Tuesday 13th October 2015
NEWS TICKER, OCTOBER 12TH 2015: Segulah IV LP has sold Etraveli Holding AB to ProSiebenSat.1 Media AG for some €235m. For ProSiebenSat.1, Etraveli represents its largest international investment in eCommerce to date and it complements its travel portfolio brand 7Travel. Etraveli is one of Europe’s largest Online Travel Agents and is headquartered in Uppsala, Sweden, and operates in 40 countries and four continents. In 2014, Etraveli generated around €900m in Total Transaction Value and €69m in net revenue. In the first six months of 2015, net revenue growth was 34% year on year. Arma Partners acted as exclusive financial advisor to Segulah IV - Joint venture partners Lionstone Investments (Lionstone), a privately owned, US-based real estate investment company, and Hermes Investment Management, the £29.8bn manager focused on delivering superior, sustainable, risk adjusted returns to its clients – responsibly, have acquired One Bunker Hill, a landmark Art Deco office building located in the heart of Downtown Los Angeles. Lionstone and Hermes Investment Management will renovate the 273,000 sq ft building, preserving its character while converting its more traditional offices into creative workspaces suitable for technology, media and entertainment companies desiring a downtown location. Jane Page, CEO at Lionstone, says, “The resurgence of the Downtown submarket of Los Angeles, along with the unique features of this historical property, make this investment very attractive. The partnership will embark on an extensive capital renovation program to reposition the building and transform conventional office space into a creative, amenity-rich environment.” - Morningstar has moved the Morningstar Analyst Rating™ for the Royal Corporate Bond fund to Silver. The fund’s rating was previously Under Review. Prior to being placed Under Review, the fund held a Gold rating. Ashis Dash, manager research analyst at Morningstar, says, “Following a recent Morningstar Analyst Ratings meeting, we have moved the Royal London Corporate Bond fund to a Morningstar Analyst Rating™ of Silver. The fund’s rating was previously Under Review following the announcement that manager Sajiv Vaid would be leaving Royal London Asset Management (RLAM). Prior to being placed Under Review, the fund held a Gold Rating. Jonathan Platt, the co-manager of the fund and head of fixed income at RLAM, took over sole managerial responsibility for the fund in May 2015. Platt joined RLAM in 1985 and has been instrumental in developing RLAM’s fixed income expertise and shaping the fund’s investment approach. While we view Vaid’s departure as a significant loss, the continuity to the investment process provided by a seasoned manager in Platt and the support he receives from a close-knit fixed income team at RLAM continue to drive our positive view on the fund.” - Fidessa group plc (LSE: FDSA) says it is providing CIMB Securities (CIMB), with its derivatives platform. Justin Llewellyn-Jones, Global Head of Derivatives at Fidessa, views the expanded partnership with CIMB as timely given the current trends in global derivatives. "Interest in Asian derivatives is on the rise with exchanges, clearing houses, brokers and vendors all making significant moves in the region," he said. "CIMB's implementation of an integrated system will enable their local, regional and global clients to participate fully in global markets in any way they choose, and take advantage of our real-time monitoring and reporting capabilities as well as our sophisticated algorithms and controls." With the futures and options platform co-located with SGX in Singapore, CIMB's clients will enjoy low-latency access to Asian derivatives markets. They will also be able to take advantage of Fidessa trading screens themselves, enabling them to both monitor order progress and execute their own DMA trades. David Polen, Global Head of Electronic Execution at Fidessa, adds: "Managing execution in Asia has always been a nuanced business. There is a tremendous velocity of regulatory and technical change across all jurisdictions. On top of this, buy-sides require flexibility in how their orders are handled.” – Emerging markets’ foreign exchange reserves have dropped about $650bn (7% of total reserves) since reaching a peak of $9.4trn in June 2014 says Jan Dehn, head of research at Ashmore. Emerging markets control nearly 80% of the world’s FX reserves. Currency movements are the big determinant of reserve levels. Huge shifts in exchange rates, particularly in the value of the USD have affected central bank reserves since mid-2014. Nonetheless, Dehn suggests that reserves in many emerging economies are of a level that any appreciation in the US dollar is unlikely to pose a major risk to their overall reserve position. Dehn says the dollar is now so strong that it is hurting US growth and its strength has become the most important factor influencing the Fed’s decisions on rates. “This means that the two most compelling reasons for the dollar to continue to rally – higher growth and higher rates – are losing