Friday 12th February 2016
NEWS TICKER: FRIDAY, JANUARY 12TH: Morningstar has moved the Morningstar Analyst Rating™ for the Fidelity Global Inflation Linked Bond fund to Neutral. The fund previously held a Bronze rating. Ashis Dash, manager research analyst at Morningstar, says, “The fund’s rating was placed Under Review following the news that co-manager Jeremy Church was leaving Fidelity. Lead manager, Andrew Weir, who has managed the fund since launch in May 2008, remains in charge and is further supported by the new co-manager, Tim Foster. While we acknowledge Weir’s considerable experience in the inflation-linked space, some recent stumbles and below-benchmark returns over time have led us to lower our conviction in the fund. This is currently reflected by our Neutral rating.” - Italian GDP growth looks to have stalled to 0.1pc in the last quarter of 2015, falling below analyst expectations of 0.3% growth. The Italian economy grew by just 0.6% last year having come out of its worst slump since before the pyramids were built. The slowdown will put further pressure on reforming Italian prime minister Matteo Renzi, who has been battling to save a banking system lumbering under €201bn (£156bn) of bad debt, equivalent to as much as 12% of GDP. It is a serious situation and one which threatens Italy’s traditionally benign relationship with the European Union. The EU’s bail in rules for bank defaults seeks to force creditors to take the brunt of any banking failures. Italy suffered four bank closures last year, which meant losses of something near €800m on junior bond holders (with much of the exposure held by Italian retail investors). No surprise perhaps, Italian bank stocks have taken a beating this year, Unicredit shares are currently €3.06, compared with a price of €6.41 in April last year. In aggregate Italian banking shares are down by more than 20% over the last twelve months. Italian economy minister Pier Carlo Padoan told Reuters at the beginning of February that there isn’t any connection between the sharp fall in European banking stocks, as he called on Brussels for a gradual introduction of the legislation. He stressed that he did not want legislation changed, just deferred - Is current market volatility encouraging issuers to table deals? Oman Telecommunications Co OTL.OM (Omantel) has reportedly scrapped plans to issue a $130m five-year dual-currency sukuk, reports the Muscat bourse. Last month, the state-run company priced the sukuk at a profit rate of 5.3%, having received commitments worth $82.16m in the dollar tranche and OMR18.4m ($47.86m) in the rial tranche. Meantime, Saudi Arabia's Bank Albilad says it plans to issue SAR1bn-SAR2bn ($267m-$533m) of sukuk by the end of the second quarter of 2016 to finance expansion, chief executive Khaled al-Jasser told CNBC Arabia - The US Commodity Futures Trading Commission (Commission) announces that the Energy and Environmental Markets Advisory Committee (EEMAC) will hold a public meeting at the Commission’s Washington, DC headquarters located at 1155 21st Street, NW, Washington, DC 20581. The meeting will take place on February 25th from 10:00 am to 1:30 pm – Local press reports say the UAE central bank will roll out new banking regulations covering board and management responsibilities and accountability – Following yesterday’s Eurogroup meeting, Jeroen Dijsselbloem, says that “Overall, the economic recovery in the eurozone continues and is expected to strengthen this year and next. At the same time, there are increasing downside risks and there is volatility in the markets all around the world. The euro area is structurally in a much better position now than some years ago. And this is true also for European banks. With Banking Union, we have developed mechanisms in the euro area to bring stability to the financial sector and to reduce the sovereign-banking nexus. Capital buffers have been raised, supervision has been strengthened, and we have clear and common rules for resolution. So overall, structurally we are now in a better position and we need to continue a gradual recovery”. Speaking at the press conference that followed the conclusion of the February 11th Eurogroup, Dijsselbloem also acknowledged that “good progress” has been made in official discussions between Greece and its officials creditors in the context of the 1st programme review. Yet, he noted that more work is needed for reaching a staff level agreement on the required conditionality, mostly on the social security pension reform, fiscal issues and the operation of the new privatization fund. On the data front, according to national account statistics for the fourth quarter of 2016 (flash estimate), Greece’s real GDP, in seasonally and calendar adjusted terms, decreased by 0.6%QoQ compared to -1.4%QoQ in Q3. The NBS Executive Board decided in its meeting today to cut the key policy rate by 0.25 pp, to 4.25%. - Today’s early European session saw an uptick in energy stocks, banking shares and US futures. Brent and WTI crude oil futures both jumped over 4% to $31.28 a barrel and $27.36 respectively before paring gains slightly; all this came on the back of promised output cuts by OPEC. That improving sentiment did not extend to Asia where the Nikkei fell to a one-year low. Japan's main index fell to its lowest level in more than a year after falling 4.8% in trading today, bringing losses for the week to over 11%. Yet again though the yen strengthened against the US dollar, which was down 0.1% ¥112.17. Swissquote analysts says, “We believe there is still some downside potential for the pair; however traders are still trying to understand what happened yesterday - when USD/JPY spiked two figures in less than 5 minutes - and will likely remain sidelined before the weekend break.” Japanese market turbulence is beginning to shake the government and may spur further easing measures if not this month, then next. Trevor Greetham, head of multi asset at Royal London Asset Management, says “When policy makers start to panic, markets can stop panicking. We are seeing the first signs of policy maker panic in Japan with Prime Minister Abe holding an emergency meeting with Bank of Japan Governor Kuroda. We are going to get a lot of new stimulus over the next few weeks and not just in Japan. I expect negative interest rates to be used more in Japan and in Europe and I expect this policy to increase bank lending and weaken currencies for the countries that pursue it”. Greetham agrees that both the yen and euro have strengthened despite negative rates. “Some of this is due to the pricing out of Fed rate hike expectations; some is temporary and to do with risk aversion. In a market sell off money tends to flow away from high yielding carry currencies to low yielding funding currencies and this effect is dominating in the short term”. Australia's S&P ASX 200 closed down 1.2%. In Hong Kong, the Hang Seng settled down 1.01. in New Zealand the NZX was down 0.89%, while in South Korea the Kospi slid 1.41%. The Straits Times Index (STI) ended 1.25 points or 0.05% higher to 2539.53, taking the year-to-date performance to -11.91%. The top active stocks today were DBS, which declined 0.91%, SingTel, which gained 1.13%, JMH USD, which declined 1.39%, OCBC Bank, which gained 0.13% and UOB, with a0.34% advance. The FTSE ST Mid Cap Index declined 0.50%, while the FTSE ST Small Cap Index declined0.31%. Thai equities were down 0.38%, the Indian Sensex slip 0.71%, while Indonesian equities were down another 1.16%. The euro was down 0.3% against the dollar at $1.1285, even after data showed Germany's economy remained on a steady yet modest growth path at the end of last year. Gold fell 0.7% to $1238.80 an ounce, after gold gained 4.5% Thursday to its highest level in a year. Greetham summarises: “Like a lot of people, we went into this year's sell off moderately overweight equities and it has been painful. What we have seen has been a highly technical market with many forced sellers among oil-producing sovereign wealth funds and financial institutions protecting regulatory capital buffers. However, economic fundamentals in the large developed economies remain positive, unemployment rates are falling and consumers will benefit hugely from lower energy prices and loose monetary policy.”

Latest Video

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. http://www.ftseglobalmarkets.com/
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.

Current Issue