Thursday 26th May 2016
NEWS TICKER, WEDNESDAY, MAY 25TH: Invesco Perpetual today announced that Thomas Moore has been appointed to join the Henley Fixed Interest investment team* in June. Moore has over 17 years’ experience in fixed interest markets, and joins from Morgan Stanley & Co. where he held the role of managing director and head of European Credit Analytics, building and managing a team of 12 professionals. He began his career in New York in 1999 at Orion Consultants, Inc. where he held a number of roles focused on US and international fixed income markets, before moving to Morgan Stanley in 2004. Thomas is a graduate of Harvard and Oxford Universities and holds an MBA from Columbia Business School. Moore’s appointment follows a series of promotions and additions to the Invesco Perpetual Fixed Interest team in 2015. The Henley Fixed Interest team is now 24 strong and manages assets of £28.8bn across a range of over 27 funds for investors -According to MEA Risk, Al-Qaeda in the Islamic Maghreb has released a statement to claim responsibility for an attack that it reportedly carried out recently at a Areva's uranium mining facility in Arlit, city of Agadez (northern Niger). AQIM statesthat the "Grand Sahara's el-Nosr" brigade conducted the attack, "despite reinforced security and airborne surveillance." In the same statement, the militant organization stressed that its main purpose in the region is to "undermine French and Western interests in the region", which it deems "legitimate targets." It is unknown whether this attack caused any casualties - Maitland, the global advisory and fund administration firm, has opened a new office in Miami. The office will provide Maitland’s LatAm team with a regional base, giving their growing private and institutional client base access to on-the-ground support. The new office is Maitland’s 15th across 12 countries. The firm says economic and political instability in Brazil and LatAm – alongside regulatory changes such as Brazil’s recently announced tax amnesty program – are driving increased demand for its services, especially for clients who have based themselves outside their country of origin. The move ultimately allows Maitland to forge closer relations with its clients, prospects as well as the growing community of service providers in the vicinity. Benjamin Reid, senior business development and client manager, LatAm, has relocated to Miami to the group’s business development efforts in the region and will be joined by Pedro Olmo and Camila Saraiva, as client relationship managers responsible for the day-to-day management of Maitland’s growing book of LatAm clients. Olmo joined Maitland from Turim family office in Brazil where he was the group’s in-house counsel. 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The auction volume will now be evenly distributed over the next four scheduled auctions. The auction calendar will be adjusted accordingly and an updated version will be published soon. The European Energy Exchange (EEX) is the leading energy exchange in Europe. It develops, operates and connects secure, liquid and transparent markets for energy and commodity products. At EEX, contracts on Power, Coal and Emission Allowances as well as Freight and Agricultural Products are traded or registered for clearing. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX) and Gaspoint Nordic are also part of EEX Group. Clearing and settlement of trading transactions are provided by the clearing house European Commodity Clearing (ECC) - Commercial real estate investor Raven Russia has listed on the Channel Islands Securities Exchange (CISE). The firm is already listed on the LSE. Advisers to the transaction were UK legal advisers Berwin Leighton Paisner, Guernsey legal advisers Carey Olsen, broker N+1 Singer and listing sponsor Ravenscroft. The company has also announced a proposed fundraising of a minimum of £105.5m by way of a placing of new convertible redeemable preference shares with the intention that they will be listed solely on the CISE and traded on the SETSqx platform of the LSE - Allianz Global Investors says that that Deborah Zurkow, CIO and Head of Infrastructure Debt, is to take on a new, broader role, becoming head of the alternatives pillar within its global investment platform. Zurkow will join AllianzGI’s Global Executive Committee, effective June 1st. As head of alternatives, Zurkow will lead the continued build out of AllianzGI’s Alternatives capability, which comprises a diverse mix of both liquid and illiquid alternative investment solutions for clients. Since the creation of AllianzGI’s Alternatives pillar in December 2014, assets under management have doubled, growing from €7.9bn in December 2014 to €15.7bn by the end of Q1 2016. Andreas Utermann, chief executive officer and Global CIO at Allianz Global Investors, says, “Over the last few years, Deborah and her team have helped turn the idea of infrastructure debt as an asset class for institutional investors into a reality. In her new, expanded role, Deborah will be able to put her experience of developing innovative solutions that meet clients’ needs to work across the entire spectrum of Alternatives, one of the fastest growing parts of our investment platform, increasingly attractive to investors looking for alpha in era of financial repression.” In other related moves, Claus Fintzen will become CIO and head of Infrastructure Debt, reporting to Deborah Zurkow, assuming day to day responsibility of AllianzGI’s Infrastructure Debt team with immediate effect. Claus joined AllianzGI in 2012 along with Deborah and three other team members from Trifinium Advisors. As well as being instrumental in helping develop AllianzGI’s infrastructure debt platform, Claus brings 21 years of industry experience to the role – Aquila Capital is providing institutional investors with access to its latest diversified renewable energy portfolio (the Aquila Capital Renewables Fund III) via a bond solution. The securitisation, which already has been given an indicative investment grade rating by an ESMA-recognised rating agency, is targeting an A- rating thanks to the high quality of the underlying portfolio, its efficient structure and very modest structuring costs. Both the securitisation and a direct investment in the Fund provide investors with access to a conservative, broadly diversified portfolio of wind and photovoltaic plants in politically stable countries in Western Europe. The Fund is already invested in 13 operational renewable energy plants in Sweden, Germany, the United Kingdom and France, and benefits from a pipeline of potential investments in excess of €350m. Roman Rosslenbroich, chief executive officer and co-founder of Aquila Capital, says: ”We actively had the securitisation reviewed by a reputable audit firm with respect to its regulatory, legal and tax suitability for the Fund’s anchor investor - a leading German insurance company. Due to significant demand, we are now making this investment opportunity available to additional investors.” - UniCredit is entering into the Swiss ETF market by issuing two ETFs with SIX Swiss Exchange, for which it is also acting as market maker. This increases the number of ETF issuers on SIX Swiss Exchange to an unprecedented 22 and the product range on offer to a new record high of 1,240. The two newly listed ETFs on European convertible bonds offer investors a supplement to the diversification of their portfolios, while offering the advantages of on-exchange trading for what was previously an asset class that was heavily OTC-traded The ETFs are the Swiss franc denominated UC Thomson Rts. Bal. European Convertible Bond UCITS ETF ( LU1199448058) and the UC Thomson Rts. Bal. European Convertible Bond UCITS ETF (LU1372156916) –

