Wednesday 27th May 2015
NEWS TICKER: WEDNESDAY, MAY 27TH: The S&P Capital IQ division of McGraw Hill Financial (NYSE:MHFI) whose CUSIP Global Services (CGS) unit produces identifying instruments and entities that support efficient global capital markets, says Scott Preiss, currently CGS’s Vice President and Chief Operating Officer, has been promoted to the role of Global Head & Managing Director, replacing Jim Taylor, who is retiring, on July 1st, after 28 years of service - Orezone Gold Corporation (ORE-TSX) says a mining permit application has been submitted to the government of Burkina Faso for the construction and operation of its wholly owned Bomboré gold project. The application is based upon the recently announced positive Feasibility Study (April 28, 2015) and includes an environmental and social impact assessment and a relocation action plan (RAP) for the local people affected by the project. The four to eight month permitting process includes public hearings and a complete review by the Ministry of Mines and Energy1 (MEE) and the Ministry of Environment and Durable Development2 (MEDD) and the National Mining Commission3 (NMC), a technical panel. During a weekly cabinet session in parliament the recommendations of the NMC are reviewed and once approved, the permit is a Decree signed by the President of Burkina Faso, the Minister of Economy and Finances, the Minister of MEE and the Minister of MEDD - BNP Paribas Securities Services says its BNP Paribas Dealing Services subsidiary has been selected to manage the dealing activities of RPMI Railpen, the investment manager for the Railways Pension Scheme (RPS). RPS is the sixth largest pension scheme in the UK. Following its decision to bring some of its investment activities in house, RPMI Railpen says it was looking for a dealing desk solution to optimise the execution of its market transactions. RPMI Railpen manages the assets of the RPS on behalf of its parent company, the Railways Pension Trustee Company Limited. Railpen Investments, its investment arm, is an FCA authorised investment manager with assets under management exceeding £21bn - LIM Advisors Ltd, a Hong Kong based fund manager, has signed a milestone agreement to utilise SimCorp Dimension for a full front, middle and back office platform. The $2bn fund manager will leverage SimCorp Dimension to establish full operational capability across multiple asset classes, including equity, bonds, convertibles, listed futures & options and derivatives - Botswana-based grocery retailer, Choppies Enterprises Limited (Choppies) debuted on the Main Board of the Johannesburg Stock Exchange (JSE) in the Food Retailers and Wholesalers sector and is the sixth listing on the exchange this year. The firm raised SAR575m in a secondary listing. Choppies boasts a wide FMCG portfolio, including its own private label products and leading international food brands. As a fast growing retailer on the continent, Choppies’ secondary listing on the JSE is intended to assist the company with access to capital needed to support its organic and acquisitive growth as well as establish its presence and public profile in strategic markets in Southern and East African markets. The group is currently the top supermarket chain in Botswana, holding significant market share of the overall national food retail market. Choppies currently operates 125 retail outlets in Southern Africa, comprising 72 stores in Botswana, 35 stores in South Africa and 18 stores in Zimbabwe. Through the listing, Choppies intends to increase its footprint in South Africa, Zimbabwe, Kenya, Namibia, Tanzania and Zambia – Small World FS, the international payment services provider says it has processed £10bn in transactions since launching in 2006. The London-headquartered financial technology business now operates the third largest payout network in the world, with a global payout network of over 250,000 locations in 188 countries. This news comes after months of rapid expansion, including the extension of its digital services into 14 sending markets, as well as inking deals with the MTN Group, Africa’s largest mobile operator, and Nations Trust Bank, Sri Lanka’s fastest growing bank - Ullink, a global provider of market leading electronic trading and connectivity solutions, today announced that Kotak Institutional Equities (KIE), one of India's leading institutional brokers and a division of Kotak Securities has chosen Ullink’s UL Bridge connectivity solution. KIE has chosen UL Bridge to facilitate FIX messaging, message enrichment and order routing, to enhance its existing connectivity infrastructure. UL Bridge’s uniquely modular architecture works in conjunction with KIE’s Order Management System (OMS), allowing KIE to provide better execution services to more clients, both locally and globally - The Straits Times Index (STI) ended 35.04 points or 1.01% lower to 3424.94, taking the year-to-date performance to +1.78%. The top active stocks today were DBS, which declined 1.54%, Singtel, which declined 1.89%, OCBC Bank, which declined 0.67%, UOB, which declined 1.62% and Ascendas-hTrust, with a 1.43% advance. The FTSE ST Mid Cap Index declined 0.35%, while the FTSE ST Small Cap Index declined 0.06%. The outperforming sectors today were represented by the FTSE ST Health Care Index, which rose 0.26%. The two biggest stocks of the Index - Raffles Medical Group and Tianjin Zhongxin Pharmaceutical Group Corporation- ended 0.46% lower and 3.48% higher respectively. The underperforming sector was the FTSE ST Telecommunications Index, which slipped 1.81%. Singtel shares declined 1.89% and StarHub declined 0.50%.

