Sunday 7th February 2016
NEWS TICKER: Friday, February 5th: According to Reuters, Venezuela's central bank has begun negotiations with Deutsche Bank AG to carry out gold swaps to improve the liquidity of its foreign reserves as it faces debt payments of some $9.5bn this year. Around 64% of Venezuela's $15.4bn reserves are held in gold bars, which in this fluid market impedes the central bank's ability to mobilise hard currency for imports or debt service. We called the central bank to confirm the story, but press spokesmen would not comment - The Hong Kong Monetary Authority (HKMA) says official foreign currency reserves stood at $357bn (equivalent to seven times the currency in circulation or 48% of Hong Kong M3) as at the end of January, down compared with reserve assets of $358.8bn in December. There were no unsettled foreign exchange contracts at month end (end-December: $0.1bn) - BNP Paribas today set out plans to cut investment banking costs by 12% by 2019 to bolster profitability and reassure investors about the quality of its capital buffers. The bank is the latest in a line of leading financial institutions, including Credit Suisse, Barclays and Deutsche Bank which look to be moving away from capital intensive activities. BNP Paribas has been selling non-core assets and cutting back on operations including oil and gas financing for the last few years as it looks to achieve a target of 10% return on equity. Last year the bank announced a €900m write-down on its BNL unit in Italy, which pushed down Q4 net income down 51.7% to €665m - Johannesburg Stock Exchange (JSE)-listed tech company, Huge Group, will move its listing from the Alternative Exchange (AltX) to the JSE main board on March 1st - Moody's says it has assigned Aaa backed senior unsecured local-currency ratings to a drawdown under export credit provider Oesterreichische Kontrollbank's (OKB) (P)Aaa-rated backed senior unsecured MTN program. The outlook is negative in line with the negative outlook assigned to the Aaa ratings of the Republic of Austria, which guarantees OKB’s liabilities under the Austrian Export Financing Guarantees Act – As the first phase of talks between Greece and its creditors draws to an end, International Monetary Fund chief Christine Lagarde stressed to journalists in Greece that debt relief is as important as the reforms that creditors are demanding, notably of the pension system. "I have always said that the Greek program has to walk on two legs: one is significant reforms and one is debt relief. If the pension [system] cannot be as significantly and substantially reformed as needed, we could need more debt relief on the other side." Greece's pension system must become sustainable irrespective of any debt relief that creditors may decide to provide, Lagarde said, adding that 10% of gross domestic product into financing the pension system, compared to an average of 2.5% in the EU, is not sustainable. She called for "short-term measures that will make it sustainable in the long term,” but did not outline what those measures might be. According to Eurobank in Athens, IMF mission heads reportedly met this morning with the Minister of Labour, Social Insurance and Social Solidarity, Georgios Katrougalos, before the team is scheduled to leave Athens today. According to the local press, it appears that differences exist between the Greek government and official creditors on the planned overhaul of the social security pension system. Provided that things go as planned, the heads are reportedly expected to return by mid-February with a view to completing the review by month end, or at worst early March. In its Winter 2016 Economic Forecast published yesterday, the European Commission revised higher Greece’s GDP growth forecast for 2015 and 2016 to 0.0% and -0.7%, respectively, from -1.4% and 1.-3% previously - Fitch says that The Bank of Italy's (BoI) recent designation of three banks as 'other systemically important institutions' (O-SIIs) has no impact on its ratings of the relevant mortgage covered bond (Obbligazioni Bancarie Garantite or OBG) programmes. Last month, BoI identified UniCredit, Intesa Sanpaolo. and Banca Monte dei Paschi di Siena as Italian O-SIIs. Banco Popolare and Mediobanca have not been designated O-SIIs. This status is the equivalent of domestic systemically important bank status under EU legislation. Fitch rates two OBG programmes issued by UC and one issued by BMPS, which incorporates a one-notch Issuer Default Rating (IDR) uplift above the banks' IDRs. The uplift can be assigned if covered bonds are exempt from bail-in, as is the case with OBG programmes under Italy's resolution regime and in this instance takes account of the issuers' importance in the Italian banking sector – Meantime, according to local press reports, Italian hotel group Bauer and special opportunity fund Blue Skye Investment Group report they have completed the rescheduling and refinancing of Bauer’s €110m debt through the issue of new bonds and the sale of non-core assets, such as the farming business Aziende Agricole Bennati, whose sale has already been agreed, the Palladio Hotel & Spa and a luxury residence Villa F in Venice’s Giudecca island – Meantime, Russian coal and steel producer Mechel has also agreed a restructuring of its debt with credits after two intense years of talks. The mining company, is controlled by businessman Igor Zyuzin - Asian markets had a mixed day, coming under pressure. Dollar strengthening worries investors in Asia; from today’s trading it looks like dollar weakening does as well. Actually, that’s not the issue, the dollar has appreciated steadily over the last year as buyers anticipated Fed tightening; but it has hurt US exports and that has contributed to investor nervousness over the past few weeks, which is why everyone is hanging on today’s The nonfarm payrolls report, a bellwether of change – good or bad in the American economic outlook. Back to Asia. The Nikkei 225 ended the day at 16819.15, down 225.40 points, or 1.32%; and as the stock market fell the yen continued to strengthen. The Nikkei has shed 5.85% this week. The dollar-yen pair fell to the 116-handle, at 116.82 in afternoon trade; earlier this week, the pair was trading above 120. It is a hard lesson for the central bank, whose efforts to take the heat out of the yen by introducing negative interest rates has done nothing of the sort. Australia's ASX 200 closed down 4.15 points, or 0.08% after something of a mixed week. The index closed at 4976.20, with the financial sector taking most of the heat today, with the sector down 0.7%. In contrast, energy and materials sectors finished in positive territory, buoyed by gains in commodities. The Hang Seng Index closed at 19288.17, up 105.08 points (or 0.55%) while the Shanghai Composite was down 0.61%. down 17.07 points to 2763.95. The Shenzhen composite dropped 20.36 points (1.15%) to 1750.70, while the Kospi rose marginally by 0.08% to 1917.79. Today is the last day of trading on the Chinese exchanges for a week.

