Friday 29th July 2016
NEWS TICKER: JULY 28TH 2016: The Prysmian Group's first-half results are marked by revenue growth and a significant improvement in profitability. Explains CEO Valerio Battista. "The biggest drivers of growth have been Energy Projects and Telecom. The important set of technological innovations introduced between end of 2015 and 2016, involving the launch of the 600kV and 700kV cable systems, combined with greater project execution capabilities, involving the commissioning of Ulisse, the Group's third cable vessel, mean the Group is well positioned to continue taking advantage of the opportunities offered by the market. In the Telecom business, growth has been driven by the recovery in optical fibre competitiveness and the new optical cable manufacturing capacity in Eastern Europe. Performance by the higher value-added businesses has contributed to a fresh upturn in profitability, with a significant improvement in margins, also thanks to our actions to reduce fixed costs and rationalise manufacturing footprint. The newly acquired Oman Cables Industry has also made an important contribution in this regard." – The Samsung Electronics board has decided to make additional investments in Samsung Venture Investment Corporation's, an affiliated company of Samsung Electronics, New Technology Investment Funds. SVIC plans to establish a new venture fund, SVIC 32. SVIC 32 is a cooperative fund with its investment focus on the latest technologies to enhance competitiveness of existing set businesses and identify future growth businesses. The transaction is expected occur during the third quarter of 2016. The transaction size is KRW 198bn (99% of the total fund: KRW200bn) -- As a slug of generally positive data emerges from the UK this week, and commenting on today’s corporate results, Richard Marwood, senior fund manager at Royal London Asset Management, says, “Today’s flurry of corporate earnings suggests that as yet the outcome of the EU referendum has not had a major impact on many UK listed companies, outside of the movements in currencies. Without a clear financial picture of the impact, many CEOs are at pains to highlight the resilience of their business and their willingness to take strong action if required. I would expect the bid for ARM to herald a period of heightened corporate activity. The increased offer for Premier Farnell is another clear example of overseas bidders taking advantage of a depressed pound to snap up UK assets.” -- Singapore Exchange (SGX) today welcomed EC World REIT to Mainboard under the stock code “BWCU”. EC World REIT is the first Chinese specialised logistics and e-commerce logistics REIT to be listed on SGX. With an initial geographical focus on the People’s Republic of China (PRC), the REIT invests in a diversified portfolio of income-producing real estate primarily used for e-commerce, supply-chain management and logistics purposes. Peter Lai Hock Meng, Chief Executive Officer of EC World Asset Management Pte. Ltd., the Manager of EC World REIT, said, “We are pleased to celebrate EC World REIT’s successful listing and trading today and we would like to extend our sincere appreciation to all investors for making this milestone possible. Our IPO portfolio of six quality properties offers investors unique exposure to the logistics and e-commerce sectors in Hangzhou - one of the largest e-commerce hubs in China.” – Emerging markets assets benefitted in the Asian session today as the dollar retreated following the US Fed’s decision yesterday to do nothing. Yields on US government bonds declined slightly in the hours following the release of the monetary policy statement. The fall on the long end was with 6 basis points and was more pronounced than the drop on the short end of 3 basis points (bps). The dollar lost 3/4 of a cent vs the euro and stood this morning at 1.107 EUR/USD. The Federal Reserve stopped short of signalling a near-term increase in US interest rates, and while a December move is seen as likely, markets are focusing instead on the extra stimulus Japan's government is expected to deliver tomorrow. A subsequent retreat in the retreat boosted emerging assets in the Asian session with stocks at new 11-month highs despite fresh wobbles on Chinese equity markets. The Straits Times Index meantime (STI) ended 23.88 points or 0.81% lower to 2917.61, taking the year-to-date performance to +1.21%. The top active stocks today were DBS, which declined 2.34%, Singtel, which declined 0.46%, UOB, which declined 1.27%, OCBC Bank, which declined 0.57% and Wilmar Intl, with a close unchanged. The FTSE ST Mid Cap Index gained 0.04%, while the FTSE ST Small Cap Index declined 0.88%. MSCI's emerging equity index rose 0.25% despite pullbacks in Asian markets, where some concern is rising over volatility in China and the weakening yen. Elsewhere in Asia, Chinese shares fell as much as 3% at one point before recovering as new regulations are expected to prompt wealth managers at small banks to bail out of stocks and into bonds. Elsewhere, the Turkish lira continues to recover, firming to one-week highs. In emerging Europe, Turkish assets continued their post-coup recovery, shrugging off a worsening crackdown on alleged plotters. Stocks jumped 1 percent to one-week highs while the lira was flat, also near one-week highs. Turkey's economic confidence index hit also touched its highest level so far this year in July, rising 14.9% to 95.7. In Africa meantime, the temperature is different. the Nigerian naira hit new record lows against the dollar on Wednesday, shrugging off a rate increase of 200 basis points (bps). Traders are also waiting to see if Egypt will announce plans to devalue its pound at a central bank meeting. Cairo stocks pulled off three-month highs hit after news the government was in loan talks with the International Monetary Fund. The government’s 2025 dollar bond, which rose 4% after the news, eased half a percent. Poland too is in the spotlight today as the European Commission's statement yesterday gave Warsaw three months to address rule of law concerns. In early trading today Polish stocks extended losses, falling 0.7% and the zloty lost 0.2.%.