steam,” he states - National wealth manager Bellpenny says it has completed two more transactions involving IFA businesses. The deals bring combined funds under management of over £150m and more than 500 active clients. This takes Bellpenny’s total number of acquisitions since launch to 32. The acquisition of Cambridge-based IFA, Ashton KCJ Financial Planning LLP, encompasses around £60m of funds under management. The business was jointly owned by Ashton KCJ Solicitors and Price Bailey LLP. The second purchase is that of Horsham-based IFA, Principals in Practice Limited (PIP) and involves £90m of funds under management - ETF Securities and ISE ETF Ventures have launched an equity index ETF, the ETFS ISE Cyber Security GO UCITS ETF from the ETF Securities product family, in partnership with ISE ETF Ventures on Xetra and Börse Frankfurt. The ETF’s ISIN is DE000A14ZT85. The ETFs’ total expense ratio is 0.75%, has an accumulating distribution and is benchmarked against the ISE Cyber Security UCITS Index. The ETF gives investors access to companies around the world whose business focuses on cyber security, including protecting websites and networks against unauthorised access, developing the requisite hardware and software as well as offering advisory services in this area. The new ETF only includes companies with a minimum market cap of $100m and a minimum daily value traded of $1m. ISE, which is part of Deutsche Börse Group, has calculated the underlying index since August 26, 2015 with a base date of December 31st 2009 - Stocks in China and Hong Kong rallied Monday on stimulus measures from Beijing and signals of reform in the country's telecommunications sector. The Shanghai Composite Index rose 3.3% while Chinese firms in Hong Kong led theHang Seng Index up 1.3%.China's central bank announced over the weekend that it would expand a pilot program that would boost banks' lending abilities. The plan, currently in place in Shandong and Guangdong, allows banks to pledge certain assets to secure loans from the central bank. It will be expanded to nine provinces including Shanghai and Beijing. The Straits Times Index (STI) ended 51.47 points or 1.75% higher to 2998.5, taking the year-to-date performance to -10.90%. The top active stocks today were DBS, which gained 1.55%, SingTel, which gained 2.12%, Noble, which gained16.05%, Keppel Corp, which gained3.91% and UOB, with a 1.84%advance. The FTSE ST Mid Cap Index gained 1.32%, while the FTSE ST Small Cap Index rose 0.93%. - Glencore--the world's largest copper supplier and third-largest copper miner—is reported to have initiated the sale of its Cobar underground mine in Australia's New South Wales state and its Lomas Bayas open-pit operation in northern Chile. The company is reported to have begun the sales in response to a number of unsolicited expressions of interest from various potential buyers. Interested parties will be able to place an offer for one or both of the mines. Cobar was valued at $329m by Glencore at the end of 2013 following a $137m write-down on a revised mining plan, while Lomas Bayas mine, located in northern Chile's Atacama region is valued at $335m. Australian press reports say Bank of America Merrill Lynch and UBS are advising Glencore on the sale. - In Turkey, headline inflation accelerates to 7.9% year on year in September, due to a stronger FX pass-through and higher food prices, says National Bank of Greece. The country’s trade balance improved significantly in August, mainly on the back of a lower energy bill and weaker domestic demand, while core inflation rose to an 8-month high in September, reflecting a stronger pass-through from a weaker TRY (the depreciation of the TRY against the basket of “50%*TRY/EUR+50%*TRY/USD” accelerated to a 1½-year high of 20.9% year on year in September from 16.6% in August). The CBRT’s favourite core inflation measures, i.e., CPI-H (that excludes energy, unprocessed food, alcohol, tobacco and gold) and CPI-I (that also excludes processed food) rose to 8.3% year on year and 8.2% year on year, respectively, in September from 7.8% and 7.7% in August. Furthermore, food prices (comprising 24.2% of the CPI basket) increased by a 4-month high of 10.7% year on year in September against 9.7% year on year in August (adding 0.3 percentage points to headline inflation). – The European Investment Bank has filed a notice with the Luxembourg Stock Exchange that it will redeem all the outstanding notes of its $50m callable zero coupon bonds due October 31st 2042 (ISIN: XS0847990768) at a redemption price of 112.4864000% at the end of this month – Bulgaria reports that its consolidated budget recorded a surplus of 0.7% of GDP in the first eight months of 2015 compared with a deficit of 1.6% in the same period in 2014. This was the best performance since 2008, and was mainly driven by an across-the-board improvement in budget revenue (up 2.2 percentage points of GDP year on year in between January and the end of August). Specifically, tax revenue surged in 8M:15 (up 1.3 percentage points of GDP year on year), largely attributed to strong base effects.

