Monday 30th May 2016
NEWS TICKER, FRIDAY MAY 27TH: BGEO Group plc, the London listed holding company of JSC Bank of Georgia, has this morning announced that Bank of Georgia, Georgia’s leading bank, and the European Bank for Reconstruction and Development (EBRD) have signed a GEL220m (approximately £70m) loan agreement with a maturity of five years. EBRD obtained the local currency funds through a private placement of GEL-dominated bonds arranged by Galt &Taggart, a wholly owned subsidiary of BGEO. This is the largest and the longest maturity local currency loan granted to a Georgian bank, which will allow Bank of Georgia to issue longer-term local currency loans, providing essential support for micro, small and medium sized enterprises to converge to DCFTA requirements, as well as underserved women entrepreneurs. “We are keen to develop financial products and lending practices, to service specifically women-led SMEs, which will ultimately increase their involvement in developing Georgia’s private sector”, says Irakli Gilauri, CEO of BGEO Group - The UK’s CBI has responded to analysis from the Treasury showing that a vote to leave the European Union could negatively impact UK pensions. Rain Newton-Smith, CBI Economics Director, says that: “All pension schemes benefit when funds can be invested across a stable, growing economy, to best support people in their retirement years. Any financial market turmoil caused by a Brexit is likely to have a negative effect on household wealth, the value of funds and damage pensions here at home, especially for those looking to retire within the next few years. The sheer weight of credible evidence points towards a serious economic shock if the UK were to leave the EU, meaning a hit to the value of our private pensions, jobs and prosperity.” - EPFR Global reports that Nine weeks into the second quarter mutual fund investors remain underwhelmed by their choices as they seek to navigate a global economy characterized by political uncertainty in Europe, lacklustre corporate profits and the prospect of another interest rate hike in the US, economic stress in major emerging markets and Japan's experiment with negative interest rates. During the week ending May 25 all nine of the major EPFR Global-tracked Emerging and Developed Markets Equity Fund groups posted outflows, as did Global, High Yield, Asia-Pacific and Emerging Markets Bond Funds, seven of the 11 major Sector Fund groups and three out of every five Country Equity Fund groups. Alternative Funds look to have taken in over $1bn for the fifth time in the past 14 weeks. Overall, EPFR Global-tracked Bond Funds added $2.6 billion to their year-to-date tally while another $9.1bn flowed out of Equity Funds. Some $12bn was absorbed by Money Market Funds with US funds attracting the bulk of the fresh money. EPFR Global-tracked Emerging Markets Equity Funds remained under pressure from many directions. China's economic data and policy shifts continue to paint a mixed picture for growth in the world's second largest economy, the US Federal Reserve is talking up the prospects of a second rate hike this summer, Europe's recovery appears to be running out of stream and the recent recovery in commodities prices is being viewed with scepticism in many quarters. All four of the major groups recorded outflows during the week ending May 25, with the diversified Global Emerging Markets (GEM) Equity Funds seeing the biggest outflows in cash terms and EMEA Equity Funds in flows as a percentage of AUM terms. Latin America Equity Funds extended their longest outflow streak since late 3Q15 as investors who bought into the prospect of political and economic change in Brazil confront the messy reality. However, year to date Brazil has been the top emerging market for all EPFR Global-tracked Equity Funds as managers bet that the impeachment proceedings against President Dilma Rousseff will open the door to more centrist economic policymaking says the funds data maven. Among the EMEA markets, the firm reports that GEM managers are showing more optimism than investors. EMEA Equity Funds have now posted outflows for five straight weeks and investors have pulled over $300m out of Russia and South Africa Equity Funds so far this month, though GEM allocations for both South Africa and Russia climbed coming into this month. The latest allocations data indicates less optimism about China despite is still impressive official numbers - annual GDP was running at 6.7% in 1Q16 - and the edge the recent slide in the renminbi should give Chinese exporters. GDP growth in Emerging Asia's second largest market, India, is even higher. Elsewhere, India Equity Funds have struggled to attract fresh money as investors wait to for domestic business investment and the government's reform agenda to kick into higher gears says EPFR Global – According to New Zealand press reports, stock exchange operator, NZX, will initiate confidential enquiries into listed companies that experience large, unexplained share price movements, to determine whether they may be holding undisclosed "material" information even while remaining in compliance with the market's Listing Rules that require disclosure of material information at certain trigger points. In an announcement this morning, NZX also warned investors not to assume that a listed entity's Listing Rules compliance statements meant they did not have material information in their possession which would potentially require eventual disclosure - Asian stocks were modestly higher today, largely on the back of increasingly softening sentiment from the US Federal Reserve. Most people think there will be one rate hike this year, but likely it will be in July rather than June. Either way, it will be one and not two or three. Fed chair Janet Yellen is scheduled to talk about interest rates at an event at Harvard University today and the expectation is that a softer approach for the rest of this year will be writ large; a good signal of intent will follow today’s quarterly growth stats. The presidential election will encourage caution; continued market volatility will encourage caution and mixed manufacturing data will encourage caution. Japan’s benchmark Nikkei 225 index added 0.4% to touch 16,834.84 and Hong Kong’s Hang Seng rose 0.9% to 20,576.52. The Shanghai Composite Index gained 0.3% to 2,829.67. The Straits Times Index (STI) ended 6.65 points or 0.24% higher to 2773.31, taking the year-to-date performance to -3.80%. The top active stocks today were SingTel, which gained 1.05%, DBS, which gained 0.07%, UOB, which gained0.11%, Keppel Corp, which gained2.47% and Ascendas REIT, which closed unchanged. The FTSE ST Mid Cap Index gained 0.27%, while the FTSE ST Small Cap Index rose 0.30% - The European Bank for Reconstruction and Development (EBRD) says it is taking the first step towards developing a green financial system in Kazakhstan in partnership with the Astana International Financial Centre (AIFC) Authority. EBRD President Sir Suma Chakrabarti and AIFC Governor Kairat Kelimbetov signed an agreement today on the sidelines of the Foreign Investors Council’s plenary session to commission a scoping study for the development of a green financing system in Kazakhstan. The study, scheduled to be completed in 2017, will assess the demand for green investments, identify gaps in current regulations, and make recommendations for the introduction of green financing standards and for the development of the green bonds market and carbon market services. The development of a green financing system would be consistent with the COP21 Paris Agreement, aligning financing flows with a pathway towards low greenhouse gas emissions and climate resilient development. The AIFC Authority was put in place earlier this year and is tasked with developing an international financial centre in Astana. In March, the AIFC Authority, TheCityUK and the EBRD signed a Memorandum of Understanding to support the establishment of the financial centre and to encourage and improve opportunities for the financial and related professional services industries – Turkey’s Yuksel has issued notice to holders of $200m senior notes due 2015 (ISIN XS0558618384), and filed with the Luxembourg Stock Exchange, that the company has agreed a term sheet with the ad-hoc committee of noteholders and its advisors to implement a restructuring of the notes and is currently finalising the required scheme documentation with the Committee. Once agreed, the Company will apply to the English High Court for leave to convene a meeting of note creditors to vote on the scheme proposals as soon as reasonably practicable when the High Court reconvenes after vacation in June 2016 - Following the agreement in principle of the May 24th Eurogroup for the release of the next loan tranche to Greece, domestic authorities have intensified their efforts for the completion of all pending issues reports EFG Eurobank in Athens. According to Greece’s Minister of Finance Euclid Tsakalotos, on the fulfilment of all pending issues, €7.5bn will be disbursed in mid-June, of which €1.8bn will be channeled to clear state arrears – This weekend is the second UK May Bank Holiday. FTSE Global Markets will reopen on Tuesday, May 31st at 9.00 am. We wish our readers and clients a sunny, restful, safe and exceedingly happy holiday.