Blog

The European Review

By Patrick Artus, chief economist at Natixis

Why the ECB will need to purchase bonds again

Friday, 27 July 2012 Written by 
Why the ECB will need to purchase bonds again Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place. http://www.ftseglobalmarkets.com/

Even if the European Central Bank (ECB) does not particularly like the idea, it will soon have to return to buying government bonds from several eurozone countries. The reasoning behind this prediction lies in a chain of events already taking place.

Earlier this year the ECB froze its securities market programme (SMP), which, since its inception in 2010, has bought over €210bn worth of sovereign bonds. The responsibility of buying sovereign bonds from various eurozone countries, it said, would now shift to the European Financial Stability Fund (EFSF) and European Stability Mechanism (ESM).

Despite the high level of interest rates in Spain and Italy, the ECB has not resumed its purchases of government bonds, and shows no enthusiasm for doing so. As mentioned, its official stance is that government bond purchases should be carried out by the EFSF/ESM.



However, many analysts (us included) believe the EFSF/ESM will not be able to react sufficiently – mainly due to its size but also the fact it lacks access to monetary creation, which the lender of last resort for governments must have.

To see the chain of events taking place, we only need look at the economic position of Spain, Italy, France and Portugal – which are all deteriorating. This reinforces the risk that investors will refuse to finance these countries, which will push interest rates to the point where there is a threat of default.

In these countries (obviously to different extents):

  • the private sector continues to deleverage;
  • the fiscal policy is and will be restrictive;
  • there is a decline in real wages since labour's bargaining power is weakening;
  • household demand is deteriorating, which leads to companies reducing their investment rate;
  • sluggish activity is leading to job losses and preventing these countries from improving their public finances; and
  • despite the decline in domestic demand in Italy, Spain and Portugal, there remains a substantial external deficit; in France, on the other hand, domestic demand has not started to fall yet, but the external deficit is rising.

The improvement in competitiveness due to the fall in wages (in Spain, Italy and Portugal, but not yet in France) is unable to improve foreign trade, either because the industrial sector is too small as a proportion of the whole economy (Spain, Portugal, France), or because this improvement is insufficient (Italy).

So there is clearly a downward spiralling risk. The crisis spreads from one country to the next via foreign trade and, since the external deficits are only partially being reduced, the crisis may be exacerbated by the rise in interest rates.

Therefore, we can see a continuous weakening of the economy. If the countries’ economic situation deteriorates, it will be increasingly difficult to finance their debts. Investors will be concerned about the countries’ situation and their solvency – in fiscal and external terms. Interest rates will rise further, and this means that countries and governments will be threatened with default.

Realistically, if this occurs the ECB will have to intervene because the officially planned solution (bond purchases by the EFSF/ESM) will not be sufficient. Given the size of the countries’ debts, the need to buy bonds will exceed the capacity of a bond issuer such as the EFSF/ESM – especially in the event of a bond market crisis affecting several eurozone countries.

Given that the lender of last resort for governments must have access to monetary creation, the only institution capable of buying bonds at the volumes required will be the ECB.

We believe that at the end of this process the ECB will have to intervene via massive government bond purchases (similar to the action taken by Bank of England). This is legal, provided that it relates to purchases in the secondary market, irrespective of some countries’ reservations.

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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