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Bunking the myth of oil price hikes and speculation

Monday, 05 March 2012
Bunking the myth of oil price hikes and speculation The question of whether speculators are responsible for the recent spikes in the price of oil has been one of the most hotly debated topics in the oil market in the last few years. Most recently it has prompted US regulators to put limits on some speculative positions and re-define what they consider to be speculative positions. Vanja Dragomanovich met up with Rita D'Eclessia, professor at the Department of Economic Theory and Quantitative Methods for Political Choices at the University of Rome and a visiting lecturer at Birkbeck University in London, who has run these theories through a set of mathematical tests and has produced some slightly surprising results. http://www.ftseglobalmarkets.com/

The question of whether speculators are responsible for the recent spikes in the price of oil has been one of the most hotly debated topics in the oil market in the last few years. Most recently it has prompted US regulators to put limits on some speculative positions and re-define what they consider to be speculative positions. Vanja Dragomanovich met up with Rita D'Eclessia, professor at the Department of Economic Theory and Quantitative Methods for Political Choices at the University of Rome and a visiting lecturer at Birkbeck University in London, who has run these theories through a set of mathematical tests and has produced some slightly surprising results.

Vanja Dragomanovich (VD): Why has the issue of oil prices attracted so much attention outside the actual oil market?
Rita D'Eclessia (RD’A): Analysis and empirical evidence shows that four out of the last five global recessions were preceded by oil shocks. In the case of the 2007-2008 crisis oil prices cannot be ignored as a culprit of what happened: the oil price increased over 300% and this caused the annual fuel bill of OECD countries to increase dramatically. Exceptional oil price volatility affects many economic variables and their related markets. Oil price fluctuations affect consumers, producers and marketers, especially in terms of costs, incentives to invest in technology and trading strategies. The importance of oil prices is further increased by the fact that other forms of energy such as coal, gas, and, to a lesser extent, electricity are sometimes priced in order to compete with oil, so that oil price fluctuations become reflected in broader energy price changes.

VD: As part of your research you looked into the link between the volatility in oil prices and the involvement of speculators in the market. Can you talk us through your findings?
RD’A: Economists and financial experts are divided over who they think was responsible for driving crude oil prices to their peaks in the first half of 2008. Basically trend-following speculation and institutional commodity index-buying have reinforced the output pressure on prices. In my research I tried to identify which economic and financial variables provide insights into understanding oil price dynamics. Our proposition was that the changes in the oil price are an example of an economic variable which is largely unpredictable. In such a context the role of futures markets, considered as a measure of the speculative component in the market, is also investigated. However, our conclusion was that using the data we had, we could not find any evidence that the oil price depends on speculative activity in the market.

VD: What data did you base your research on? For instance, how did you define speculators and how did you distinguish between speculative and non-speculative activity? Was your research based on information from several commodity exchanges?
RD’A: I set up an econometric model to capture possible long run equilibrium between some macroeconomic variables and some financial variables. The data used to measure speculation is the number of the benchmark US futures oil contracts, the West Texas Intermediate (WTI) spot crude oil held by speculators; this is data published by the US Commodities Futures Trading Commission (CFTC).
I used monthly West Texas Intermediate spot oil prices between 1993 and 2011 and assumed that speculators are participants who trade oil as an investment and not to hedge.

VD: Once you established that the link between speculative activity and oil price volatility was weak which other factors proved most influential in the oil market?
RD’A: Surprisingly, by far the strongest influence is the price of gold, followed by the strength of the euro against the dollar. For instance we found that for any one basis point move in the euro/dollar exchange rate the oil price moved by $2.8 dollars. Given that the euro was only introduced in 2000 we ran the analysis using the Deutschmark from 1993 till the introduction of the euro.
In all, we tried six different variables to try and find some meaningful correlation. We tried open interest, US interest rates, imports of WTI and WTI oil futures, all of which proved not to have a strong impact on the oil market.

VD: Your analysis was primarily statistical. However, in that period of time oil would have also moved for other reasons such as geopolitical crises, conflicts in the Middle East, economic crises, and political changes in Europe. How do those factors feature in your analysis?
RD’A: That is correct, but we can infer the influence of political events through the fluctuations of the dollar exchange rate and the price of gold. In any case the debate continues; oil price changes certainly cannot be explained solely by looking at the supply and demand dynamics.

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