Friday 22nd May 2015
NEWS TICKER: THURSDAY, MAY 21th: Moody's Japan has assigned rating of A1 to total of $2.5bn bonds due 2020 and 2025 issued by Japan Bank for International Cooperation (JBIC). The rating outlook is stable.The debts are guaranteed by the Government of Japan. The specific debt issues rated are $1bn Fixed Rate bonds, Series 11 JBIC Government-Guaranteed Global USD Bond due 2020 and $1.5bn Fixed Rate bonds, Series 12 JBIC Government-Guaranteed Global USD Bond due 2025. Moody's concludes that the creditworthiness of JBIC reflects that of the sovereign, given the integration of its mandate with the government's foreign economic policies and the high level of government oversight of its operations – Salvepar’s combined general shareholders meeting yesterday approved a proposed ordinary dividend for fiscal year 2014 of €2.20 per ordinary share, and has decided that each shareholder will be allowed to opt for the payment of the dividend in full in cash, or for the payment of the dividend in full in ordinary shares, or for the payment half in cash and half in ordinary shares. The option to receive the dividend payment in new shares can be exercised by the Company’s shareholders between May 28th, 2015 and June 10th, 2015 (inclusive. After June 10th, 2015, the dividend can only be paid in cash. The maximum aggregate number of new ordinary shares of the company which may be issued is 455,888 shares, which represents 6.65% of the share capital and voting rights of the company as at the date of the General Meeting - Two WisdomTree equity index ETFs launched on Xetra ETFs based on Japanese and European companies with strong dividends - plus a currency hedge. Two new exchange-listed index funds issued by WisdomTree have been tradable on Xetra since Thursday. WisdomTree is primarily a Smart Beta ETF provider, using fundamental data to weight companies in the reference index. The new WisdomTree ETFs weight the stock corporations contained in the reference index on the basis of the annual dividends they pay. Companies with higher dividend yields have a heavier weighting. WisdomTree Japan Equity UCITS ETF is a USD Hedged Asset class: equity index ETF (ISIN: DE000A14SLH0), with a total expense ratio: 0.48% and is benchmarked against the WisdomTree Japan Hedged Equity Index. The WisdomTree Japan Equity UCITS ETF - USD Hedged enables investors to participate in the performance of Japanese companies that generate at least 20% of their revenues outside Japan. The currency hedge covers the exchange rate risk of the Japanese yen to the US dollar. Meanwhile, the WisdomTree Europe Equity UCITS ETF - USD Hedged Asset class: equity index ETF (ISIN: DE000A14SLJ6) has a total expense ratio of 0.58%. The ETF provides access to the performance of European companies that generate at least 50 percent of their revenues outside Europe. This ETF also offers investors the additional benefit of the currency hedge, which reduces euro-US dollar exchange rate risk – PowerShares has launched an equity index ETF on Xetra, the first ETF for high dividend, low volatility US companies says the firm. PowerShares S&P 500 High Dividend Low Volatility UCITS ETF Asset class: equity index ETF (ISIN: IE00BWTN6Y99) has a total expense ratio of 0.39% and benchmarked against the S&P 500 Low Volatility High Dividend Index. The PowerShares S&P 500 High Dividend Low Volatility UCITS ETF provides investors access for the first time to performance of US companies with high dividend yields and low volatility. The reference index firstly comprises 75 companies with the highest dividend yields from the S&P 500, and then proceeds to identify the 50 with the lowest volatility - MTN Rwanda shareholder, Crystal Telecom, launched its much-awaited Initial Public Offering (IPO) this morning. The company is selling a 20% stake in MTN Rwanda, the largest telecom operator in the country, to the public. The move is part of the strategy by Crystal Ventures, the holding company, of monetising their mature holdings in firms with the intention of redeploying the capital in early-stage enterprises.The IPO comes after the Capital Market Authority approved Crystal Telecom's application to float its MTN Rwanda shares on the stock exchange. Once listed, Crystal Telecom will become the third domestic company with shares trading at the bourse, after Bank of Kigali and Bralirwa. The last IPO at the stock exchange was in 2011 when Bank of Kigali listed its shares for trade at RWF125 each. Crystal Telecom shares starting price will be announced during the launch - Welltec’s revenues reduced in the first quarter of 2015 as mar¬ket activity contracted sharply in response to the lower oil price. This overshadowed growth in some geomarkets and the de¬cline in revenue was accentuated by strong currency headwinds. EBITDA reduced accordingly, with margin impacted by lower levels of utilisation and increased redeployment of fleet and per¬sonnel to match the local demand. Proactive cost management and working capital discipline allowed for improved cash flows in the period. Revenues of $68m were 14% lower compared to the same period last year. On an adjusted currency basis rev¬enues were 7% lower. In Europe, Middle East, Africa and Russia CIS (EMEAR), revenues decreased by 22% to $33m. Revenues in the Americas fell 8% to $25m, while Asia Pacific revenues were level at $10m.

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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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