Tuesday 24th May 2016
News ticker: Chubb today announced the appointment of Joe Fernandez, formerly D&O and Financial Institutions Product Manager for legacy ACE in Continental Europe, to the new role of financial lines product manager for Eurasia and Africa for Chubb, as it continues to invest in building its insurance capabilities in its newest business region. In his new role, Joe will be responsible for the development and implementation of financial lines underwriting strategies in Eurasia and Africa. He will also be responsible for employee financial lines products training. Joe will continue to be based in London, reporting to Grant Cairns, financial lines manager for Chubb in the UK and Ireland. His appointment is effective immediately. Fernandez has 18 years of insurance industry experience. He joined ACE in 2004 as corporate manager for Commercial D&O. Previously he held the position of corporate manager for Commercial D&O at AIG— Commenting on Royal Dutch Shell PLC’s Annual General Meeting, Ashley Hamilton Claxton, corporate governance manager at Royal London Asset Management, said: “The senior executive pay awards last year are not sufficiently justified by the company’s financial performance. We remain disappointed that the chief executive received very close to the maximum possible bonus in a year when overall financial performance was weak. Whilst the board did exercise some discretion in reducing the awards, we believe they could have done more. We also think the peer group of four companies that Shell uses to benchmark its long term incentive plans (LTIPs) is too narrow. However, we do acknowledge that despite a tough operating year, the company has had several successes in 2015, including the completion of the BG Group deal. We also appreciate that Shell has made very positive steps in responding to the concerns raised by its investors and we will be engaging with the company going forward.” Royal London Asset Management holds shares in Royal Dutch Shell worth £936m - UBS AG has opened a stock-index futures brokerage service in China. The brokerage will support clients wanting to trade on futures on the CSI 300, SSE 50 and CSI 500 indexes as well as treasury futures say local press reports - Tuesday, May 24th: Pakistan reportedly plans to sell a 40% stake in its stock exchange according to its managing director Nadeem Naqvi who announced the sale at an investment conference organised by Renaissance Capital in London yesterday. The exchange has approached the London, Shanghai, Istanbul and Qatar stock exchanges he said, explaining that a further 20% share will be sold in the local stock market. The sell-off is part of a government led privatisation program, involving some 70 companies following the disbursement of a $6.7bn IMF rescue package back in 2013. The terms of the loan end in September - Moody's Investors Service (Moody's) has confirmed the Ba3 corporate family rating (CFR) and Ba3-PD probability of default rating (PDR) of Russian vertically integrated steel and mining company Evraz Group S.A. (Evraz), and the B1 (LGD 5) senior unsecured ratings assigned to the notes issued by Evraz and Raspadskaya Securities Ltd. The outlook on all the ratings is negative – According to defence title Janes, The China Nuclear Engineering and Construction Corporation (CNEC) - one of China’s 10 key defence industrial enterprises - has entered an agreement with China's Minsheng Banking Corp to support its impending initial public offering (IPO) of 2.6bn shares on the Shanghai Stock Exchange, which is expected to raise around $250m. China's State Administration of Science, Technology and Industry for National Defense (SASTIND), which oversees the development of the country's aerospace and defence industry, said on 23 May that the agreement with the bank will support CNEC's "leap forward" towards "strategic development" - Thailand-based developer of integrated e-logistics trading and e-business service solutions Netbay says it is planning to offer 40m shares, equivalent to 20% of the registered and paid-up capital, in an initial public offering (IPO) and expects to get listed on the Market for Alternative Investment (MAI) next month. The company has the registered capital of THB200m. The firm has reportedly s appointed Maybank Kim Eng (Thailand) as financial advisor and underwriter. Netbay CEO Pichit Viwatrujira-pong says that the proceeds would be used to expand its business and increase the working capital. It targets the revenue growth of 20% this year, up from THB223m last year – Old Mutual has moved closer to the IPO of Old Mutual Wealth next year as it confirmed in a JSE announcement today that it was close to selling its stake in Old Mutual Asset Management (OMAM) to Affiliated Managers’ Group in a deal valued at $1bn - Zhouheiya Food Co. is expected to file an application for a Hong Kong listing in the next couple of weeks, looking to raise up to $500m, reports the Wall Street Journal today - UK operator Vodafone has announced its Group Chief Commercial Operations and Strategy Officer, Paolo Bertoluzzo, is going to step down after 17 years with the company to take a CEO role at payment and general financial services company Istituto Centrale delle Banche Popolari Italiane (ICBPI). Vodafone says it will announce a successor in ‘due course’ - The number of money laundering convictions and confiscations is relatively low given the size and characteristics of Jersey’s financial sector according to the latest report on the UK’s Crown Dependency of Jersey from the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), adopted in December 2015. Apparently, this is the last in a cycle of MONEYVAL evaluation reports based on methodology set out by the Financial Action Task Force (FATF) in 2004. MONEYVAL is currently evaluating its members according to the FATF’s updated 2013 methodology.