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  • Friday, 05 February 2016 DMO to issue new long term index linked gilt in late February
    The UK Debt Management Office (DMO) is announcing today that the sixth and final syndication of the 2015-16 programme will be the launch of a new index-linked gilt maturing on November 22nd 2065. The new gilt will pay a short first dividend on May 22nd. The sale will take place the week beginning February 22nd. Read more...
  • Friday, 05 February 2016 Global turbulence calls for regional unity over national interest says Shultz.
    At a speech today to students at the London School of Economics, Martin Schultz, president of the European parliament stresses that the UK should remain in the European Union. Acknowledging that for the past few years the EU has operated in “crisis mode”, he suggested that both the Union and the UK would be diminished by separation as the world fragments into regionalism. Read more...
  • Friday, 05 February 2016 US Stats Bureau says employment rises by 151,000 in January
    Total nonfarm payroll employment rose by 151,000 in January, and the unemployment rate was little changed at 4.9 %, the US Bureau of Labor Statistics reported today. Job gains occurred in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Employment declined in private educational services, transportation and warehousing, and mining. The news will of course feed an uptick in share prices today, though the figures are likely not enough in such a dynamic and volatile global market for the Federal Reserve monetary policy committee to risk raising rates, even just a little bit. Read more...
  • Friday, 05 February 2016 Moody's downgrades Armenia's Unibank to B3 from B2
    Moody's has today downgraded Unibank OJSC's long-term local and foreign currency deposit ratings to B3 from B2. The rating agency has also affirmed the bank's Not-Prime short-term local and foreign currency deposit ratings. At the same time, Moody's has downgraded the bank's Baseline Credit Assessment (BCA) and adjusted BCA to caa1 from b3. The outlook on the long term deposit ratings is stable. Read more...
  • Friday, 05 February 2016 Liquidnet adds to global execution & quantitative services team
    Trading network Liquidnet says it has expanded its Execution & Quantitative Services (EQS) Group with two new hires, Craig Viani and Gerald Casey. Viani joins Liquidnet’s Algo Services Group as an execution consultant, while Casey joins as head of trading strategy. Read more...
  • Friday, 05 February 2016 AMF/AFG launch FROG to boost French funds industry
    The Autorité des Marchés Financiers (AMF), the French financial market regulator, and the French Asset Management Association (AFG) are launching FROG, a working group chaired by Didier Le Menestrel that is intended to raise the profile and broaden the distribution of French investment funds abroad. FROG will unveil its recommendations for infrastructure, legal structure, technological developments and more next summer. Read more...
  • Thursday, 04 February 2016 US court imposes sanctions worth $2.5m on Worth Group and principals
    The US Commodity Futures Trading Commission (CFTC) says the District Court for Southern of Florida has imposed fines on Worth Group Incof Jupiter, Florida, and its owner and operator, Andrew Wilshire and Wilshire’s sister, Eugenia Mildner who served as Worth’s sole officer and director prior to February 2012. The defendants must now pay restitution of $1,250,000 and a civil monetary penalty worth $1,250,000 against a CFTC complaint filed on August 13th 2013,which charged the principals with defrauding retail precious metals customers and engaging in illegal, off-exchange retail commodity transactions. Read more...