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A Clarion Call for Investors in Youth-led Enterprise

Tuesday, 01 July 2008
A Clarion Call for Investors in Youth-led Enterprise At the Doha Summit on young people and employment, held in February this year, the issues of chronic youth unemployment, discrimination against women in the job market, lack of skills required for particular jobs among university graduates and the negative perception about private sector jobs were key discussion topics. In a groundbreaking development, involving FTSE Group with youth initiative Silatech, established by Her Highness Sheikha Mozah bint Nasser Al Missned of Qatar, is now leading a regional wide index project to support youth-led small and medium sized enterprises (SMEs) in the Middle East and North African region. Over the medium to long term, the project hopes to encourage sustained private sector institutional investment in seed companies in the region to facilitate equal opportunity and employment. Francesca Carnevale reports.
At the Doha Summit on young people and employment, held in February this year, the issues of chronic youth unemployment, discrimination against women in the job market, lack of skills required for particular jobs among university graduates and the negative perception about private sector jobs were key discussion topics. In a groundbreaking development, involving FTSE Group with youth initiative Silatech, established by Her Highness Sheikha Mozah bint Nasser Al Missned of Qatar, is now leading a regional wide index project to support youth-led small and medium sized enterprises (SMEs) in the Middle East and North African region. Over the medium to long term, the project hopes to encourage sustained private sector institutional investment in seed companies in the region to facilitate equal opportunity and employment. Francesca Carnevale reports.
A 2007 report by the International Business Leaders Forum (IBLF) puts the scale of the problem in context. In the report, IBLF notes that over 290m people live in the Middle East and North African region (MENA) and the demographic is expected to double over the next thirty years. Out of today’s population, some 60% is under 24. That in turn means that 20m jobs have to be found right now to reduce current levels of unemployment, and over 100m new jobs have to come on stream in the next 20 years to meet supply.

