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NEWS TICKER, THURSDAY, September 3rd: The Straits Times Index (STI) ended 28.3 points or 0.98% higher to 2906.43, taking the year-to-date performance to -13.63%. The top active stocks today were SingTel, which gained 0.82%, DBS, which gained 0.80%, UOB, which gained 1.40%, OCBC Bank, which gained1.13% and CapitaLand, with a 0.36%advance. The FTSE ST Mid Cap Index gained 0.55%, while the FTSE ST Small Cap Index rose 0.24% - Madrid City Hall announced it would dedicate €10m out of its 2016 budget to a "welcome plan for refugees" to include housing, integration, psychological support and legal aid, City Hall spokeswoman Rita Maestre (Ahora Madrid) said during a press conference on Thursday. Maestre said a budget had been decided upon but that specific numbers had not: "We want to welcome all those who are fleeing from war", adding that given their situation "a permanent housing solution" would be needed in the city. The Mayor of the Spanish capital, Manuela Carmena, said on Wednesday that a decision would be taken at the city government meeting today: "The city of the hug must, of course, be ready to welcome refugees" - The European Bank for Reconstruction and Development (EBRD) is joining international efforts to clean up Tunisia’s Lake Bizerte with a €20m loan and technical assistance to support the expansion and rehabilitation of the sewerage network of the Bizerte region and the rehabilitation of three wastewater treatment plants located near the lake. The EBRD’s investment is part of an integrated environmental programme aimed at de-polluting Lake Bizerte and reducing sources of pollution through investments in wastewater, solid waste and industrial effluents. This programme is labelled by the Union for the Mediterranean and is part of the Horizon 2020 Initiative, which aims to de-pollute the Mediterranean by the year 2020. The European Investment Bank is providing a €40 million sovereign loan to the programme while the European Union Neighbourhood Investment Facility is contributing a €15m grant for both capital expenditure and technical cooperation - Analysis of illicit financial flows (IFFs) by Global Financial Integrity (GFI) shows that over the period 2003-2012 the global volume of IFFs grew by more than 9% annually (. In 2012 (the most recent year for which data are available), illicit flows were estimated at close to $1trn. In response to this unfettered surge in illicit capital leaving developing nations, the UN has endorsed target 16.4 in the Sustainable Development Goals (SDGs), which commits the global community to “significantly reduce” IFFs by 2030. This UN action “represents an historic moment in development policy given that it is the first time the international community has recognized the illicit flows problem and pledged to address it,” says GFI President Raymond Baker - US Secretary of Commerce Penny Pritzker named Eduardo Leite, Chairman of the Executive Committee of Baker & McKenzie LLP, as the new chair of the US section of the US-Brazil CEO Forum. “Mr. Leite has served on the U.S. section of the CEO Forum for several years, and I am pleased that he has agreed to serve as Chairman,” said Secretary Pritzker. The new US section chair was named after the former chair, Ms. Patricia Woertz, Chairman of the Board of Directors of Archer Daniels Midland Company, submitted her resignation from the role. However, Woertz will remain a member of the U.S.-Brazil CEO Forum, and Leite will complete the current three-year term, which ends on August 13th 2016 - MarketAxess Holdings Inc. (Nasdaq:MKTX), the operator of a leading electronic trading platform for fixed-income securities, and the provider of market data and post-trade services for the global fixed-income markets, today announced total monthly trading volume for August 2015 of $75.5 billion, consisting of $43.7 billion in U.S. high-grade volume, $26.7bn in other credit volume, and $5.1 billion in liquid products volume. MarketAxess is providing both the reported and adjusted estimated US high-grade TRACE volumes on its website. The Company believes that the adjusted estimated volumes provide a more accurate comparison to prior period reporting.

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The European Review

By Patrick Artus, chief economist at Natixis

Avoid investing in German financial assets

Wednesday, 09 May 2012 Written by 
Avoid investing in German financial assets It may seem tempting to invest in German financial or property assets: Germany's economic and financial situation is at present far better than that of the other euro-zone countries, and German assets have outperformed those of the other euro-zone countries. http://www.ftseglobalmarkets.com/

It may seem tempting to invest in German financial or property assets: Germany's economic and financial situation is at present far better than that of the other euro-zone countries, and German assets have outperformed those of the other euro-zone countries.

But it should be realised that: German assets are overvalued because the euro zone's monetary policy is too expansionary for Germany and because German investors have a very significant domestic bias while the supply of assets is small and Germany risks economic and financial overheating which could lead to a correction in asset prices in the medium term.

German financial assets might seem attractive
German financial and property assets might seem attractive for two reasons. First, because the present economic and financial situation in Germany is far better than in other euro-zone countries. This is reflected in its public finances, current-account balance, the size of its industry and export capacity, its cost-competitiveness, corporate profitability and investment drive, and in its labour market - which is now experiencing rises in real wages, compared to falling real wages in the rest of the euro zone. All in all, given that Germany does not need to reduce its fiscal deficit, and given the rise in real wages, better export performance, increasing business investment and job creation, the growth outlook is at present far better in Germany than in the other euro-zone countries.



The second reason why German assets could seem attractive is that their recent performance has been strong. This is true for government bonds, equities, corporate bonds, bank debts and residential real estate (but not commercial real estate), since 2008.

But in reality, investment in German assets should be avoided, because they are too expensive and Germany could start overheating

German assets are too expensive
Since 2006, Germany has witnessed and will continue to maintain stronger growth than the euro zone as a whole. This means that the euro zone's current monetary policy is too expansionary for Germany, as it was for the rest of the euro zone from 2002 to 2007. This of course tends to cause a rise in asset prices.

Also, Germany has excess savings (by households and companies, as shown by its external surplus) with an increasing bias for investing domestically, while at the same time the supply of assets is small: meaning the fiscal deficit has almost disappeared, companies are self-financed and issue few bonds and residential construction is at a low level. There is therefore ex ante excess demand for German assets, which has driven up asset prices, especially for safe-haven government bonds.

Germany could start overheating in the medium term
Germany is practically in a situation of full employment, and since its companies are very profitable, wage growth is accelerating. In 2012-2013 an increase in the unit wage cost approaching 3% can be expected, with productivity gains that are fairly low. This will probably lead to a rise in underlying inflation towards 2%, and hence to even more abnormally low long-term interest rates, which will continue to push up the prices of other assets.

It is well known that such a situation of overheating (full employment and interest rates that are too low relative to growth) is potentially unstable and can lead to a downward correction in asset prices (as it occurred in Spain, Ireland and the United States, for example).

Patrick Artus

A graduate of Ecole Polytechnique, of Ecole Nationale de la Statistique et de l'Adminstration Economique and of Institut d'Etudes Politiques de Paris, Patrick Artus is today the Chief Economist at Natixis. He began his career in 1975 where his work included economic forecasting and modelisation. He then worked at the Economics Department of the OECD (1980), before becoming Head of Research at the ENSAE. Thereafter, Patrick taught seminars on research at Paris Dauphine (1982) and was Professor at a number of Universities (including Dauphine, ENSAE, Centre des Hautes Etudes de l'Armement, Ecole Nationale des Ponts et Chaussées and HEC Lausanne).

Patrick is now Professor of Economics at University Paris I Panthéon-Sorbonne. He combines these responsibilities with his research work at Natixis. Patrick was awarded "Best Economist of the year 1996" by the "Nouvel Economiste", and today is a member of the council of economic advisors to the French Prime Minister. He is also a board member at Total and Ipsos.

Website: cib.natixis.com/research/economic.aspx

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