to-cover of 2.45 times – Norway’ sovereign wealth fund reports that it has touched a record $1trn in assets as of yesterday -The Fed’s FOMC policy announcement today (expected around 18.00 GMT) is colouring global markets today. The committee will also release its latest economic projections; while Fed chair Janet Yellen’s commentary is expected about half an hour or so later – In other US market news today, look out for NAR home sales data and the Department of Energy’s latest report on weekly crude oil stocks -- Can Theresa May begin to salvage Brexit this week? Donald Tusk, president of the European Council, says he will meet with UK Prime Minister in London next week to discuss Brexit. Negotiations between the EU and UK have stalled with little progress made in recent weeks. Meantime local press reports have it that at her upcoming speech in Florence she will lay out an initial offer to contribute to the EC to secure access to the single market for a transitionary period. Will both initiatives reinject some life into the clearly stalled talks? -- Meantime corporate results news today is broadly positive despite some questions over UK consumer demand. “Kingfisher’s half year results released to the market today showed revenues rising by 4.5% to just over £6bn, with a good portion of this rise attributed to currency movements. Stripping out those currency effects, investors should note that the numbers do not look as good, with sales falling by 1.3% and underlying pre-tax profits rising by just 0.9% to £440m, reports the Share Centre. “General performance in the UK was mainly good, driven mostly by the success of Screwfix. However, this was more than offset by the continuing weakness in France where sales fell by 4.6% on a like for like basis. Overall sales were also disrupted by continuing operational changes the management is taking. This includes integration of its various brand’s operations under one IT system and one supply purchase system. Whilst some of the financial benefits are already showing through, the restructuring was expected to hit sales and interested investors should acknowledge that management is working on minimizing this effect over the longer term. This performance is not too much of a surprise to the market but interestingly, the shares were up by around 8% in early trading. Likely down to management reiterating that they expect to meet consensus underlying eps targets, despite still flagging caution for the second half of the year. They also announced a £60m share buyback which would have contributed to this morning’s share price rise.” Nonetheless, the analytics group says that it retains a cautious attitude to the retail environment as consumers in the UK are increasingly felling the pressure in real incomes. Moreover, the generally more upbeat tone in Europe isn’t feeding through to the group’s French businesses – The European Banking Authority is inviting comments on rules governing asset securitisation. The EU banking regulator is looking into concerns that some parts of its securitisation rules may make it more difficult for banks to shift nonperforming loans off balance sheets -- Having been strong in the previous week and then seen a slow session on Monday, Northern and Central European sovereign spreads traded wider yesterday, according to VTB’s Capital Bond Morning commentary today. Long and belly Russian benchmarks increased 6bps-8bps in yield, while the front end was more balanced, rising only 2bps-4bps. The bank also noted profit-taking in Ukrainian bonds, with the sovereign curve shifting up 10-12bp in the long end and 6bps-7bps in shorter durations. Kazakhstan moved up 3-4bp in all tenors. In Azerbaijan, AZERBJ 24 (YTM 4.28%) underperformed, going 5bsp higher, yield-wise. Armenia was the sole name in the sovereign space which was resilient to the weaker risk appetite, closing intact yesterday. Meanwhile, the Russian Ministry of Finance is to announce the results of the bonds swap today – Commenting on continued low market volatility in a client note this morning, Arne Staal, head of multi-asset quantitative strategies, at Standard Life Investments says, “The low volatility regime reflects an unusually ‘volatility-accommodative’ macro and corporate environment. A lack of major surprises in financial and economic data has allowed markets to price in benign economic growth expectations. Some gradual normalisation of volatility in the direction of average long-term levels is likely (in the absence of catalysts for a more abrupt increase in risk). For volatility to rise more structurally, we need to see developments that alter the expected path of the global economy. Some of the known macro risk catalysts that could lead to an abrupt transition to a high volatility regime include the risk of major government or central bank policy errors in the US, China or Europe, or geopolitical events, such as the possibility of military conflict in North Korea. In addition, valuations in many asset classes seem stretched by standard measures.” --

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Key Stories from FTSE Global Markets

Although long standing, in 2016 the country’s privatisation programme was harnessed by the government to encourage foreign investment in minority stakes in a gamut of state-owned firms, include the country’s flagship National Company KazMunaiGas. Since then, the programme has sometimes been mired in questions around governance. Partners, Carter Brod and Aset Shyngyssov of global law firm Morgan Lewis examine the viability of Kazakhstan’s privatisation plans.

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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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