Youth unemployment is chronic in emerging markets and for all its much vaunted riches and resources, the story is the same in the MENA region. Finding a job is the top priority for 68% of Arab youth and if the means to find work are not there, then the result could be very challenging indeed. The problem has been in mind for some time. A few years ago, at an International Fund for Agricultural Development meeting in Rome, Gulf Co-operation Council (GCC) secretary-general Abdul Rahman al-Attiyah compared unemployment to a ticking bomb likely to cause a “revolt” should the region fail to act comprehensively and soon. His fears may be justified. IBLF’s report says that 80% of young Arabs do not believe they will find employment easily; while 70% of young Arabs think it is up to the government to solve the unemployment problem.

The private sector can play an important role in tackling the growing crisis of youth unemployment and perhaps for too long governments and aid agencies have been seen as the only solutions to what could be an impending crisis. However, businesses and pressure groups across the Middle East now appear to be picking up cudgels and instigating—albeit in a small way—initiatives to help create new employment and enterprise opportunities for young people. IBLF’s report was published, for instance, with the support of the Young Arab Leaders, Emirates Environmental Group, Young Entrepreneurs Association, the United Nations Development Programme (UNDP) and a consortium of companies. Now comes a clarion call to action by FTSE Group and Silatech, which together are working to attract global investors into the process of change through the launch of a special index project to support youth led small businesses in the MENA region.

The initiative will promote the creation of small and medium sized enterprise (SME) markets and indices across the MENA region in order to “facilitate their growth and development and thereby increase youth employment opportunities,” notes Imogen Dillon-Hatcher, managing director of Europe, Middle East and Africa at FTSE Group. The initiative will encourage and support individual exchanges “in establishing their junior SME markets, that are lightly regulated and thereby encourage the development of smaller, entrepreneurial companies. We know that such companies are more likely to employ and even be run by the 18 to 30 age group,” she adds. The first initiative will be implemented in Qatar, where local regulator, the Qatar Financial Markets Authority (QFMA) is working with the Doha Securities Market to establish a ”younger market that will attract investors. The next stage is to establish credible investible indices supporting the junior markets that will attract institutional investment,” explains Dillon-Hatcher. Moreover, she adds, the World Bank and the International Labour Organisation (ILO) are also supporting the broader Silatech initiative.

“This initiative is about energising SMEs, which are critical to the creation of youth employment opportunities, [which is] our main goal,” says Rick Little, chief executive of Silatech. Silatech, is focused on connecting young people across MENA to encourage employment and provide new business development services, unlocking capital and encouraging new business start-ups. Moreover, other exchanges in the region have indicated their interest in the project. “We have already had the commitment of the QFMA and expect to make announcements related to other exchanges which are in accord with the project very soon,” adds Dillon Hatcher.

The initiative also has broader connotations. According to Dillon-Hatcher, “it also resonates in markets such as Syria and Yemen, for instance, where there is no formal exchange arrangement, but where we can encourage small firms to list on other exchanges in the wider region to get access to investor funds.” In Syria, for instance, the major issues are lack of skills among the youth and a high preference for the public sector; a common trend in most countries of the region. In Tunisia, unemployed youth from rural areas are increasingly migrating to the cities. In Yemen, unemployment among women is six times higher compared to that of men. These dissonances have economic consequences, and it is estimated that MENA countries are losing as much as $25bn in income every year due to unemployment.

Global firms are also investing in the initiative. Cisco Systems is in the process of creating “an incredible web based communications network supporting the project,” notes Dillon-Hatcher, “designed to appeal to 18 to 30 year olds, providing forums, chat rooms and providing advice and access to training and meeting facilities.”

It is important to remember, notes Dillon-Hatcher, that the project has sound business principles behind it. “Without that it simply would not work. Although our involvement fits neatly with our high standards of corporate citizenship driven by our relationship with UNICEF, we also have a business stake in the project. What we are creating here sits alongside our day job. That ensures its longevity and our commitment as a business. Unless it fitted in with our strategy, it could wither on the vine.” By way of explanation, she points to the perennial requirement of exchanges in the MENA region to establish national indices and pan regional indices. “Our job is to create appropriate indices for the junior markets, perhaps with different frameworks to suit local market conditions, but with a common methodology.”

Ultimately, “All exchanges in the region are keen to establish new products, such as exchange traded funds (ETFs) and this project should be seen in this regard, as a means of diversifying indices in the MENA region, and offering investors access to the growing prosperity of the region as a whole across the business spectrum. The youth opportunity project in this regard is a very exciting development, which also has significant repercussions for youth employment in the region over the longer term,” highlights Dillon-Hatcher. In other words, its business case is based on the fact that the overall success of the Middle East in increasing prosperity among its population, and in particular, younger members of that population, is of central importance to every business with long-term operations in the region.

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