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France’s industrial crisis: predictable and set to last

Friday, 03 August 2012 Written by 
France’s industrial crisis: predictable and set to last France’s industrial sector is in the midst of a steadily worsening crisis. There has been a decline in production, employment and productive investment, the external deficit remains significant, and export market shares are declining rapidly. We would argue that this situation was foreseeable, particularly if we add up issues with supply, domestic and external demand, and the impact of the eurozone crisis. Unfortunately, not a lot can be done about the weakness of demand, and the remedies to the supply problem are difficult to implement rapidly. http://www.ftseglobalmarkets.com/

France’s industrial sector is in the midst of a steadily worsening crisis. There has been a decline in production, employment and productive investment, the external deficit remains significant, and export market shares are declining rapidly.

We would argue that this situation was foreseeable, particularly if we add up issues with supply, domestic and external demand, and the impact of the eurozone crisis. Unfortunately, not a lot can be done about the weakness of demand, and the remedies to the supply problem are difficult to implement rapidly.

Let’s go through these issues, their causes and their implications.

Cause no. 1: The supply problem



Supply conditions for goods and services continue to deteriorate in France. The low profitability of companies discourages investment hence the production capacity of French industry is on the decline.

Since 2001, French industry sales prices have been falling relative to unit wage costs. Such falls reflect the excessive level of unit wage costs compared to the sophistication of industrial production in France. The downmarket nature of French industrial production prevents an increase in its selling prices, because of the high level of the price elasticity of demand for industrial products made in France: 0.9 versus 0.3 in Germany.

However, the rise in the unit wage cost – relative to selling prices – does not come as a result of the trend in productivity, but what has been happening to wages. This is because the level of costs is pushed up by the level of employers’ welfare contributions.

The subsequent fall in French industry’s profitability is substantial, reducing its capacity to invest and create jobs. This leads to the off-shoring of production capacity to countries where industrial profitability is higher, thereby weakening industry financially and threatening it with a serious crisis in the event of a recession and falling demand.

Cause no. 2: The demand problem

Between 2011 and 2012, French industry suffered from the weakness of both domestic and external demand. This resulted in a lower capacity utilisation rate than normal, which makes the problem of low profitability even more detrimental. And the decline in demand may deteriorate further if there is a fall in real wage incomes and government expenditure.

Cause no. 3: The euro-zone crisis

The eurozone crisis has two negative effects on French industry:

  1. it weakens demand and therefore imports in the eurozone countries that usually would have been France’s customers. This is significant because the eurozone accounts for 46% of French exports – the United Kingdom, which is also mired in a recession, accounts for 6%;
  2. it reduces domestic demand and capacity utilisation rates in Spain and Portugal and persuades industrial companies in these countries to turn to exports. As wage costs are lower in these countries, there is an increase in the competition that has a direct impact on French industry. France’s export market share tends to decline, whereas those of PortugalSpain and Ireland have recovered.

Remedies are very difficult to implement

Of the three issues mentioned, weakness of demand and the effects of the eurozone crisis cannot be controlled, particularly in a situation where there is private-sector deleveraging and a reduction in fiscal deficits. The question for French industry is therefore which remedies can be implemented on the supply side? We have put together the following list of possible measures:

 

  • an improvement in the sophistication of industrial production and in the differentiation of products, which will require innovation, investments, and marketing;
  • increased geographical diversification in companies' sales to increase the weight of emerging countries, which is currently quite low in France;
  • a major reform of the financing of social welfare in France to reduce the weight of welfare contributions paid by companies;
  • a fall in the hourly labour cost, either through a fall in the per capita wage, or through an increase in the number of hours worked (which is obviously a source of conflict).

 

However, these measures are all very difficult to implement rapidly.

It is also important to understand the major fragility of companies that are not very profitable (i.e. they have a shortfall in supply) when they are faced with a significant and lasting decline in demand.

Unfortunately, it looks as though this French industry crisis is not going to go away any time soon.

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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