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Gold outlook remains tied to political risks

Wednesday, 08 February 2012
Gold outlook remains tied to political risks If 2011 was all about a strong investment case for gold, the sell-off at the very end of last year heralded a more cautious approach to the yellow metal. Most analysts believe gold will continue to rise in the first half of 2012, possibly by as much as $300 to $500 a troy ounce. However, they also warn that prices are likely to start falling in the second half of this year and continue on a downward path into 2013, while platinum and palladium could climb steadily. By Vanya Dragomanovich. http://www.ftseglobalmarkets.com/media/k2/items/cache/5214bdb529ff52c2bc08d9b03f97b94e_XL.jpg

If 2011 was all about a strong investment case for gold, the sell-off at the very end of last year heralded a more cautious approach to the yellow metal. Most analysts believe gold will continue to rise in the first half of 2012, possibly by as much as $300 to $500 a troy ounce. However, they also warn that prices are likely to start falling in the second half of this year and continue on a downward path into 2013, while platinum and palladium could climb steadily. By Vanya Dragomanovich.

The vast strategic allocations—not only from speculators but also from private banking and high net worth individuals—which have shaped the precious metals market over the past two and a half years have now subsided, according to Nick Moore, a commodity analyst at RBS. “To us this had always seemed inevitable. Investment demand could not expand perpetually,” he says.
Even so, this is no grounds to become bearish because the arguments in favour of investing in gold remain solid, adds Moore. Last year, it has to be said, was busier than most, dotted with events that inevitably propelled investors towards gold as a safe haven. In case you’ve forgotten, here’s the well-worn list: the Arab Spring; the Japan earthquake; the conflict in Libya; the downgrading of the US sovereign debt; the Greek debt crisis. Equally inevitably, gold prices shot up from $1,370 a troy ounce in January 2011 to a high of more than $1,900/oz in September. The subsequent drop to $1,670/oz by year end was as much about cashing in on the year's rally as it was about deleveraging while the debt crisis exerted its wasting grip on Europe.
It is patently clear already that a lot of the uncertainty of 2011 will overhang across the market, at least for the first half of 2012. The list of reasons is again very obvious: the chronic European debt problem; fragile growth in the global economy; and unsettling political stresses emanating from Iran and the US, even potentially Syria. All of these elements will continue to inject volatility into the gold market.
With this amount of uncertainty it would be foolish to write off gold as an investment. Despite the sell-off in December, a large proportion of investors across the board—be they retail, central banks, large institutions or speculators––continue to look at gold either as an alternative currency or a diversification asset designed to protect against losses from other investments.
In the past two months investors have been divided in their approach to gold. While short-term speculators liquidated large positions in December, cashing in on a rally that happened over the course of 2011, long-term investors, particularly ETF investors, stuck faithfully to their positions. Speculative positions in Comex gold are at their lowest levels since 2009 but physical gold ETF holdings reached record levels of 2,300 tonnes in December.
Since the beginning of this year “fresh money has been put to work and the energy sector and precious metals have so far been the main recipients,” particularly gold and silver, says Ole Sloth Hansen, senior commodity manager at Saxo Bank. One of the key factors working in favour of gold is the low interest rate environment which currently exists in over half of G20 countries, he adds.
Further monetary easing in Europe, China and potentially a round of QE3 in the US will increase liquidity and drive the gold price to new records, possibly as early as the first half of 2012. “Liquidity will be a stronger influence on market performance than macroeconomic turbulence,” says Bjarne Schieldrop, chief commodities analyst at SEB bank.
The European sovereign debt crisis will also be supportive at the retail level because at times of crisis retail investors tend to buy gold bars and coins. While at first glance this type of demand may seem like a small driver of the market, industry consultancy Thomson Reuters GFMS says that last year bar and coin buying rivalled that of ETF investment flows.
“Private investors in Europe and the US are the biggest buyers of bars and coins; they buy it for safety because they are worried about the purchasing power of paper currencies,” says Carsten Fritsch, an analyst at Commerzbank.
