Wednesday 7th October 2015
NEWS TICKER: Tuesday, October 6th: Vistra (UK) Limited ('Vistra') is pleased to announce the appointment of Barry Gowdy as Director, effective 1st October. Gowdy joins Vistra from RBC Wealth Management, where he was responsible for the firm's UK property trust clients – According to NIBC the labour market report for September is one indicator that US economy is losing momentum. It is a view reflected by the weakening of business confidence surveys and a more moderate pace of job growth over the last few months. Although not related to the problems that have engulfed emerging markets over the last summer,, it appears that US businesses have on average accumulated too much in inventories. The number of non-farm payrolls increased by only 142k, whereas 200k was expected and the August reading was revised downwards from 173k to 136k. Additionally, underlying figures indicate that a relatively strong boost in the number of jobs in the public sector camouflaged the weakness in private sector job gains. Market participants were probably also intrigued by the slow rate of hourly wage (earnings) growth. These stayed flat in September compared to August, while the annual rate of wage growth stayed at 2.2%, in line with the annual rate in between 2.0 and 2.5% range this year - Global Jet Capital, a provider of financing solutions for large-cabin, long-range private jets, has agreed to purchase the aircraft lease and loan portfolio of GE Capital Corporate Aircraft in the Americas representing approximately $2.5bn of net assets. Shawn Vick, executive director of Global Jet Capital says, “We are investing heavily in growing the business both organically and through strategic acquisitions such as this one with GE. This is a prime example of our industry expertise and investment capital coming together to evaluate and identify an opportunity to expand the business in a disciplined, carefully measured way.” The price point of the aircraft range between $25m and $75m on average, and corporate users and high net worth individuals will seek competitive financing solutions rather than allocate their own cash resources which are better invested in their own businesses - Gresham Computing plc, a provider of real-time financial transaction control and enterprise data integrity solutions, today announced the appointment of Damian Canning as Sales Director for North America. Based in Gresham’s New York City office, Canning will be responsible for continuing the strong growth of Gresham’s Clareti Transaction Control (CTC) platform in North America - Spending on food, entry fees, insurance and entertainment over the three day Eid al-Adha festival, some 300,000 Saudis spent SAR400m ($107m), according to local press reports. Bahraini officials report higher than usual tourist inflows and spending. Roughly 50% of those who checked in the kingdom’s hotels were nationals of member states of the Gulf Cooperation Council, enjoying Bahrain’s more relaxed ambience - The Philippine unit of Royal Dutch Shell Plc said on Monday it was looking to launch a long-delayed initial public offering (IPO) sometime next year, and may sell even more than the minimum requirement of 10 percent of common stock. "We're getting ready for it," Shell Philippines Country Chairman Edgar Chua told reporters on the sidelines of a Shell event. "We've discussed it with the (Philippines Department of Energy), it's just a question of timing." Pilipinas Shell Petroleum Corp, which operates one of the country's two refineries, is required under a nearly two-decade local law to conduct an IPO. The company had previously cited unfavourable market conditions and the need to upgrade its local refinery in deferring a share sale. Shell's refinery upgrade is underway and could be completed hopefully by the middle of November says a Shell spokesman - European regulators have approved the London Stock Exchange's plan to link the operations of LCH.Clearnet and EuroCCP to offer investors more choice for clearing their trades on the UK bourse. The link is set to begin October 26th - The Straits Times Index (STI) ended 58.1 points or 2.08% higher to 2851.25, taking the year-to-date performance to -15.27%. The top active stocks today were SingTel, which gained 2.81%, DBS, which gained 2.36%, UOB, which gained1.64%, OCBC Bank, which gained2.05% and CapitaLand, with a 2.49%advance. The FTSE ST Mid Cap Index gained 1.45%, while the FTSE ST Small Cap Index rose 1.04%. - Morningstar has downgraded the Aberforth UK Small Companies fund to a Morningstar Analyst Rating™ of Silver. The fund previously held a Gold Rating. Samuel Meakin, manager research analyst at Morningstar, said: “Following a recent Morningstar Analyst Ratings meeting, we have moved the Aberforth UK Small Companies fund to a Morningstar Analyst Rating of Silver. The fund was previously rated Gold. Whilst we still hold the fund in high regard, the recent and upcoming changes to the management team have slightly reduced our level of conviction. Andy Bamford, one of the fund’s six managers, is set to retire at the end of this year; he follows David Ross, who retired in 2014.” - Rubicon Minerals Corporation (TSX: RMX)(NYSE MKT: RBY) was asked by Canada’s Ministry of Environment and Climate Change (MOECC) on September 30th to temporarily suspend mill operations at the Phoenix Gold Project) to treat elevated ammonia levels, discharge sufficient water from the tailings management facility (TMF), and to upgrade the TMF, under specific timelines. It also ordered Rubicon to undertake other operational and reporting obligations, including construction upgrades to the TMF. The company has been utilizing alternative technologies to address the ammonia levels in the TMF - LIFE, the global diaspora organisation of Lebanese finance executives says it has signed an academic partnership with Cambridge Judge Business School, the business school of the University of Cambridge – Figures shows that the United Kingdom’s HMRC collected a record £7.5bn in stamp duty from residential property transactions in 2014/2015, up from £6.45bn the previous year and from £4.9bn in 2012/2013 and the total tax collected from home buyers in the UK has grown by 165% over the last six years alone. Transactions in London contributed the most residential stamp duty revenue at just over £3bn, followed by the South East at £1.6bn and between 2008/2009 and 2014/2015, stamp duty revenues in London have grown by 248%, compared to around 158% in the East of England and 140% in the South East. The latest analysis reports from both Knight Frank and Savills look into the effect of this on the prime market in London and both conclude that the stamp duty changes introduced last December are still having an effect on sales 10 months on.

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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.

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.


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