Tuesday 13th October 2015
NEWS TICKER, OCTOBER 13TH 2015: NEWS TICKER: The Lyxor Hedge Fund Index was down -1.4% in September. 3 out of 11 Lyxor Indices ended the month in positive territory. The Lyxor CTA Long Term Index (+4.0%), the Lyxor CTA Long Term Index (+2.3%), and the Lyxor L/S Equity Market Neutral Index (+0.4%) were the best performers. In contrast with the sell-off by last fall, the current recovery process is proving more laborious, says Lyxor. Continued soft macro releases, several micro turbulences (VW, GLEN, the US Healthcare) and signs that the Fed might be more concerned about global growth, drove markets to re-test the end-of-August lows. L/S Equity Long bias funds and Event Driven funds were yet again the main victims. Conversely, CTAs, Global Macro and L/S Equity funds with lower or variable bias, successfully navigated challenging times - British payments processor Worldpay Group Ltd priced its listing on the London Stock Exchange (LSE) today at 240 pence per share, valuing the business at £4.8bn in the largest IPO of this year on the LSE. Payments processing giant Worldpay (WPG) managed to list this morning at 240p, right in the sweet spot of an initial 225p-260p marketing rage which was subsequently narrowed to 235-250p. It currently trades +4% at 250p equating to a positive market debut in light of a slower pace of listings The UK company, which qualifies for FTSE 100 inclusion, processes £370bn in payments from 400,000 merchants every year and handles around 40pc of web-based transactions in Europe. Worldpay earlier this year rejected an offer of up to 6.6 billion pounds, including debt, from French rival Ingenico Group SA. Last year Worldpay made an underlying profit of £765m on revenues of £3.6bn. In the first six months of this year, sales rose 13pc to £465.7m, pushing profits up by the same amount to £182.6m. As of the end of September, the London stock market had welcomed 93 flotations raising £5.3bn this year, a significant drop from the £11bn generated from 136 listings in the same period last year - This week’s major London IPOs have had mixed fortunes. and a cooling in appetite for new paper over the last two years. However, motor insurer Hastings Direct (HSTG), which came to market yesterday, could only manage to get its IPO away at 170p which was well below its 180-185p indicated range. Worldpay’s IPO success most likely reflects the global preference for digital and consumer focused firms - The gross return of the SS&C GlobeOp Hedge Fund Performance Index for September 2015 measured -1.56%. Hedge fund flows as measured by the SS&C GlobeOp Capital Movement Index declined 1.13% in October. “SS&C GlobeOp's Capital Movement Index for October 2015 was -1.13%, down from the previous month's 0.62%, reflecting primarily seasonal factors,” said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. “Comparing year-over-year flows, the -1.13% for October 2015 was virtually identical to the October 2014 reading of -1.12%, with both inflows and outflows closely in line for the comparative periods. We have been analysing our Capital Movement Index and Forward Redemption Indicator carefully in the wake of recent market volatility. October's results are certainly indicative of overall stability in hedge fund allocations.” - Zurich UK is in talks with its staff over cutting 29 jobs across the administrative and support teams for retail sales as part of a restructuring process. Zurich UK has entered a period of consultation with its support and administrative staff and it is expected 29 jobs will be cut as a result. The decision has been made to realign all Zurich UK's resources to focus on key areas of protection and wealth, and is expected to help the company deliver increased efficiency and co-ordination of services to advisers and their clients. The company has also re-aligned its platform offices in Leeds and Bristol to become the North and South offices, focusing on the two regions instead of two cities – South Africa’s National Union of Mineworkers (NUM) has signalled that there won’t be any agreement signed between the union and the Chamber of Mines (COM), at least until tomorrow morning. As the majority union, representing 72% of employees represented in the coal wage negotiations, the NUM must agree to the latest offer from the mining companies – Anglo American Coal, Delmas, Exxaro, Kangra, Koornfontein, Msobo and Glencore – represented by the COM, if the coal sector strike is to come to an end - APEC’s Energy Ministers from the 21 APEC member economies concluded their meeting on Tuesday in Cebu, the Philippines, by adopting the Cebu Declaration and Instructions, a joint statement on the the region’s energy priorities. Ministers instruct the region’s energy stakeholders to promote and collaborate on initiatives under the theme: “Towards an Energy Resilient APEC Community,” as well as create a task force on energy resilience to implement disaster-proofing of energy infrastructure, introducing energy efficiency technologies, promoting the use of clean energy and improving energy trade and investment in APEC. - Singapore property firm Perennial Real Estate Holdings (PREH) is launching a maiden issue of three-year bonds to the retail market with an annual payout of 4.65 %. Up to SGD150m of the bonds will be offered to the public although some may be re-allocated to institutional and other investors if applicable, PREH said in a statement. DBS is the sole manager and book-runner. The total issue size can be raised to SGD300m if the public offer is oversubscribed. The maiden bond offering further diversifies the firm’s sources of funding, though they have one of the shortest tenures among retail bonds issued by Singaporean companies in recent years. PREH's offer comes after jewellery firm Aspial Corporation's issuance in August, which offered a coupon rate of 5.25% over a five-year tenure - Major Asian bourses edged lower in trading today and major European equity indices fell in early trading, with energy-related shares leading the losses on profit-taking after a fall in crude oil prices yesterday. Continued concerns over China’s economic outlook and the prolonged rout in the commodities markets is beginning to take on more characteristics of a crisis, than simply market corrections. Most Asian markets fell after Chinese trade data signalled weakening global and domestic demand. Japan's Nikkei Stock Average fell 1.1%, Australia's S&P/ASX 200 lost 0.6% and Hong Kong's Hang Seng Index was down 0.5%. Indonesia's JSX fell 2.6% and South Korea's Kospi shed 0.1%. In brighter mode, the Shanghai Composite Index finished up 0.2%, while the Straits Times Index (STI) ended 33.61 points or 1.12% higher to 3032.11, taking the year-to-date performance to -9.90%. The top active stocks today were SingTel, which gained 1.56%, DBS, which gained 0.45, UOB, which gained0.91%, Noble, which gained 9.57%and Keppel Corp, with a 0.13%advance. The FTSE ST Mid Cap Index gained 1.18%, while the FTSE ST Small Cap Index rose 0.90 - The US Federal Reserve staving off a rate rise last month has given the markets breathing space and market focus will hone in on Federal Reserve Bank’s James Bullard, who will give a speech at the annual meeting of the National Association for Business Economics in Washington - According to Eurobank, the Greek government submitted to Parliament yesterday a bill containing the first set of fiscal and structural measures that will permit the disbursement of ca €2bn from the first instalment of €26bn of the €86bn loan agreed in August under the Third Economic Adjustment Programme for Greece. The bill is expected to be voted on late on Friday this week - InvestCloud, Inc, a provider of cloud-based front and middle-office solutions focused on digitizing customer experiences and internal operations for global investment advisors, today announced it has raised $45 million in growth equity funding. The round was led by FTV Capital and will be used to further invest in the company’s state-of-the-art platform and functionality, enhance customer service, and expand the company’s global footprint. Richard Garman, FTV Capital managing partner, has joined InvestCloud’s board of directors -

Latest Video

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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