Saturday 29th August 2015
NEWS: Friday, August 28TH: The Hong Kong Monetary Authority says it has granted a restricted banking licence to Goldman Sachs Asia Pacific Company Limited (GSAPCL) under the Banking Ordinance. GSAPCL, incorporated in Hong Kong, is a wholly-owned banking subsidiary of the Goldman Sachs Group, Inc. The number of restricted licence banks in Hong Kong is now 24 - Apple launched its first Australian dollar corporate bond issue, raising $1.2bn within two hours this morning. Strong demand for the US tech giant’s fixed and floating, four and seven year Kangaroo bonds saw the firm outstrip predictions it would raise between $500m and $1bn. Apple bonds are popular because the AA+ rated company is considered an ultra-safe investment, although yields are correspondingly low — about 3% on four-year bonds and about 3.8% on seven-year bonds - The European Securities and Markets Authority (ESMA) has published the responses received to the Joint Committee Discussion Paper on Key Information Document for PRIIPS. The responses can be downloaded from the regulator's website - Romania’s MV Petrom reportedly is planning a secondary listing on the London Stock Exchange. According to Romanian press reports, the local investment fund Fondul Proprietatea may sell a significant stake in the company via public offering on the Bucharest Stock Exchange and London Stock Exchange. OMV Petrom, with a current market capitalisation of €4.85bn has announced that it will ask its shareholders’ approval for a secondary listing in London. The general shareholders meeting is scheduled for September 22nd. Austrian group OMV, holds 51% of the company’s shares; other shareholders include the Romanian state, via the Energy Ministry, with a 20.6% stake, and investment fund Fondul Proprietatea, which holds 19%. The remaining 9.4% is free-float - Morgan Stanley (NYSE/MS) today announced the launch of a new fund, the IPM Systematic Macro UCITS Fund, under its FundLogic Alternatives plc umbrella. The fund provides exposure to IPM’s Systematic Macro strategy, which is based on IPM’s proprietary investment models that provide unique insights into how fundamental drivers interact with the dynamics of asset price returns. The FundLogic Alternatives Platform currently has more than $2.6bn in assets under management (as of 31 July 2015) and this latest addition expands Morgan Stanley’s offering of global macro strategies - Equities sold off hard this morning as continued pressure on Chinese stocks rippled throughout world markets. Chinese government intervention brought the Shanghai Composite back a positive close; but the question is now, has confidence eroded so much that the market will continue to depend on the government to prop it up? The other key element to consider today is the outcome of the debate in the German parliament on the Greek bailout. Last month, a record 65 lawmakers from the conservative camp broke ranks and refused to back negotiations on the bailout. The daily Bild estimated that up to 120 CDU and CSU members out of 311 might refuse to back the now-agreed deal. However, Chancellor Merkel is looking to secure support from the Social Democrats (SPD), Merkel's junior coalition partner, and the opposition Greens which will likely swing the final decision Greece’s way. However, a rebellion by a large number of her allies would be a blow to the highly popular Chancellor.

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.

Current Issue

Tweets by @DataLend

DataLend is a global securities finance market data provider covering 42,000+ unique securities globally with a total on-loan value of more than $1.8 trillion.

What do our tweets mean? See: http://bit.ly/18YlGjP

Related News

Related Articles

Related Blogs