Another big contributor to a high gold price in 2011 was the fact that central banks bought some 450 tonnes of the metal. Analysts expect the trend to subside this year but not to stop. “Central banks in emerging markets are still heavily under-invested in gold,” says Fritsch. “In 2011 Mexico for instance bought 100 tonnes of gold and Russia, Turkey and South Korea were all major buyers. We don't expect to see the same amount of central bank buying this year but we do expect central banks to buy smaller amounts, for instance Russia,” he says. Fritsch argues that if Russia does come back as a buyer it will most likely absorb some of the domestic gold production but this will mean that less gold will make it onto the global market.
One of the two key risk factors for gold is the strength of the dollar, particularly when it weakens the currency of a big gold buyer such as India. When the rupee plunged against the US currency in late 2011, domestic gold buying as good as dried up. The other potential threat to gold is a recovery in equity markets which annuls the reasons for safe-haven buying.
Looking at other precious metals such as silver, platinum and palladium, there is an interesting investment case to be made—particularly for palladium. All three were sold off heavily at the end of last year to the point that they are now considered relatively cheap.
“Within the precious metals group we see palladium as the better pick given its bias to the US and China,” says Deutsche Bank's Michael Lewis. The palladium price depends heavily on demands from the car industry which uses it to make catalytic converters, to cut CO2 emissions. In November 2011, US car sales rose by 14% and Chrysler said recently that its US sales rose 37% in December, the fastest of the top three US car manufacturers.
On the other hand, Chinese car sales slowed considerably in 2011 because of the phasing out of tax subsidies and car scrappage incentives. Yet even with that, China's sales of 18.5m cars in 2011 still outstripped the estimated 12.8m light vehicles sold in the US. This comes at a time investors in palladium futures cut their net long positions by 77% from August 2011 highs and when ETF investors reduced their exposure by 23% for the same period.
An important question this year is whether Russia will stick to current export volumes for palladium. The answer is actually a political one.  Although Russia's nickel miner Norilsk Nickel is the world's biggest palladium producer, stocks of palladium are ­state-controlled and sold through a government agency that never reveals how much stock it holds or plans to sell. For years analysts in the West have speculated that those stockpiles are about to come to an end, this year being no exception, but there is so far no material evidence to support this. The speculation may prove yet again to be a case of wishful thinking rather than actual fact.
Even so, Commerzbank expects palladium prices to recover noticeably over the course of this year and to hit $850 by the end of 2012, up from the current $680/oz.
There is a similar case to be argued for platinum, which is also used by the car industry and in jewellery. Platinum has traditionally traded at a higher price than gold, but with gold now the more expensive metal, jewellers, particularly in Asia, are switching to platinum as an alternative.
On the supply side, South Africa, the biggest platinum producing country, is facing problems with electricity supplies which could hamper platinum mining over coming months. However, at current prices, platinum miners are under pressure and on an all-in cost basis many are making losses. “We believe this is unsustainable in the long run and something has to give—the price has to recover or production growth will slow,” says RBS's Moore. He sees the $1,400/oz level as the floor and expects that any dips in prices below that figure will prove short-lived. In similar vein, Commerzbank forecasts platinum prices to rise to $1,850/oz by year end from the current $1,550/oz.
Silver is probably the most volatile of the three and not a market for the faint-hearted. “Silver has always been a volatile metal, but 2011 was a vintage year. The euphoria of the 89% February-April rally to a $50/oz peak was followed by the revulsion of a 35% collapse, the latter over just two weeks. A few months later, in September, an even more dramatic drop saw silver shed 40% of its value,” says Moore. This serves as a painful reminder for investors to tread cautiously, or at least not to leave their silver positions unchecked for lengthy periods.
This year the demand from the electrical and electronics industry, the key consumer of silver, will continue to support prices although consumption from solar cell makers is likely to slow after several years of fast growth.
RBS's Moore expects silver to rally from current levels to a peak of $34/oz in the third quarter, in line with gold, but to trend lower afterwards.

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