  • Thursday, 04 February 2016 Euro Commercial Paper outstandings decrease by USD2.5bn over the last week due to the government sector
    The amount of outstanding euro commercial paper (CP) and certificates of deposit (CD) decreased over the week ending February 3rd, according to CMDportal data. Outstandings decreased by USD2.5 billion to $867.3bn, with the government sector responsible for the decrease. In the last week, government outstandings decreased by $8bn to %221bn. This follows three weeks in which outstandings increased by $20bn. Corporate outstandings increased by $5bn to $108.1bn and have increased by $12.5bn (13.0%) in the last four weeks. Read more...
  • Thursday, 04 February 2016 Lower-than-expected mortgage rates offer refinance opportunity says Freddie Mac
    Freddie Mac(OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey (PMMS), showing mortgage rates moving lower for the fifth consecutive week amid ongoing market volatility. The average 30-year fixed is at its lowest point since the week of April 30th last year when it averaged 3.68%.30-year fixed-rate mortgage (FRM) averaged 3.72% with an average 0.6 point for the week ending February 4th, down from last week when it averaged 3.79%. A year ago at this time, the 30-year FRM averaged 3.59%. Read more...
  • Thursday, 04 February 2016 Record $187bn Distributed to Investors in real estate in in recent years
    World markets might be tanking, but real estate has been THE investment story over the last decade; helping both institutional investors and property owners. Strong real estate performance has resulted in record levels of distributed capital exceeding $100bn in 2013, 2014 and in the first half year of 2015 (FHY1 2015) As part of its 2016 Global Real Estate Report, Preqin finds that private closed-end real estate funds have again returned record amounts of capital back to investors; funds distributed $138bn to investors in 2013, $187bn in 2014, and a further $103bn in the first half of 2015. Read more...
  • Thursday, 04 February 2016 World Bank to triple commitment to Middle East in next five years to $20bn
    World Bank Group President Jim Yong Kim today announced that the World Bank Group will be tripling its commitment to the Middle East and North Africa (MENA) region in the next five years to nearly $20bn to address the consequences of conflict and to help countries recover and rebuild. Speaking at the UK’s Supporting Syria and the Region conference, Kim said, “It is imperative that we rise to the challenge of the humanitarian crisis at hand, and that we do so in a way that supports development for generations to come.” To support countries hosting large numbers of refugees, the World Bank Group is working on an extraordinary measure to provide $200m dollars in concessional financing to help create jobs and increase access to education in Lebanon and Jordan. Read more...
  • Thursday, 04 February 2016 Norges Bank outlines expectations of companies in which it will invest
    Norges Bank, Norway’s central bank, which administers the country’s massive sovereign wealth fund, has published its second annual report on the responsible investment approach of the Government Pension Fund Global. The report reviews the fund’s responsible investment in practice through last year and outlines what the central bank will expect from firms in which it will invest in 2016.. Key areas of this work include developing and promoting international standards and principles, expressing expectations towards companies, and being an active owner. The central bank says it expects companies to address a broad set of long-term risks in their strategies, investment plans, risk management and reporting. It has also updated its expectations with regard to children's rights, water management, climate change and how companies manage human rights. Read more...
  • Thursday, 04 February 2016 S&P raises Argentina local currency ratings 'B-/B' with a stable outlook
    The ratings agency says that Argentina’s new administration has presented a credible plan to deal with long-standing macroeconomic imbalances, eliminated foreign-exchange restrictions, and begun negotiations with its holdout creditors. The outlook on the local currency rating is stable, reflecting the new economic policies of the Administration, but also the potential difficulties in passing and implementing those plans. “As a result, we are raising our long-term unsolicited local currency rating to 'B-' from 'CCC+'. In addition, we are raising our transfer and convertibility (T&C) assessment to 'B-' from 'CCC-'. However, the unsolicited foreign currency ratings on Argentina remain 'SD' following its July 2014 default says S&P. Read more...
  • Thursday, 04 February 2016 EC expects lower growth in Spain in 2016
    The European Commission issued a note today that it expected economic growth for Spain in 2016, but at a slower rate than last year, and warned the leading risk to economic growth came from political doubts following December's general election. "Downside risks to the growth forecast stem mainly from the uncertainty surrounding the formation of the new government", said the Commission's latest forecast. Nonetheless, growth in Spain should remain "robust over the forecast horizon, backed by positive labour market developments, improved access to credit for firms and households, high confidence and low oil prices,” said the Commission. Read more...
  • Thursday, 04 February 2016 DFM posts net profit of AED261m for last year; profits fall 66%
    The Dubai Financial Market (PJSC) today announced its results for the 2015 financial year, posting a net profit of AED261m, compared to AED759.3m in 2014, a 66% decline. Total revenues reached to AED 451 million in 2015 compared to AED 936.7 million in 2014. The total revenue comprised of AED393.7mof operational revenues and AED57.3mof investment revenues and others. The results will be presented for ratification at company’s AGM due on March 9th. The board also proposed a cash dividend of 5% of the capital equivalent to AED400m. 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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