Wednesday 25th May 2016
News ticker: Chubb today announced the appointment of Joe Fernandez, formerly D&O and Financial Institutions Product Manager for legacy ACE in Continental Europe, to the new role of financial lines product manager for Eurasia and Africa for Chubb, as it continues to invest in building its insurance capabilities in its newest business region. In his new role, Joe will be responsible for the development and implementation of financial lines underwriting strategies in Eurasia and Africa. He will also be responsible for employee financial lines products training. Joe will continue to be based in London, reporting to Grant Cairns, financial lines manager for Chubb in the UK and Ireland. His appointment is effective immediately. Fernandez has 18 years of insurance industry experience. He joined ACE in 2004 as corporate manager for Commercial D&O. Previously he held the position of corporate manager for Commercial D&O at AIG— Commenting on Royal Dutch Shell PLC’s Annual General Meeting, Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said: “The senior executive pay awards last year are not sufficiently justified by the company’s financial performance. We remain disappointed that the chief executive received very close to the maximum possible bonus in a year when overall financial performance was weak. Whilst the board did exercise some discretion in reducing the awards, we believe they could have done more. We also think the peer group of four companies that Shell uses to benchmark its long term incentive plans (LTIPs) is too narrow. However, we do acknowledge that despite a tough operating year, the company has had several successes in 2015, including the completion of the BG Group deal. We also appreciate that Shell has made very positive steps in responding to the concerns raised by its investors and we will be engaging with the company going forward.” Royal London Asset Management holds shares in Royal Dutch Shell worth £936m - UBS AG has opened a stock-index futures brokerage service in China. The brokerage will support clients wanting to trade on futures on the CSI 300, SSE 50 and CSI 500 indexes as well as treasury futures say local press reports - Tuesday, May 24th: Pakistan reportedly plans to sell a 40% stake in its stock exchange according to its managing director Nadeem Naqvi who announced the sale at an investment conference organised by Renaissance Capital in London yesterday. The exchange has approached the London, Shanghai, Istanbul and Qatar stock exchanges he said, explaining that a further 20% share will be sold in the local stock market. The sell-off is part of a government led privatisation program, involving some 70 companies following the disbursement of a $6.7bn IMF rescue package back in 2013. The terms of the loan end in September - Moody's Investors Service (Moody's) has confirmed the Ba3 corporate family rating (CFR) and Ba3-PD probability of default rating (PDR) of Russian vertically integrated steel and mining company Evraz Group S.A. (Evraz), and the B1 (LGD 5) senior unsecured ratings assigned to the notes issued by Evraz and Raspadskaya Securities Ltd. The outlook on all the ratings is negative – According to defence title Janes, The China Nuclear Engineering and Construction Corporation (CNEC) - one of China’s 10 key defence industrial enterprises - has entered an agreement with China's Minsheng Banking Corp to support its impending initial public offering (IPO) of 2.6bn shares on the Shanghai Stock Exchange, which is expected to raise around $250m. China's State Administration of Science, Technology and Industry for National Defense (SASTIND), which oversees the development of the country's aerospace and defence industry, said on 23 May that the agreement with the bank will support CNEC's "leap forward" towards "strategic development" - Thailand-based developer of integrated e-logistics trading and e-business service solutions Netbay says it is planning to offer 40m shares, equivalent to 20% of the registered and paid-up capital, in an initial public offering (IPO) and expects to get listed on the Market for Alternative Investment (MAI) next month. The company has the registered capital of THB200m. The firm has reportedly s appointed Maybank Kim Eng (Thailand) as financial advisor and underwriter. Netbay CEO Pichit Viwatrujira-pong says that the proceeds would be used to expand its business and increase the working capital. It targets the revenue growth of 20% this year, up from THB223m last year – Old Mutual has moved closer to the IPO of Old Mutual Wealth next year as it confirmed in a JSE announcement today that it was close to selling its stake in Old Mutual Asset Management (OMAM) to Affiliated Managers’ Group in a deal valued at $1bn - Zhouheiya Food Co. is expected to file an application for a Hong Kong listing in the next couple of weeks, looking to raise up to $500m, reports the Wall Street Journal today - UK operator Vodafone has announced its Group Chief Commercial Operations and Strategy Officer, Paolo Bertoluzzo, is going to step down after 17 years with the company to take a CEO role at payment and general financial services company Istituto Centrale delle Banche Popolari Italiane (ICBPI). Vodafone says it will announce a successor in ‘due course’ - The number of money laundering convictions and confiscations is relatively low given the size and characteristics of Jersey’s financial sector according to the latest report on the UK’s Crown Dependency of Jersey from the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), adopted in December 2015. Apparently, this is the last in a cycle of MONEYVAL evaluation reports based on methodology set out by the Financial Action Task Force (FATF) in 2004. MONEYVAL is currently evaluating its members according to the FATF’s updated 2013 methodology.

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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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