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Volcker Rule likely delayed until after US presidential elections

Monday, 16 April 2012
Volcker Rule likely delayed until after US presidential elections As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports. http://www.ftseglobalmarkets.com/

As mandated by the Dodd-Frank Act, the Volcker Rule—named for its author, former Federal Reserve Chairman Paul Volcker—prohibits commercial banks from using their own capital to invest in hedge funds and private equity funds, unless such activity is deemed “systemically important” (that is, is related to market making, securitisation, hedging, and/or risk management) and is limited to a three-percent ownership stake. With nary a fan on either side of the pond, the much-maligned Volcker Rule could be ripe for modification—though any change is more likely to happen later than sooner. David Simons reports.

Regulators had hoped to have the Volcker Rule finalised by mid-July. However, ironing out the increasingly complex proposal—which includes newly added exemptions needed to placate the bill’s many opponents—will likely take much longer.

Retiring Massachusetts congressman Barney Frank, head of the House Financial Services Committee and co-author of the 2010 Dodd-Frank Act, has suggested something of a compromise; that regulators work towards completing a simplified version of the law by early September. "The agencies [have] tried to accommodate a variety of views on the implementation,” says Frank, “but the results reflected in the proposed rule are far too complex, and the final rules should be simplified significantly.”



Financial institutions may be struggling to regain public trust in the wake of the 2008 credit meltdown; however that has not stopped officials from taking aim at the proposed Volcker legislation during the SEC’s comment period which closed on February 13th. Speaking on behalf of the Securities Industry and Financial Markets Association (SIFMA), Tim Ryan, SIFMA’s president and chief executive officer called the proposed regulations “unworkable” and “not faithful to Congressional intent”. Moreover, Ryan says they will have negative consequences for US financial markets and the economy.

Echoing a common theme among Volcker critics, Ryan contends that the new law could result in drastically reduced market liquidity for investors, and make it more difficult for companies to raise capital. SIFMA’s five-part comment letter includes proposed modifications to proprietary trading restrictions and hedge fund/private-equity fund investment activity under Volcker, and expresses concern over Volcker’s impact on municipal securities and global securitisation.

Like almost everything else drafted by the Obama White House, the Volcker Rule has virtually no support in the GOP, and includes among its detractors Daniel Gallagher and Troy Paredes, the two Republican members of the Securities and Exchange Commission (SEC). Speaking at an Institute of International Bankers conference held in Washington last month, Gallagher suggested that regulators re-examine their initial efforts and, if necessary, “go back to the drawing board to make sure we regulate wisely, rather than just quickly.”

Not that all of the criticisms have had political overtones. An exception to the rule allowing US banks to continue trading treasuries and municipal bonds has drawn fire from state and local government agencies, which have demanded that they receive the same exemption. The Municipal Securities Rulemaking Board (MSRB), the US-based firm charged with protecting investor interest in the municipal-securities space, has urged regulators to expand the rule’s proprietary trading exemptions to include municipal-bond brokers. It’s an effort to avoid “bifurcation” within the municipal securities market, says MSRB, warning current exemptions “are not useful in the municipal securities market,” and unless modified will “prevent a free and open market from prevailing.”

Nor has Volcker venting been limited to the US. In a comment letter issued in February, the European Fund and Asset Management Association (EFAMA), the representative association for Europe’s investment-management community, argued that exemptions favouring US institutions pose a serious threat to European funds due to the potential shift in the balance of power. Accordingly, regulators should take the necessary steps to prevent any negative impact on liquidity and operational efficiency abroad, said the group.

Meanwhile, Oregon’s Democratic Senator Jeff Merkley, who along with Senator Carl Levin of Michigan helped draft some of the Volcker provisions, bristled at suggestions that substantial modifications would be required. If anything, said Merkley, the rule needs to be tougher, though not “as vague or complex as regulators are making it.” Also in favour of a stronger Volcker is former Citigroup chief executive officer John S Reed, who has argued that in its present form the rule “does not offer bright enough lines or provide strong enough penalties for violation."

Having made regulatory reform one of its chief priorities, the Obama administration is unlikely to cede any ground in the months leading up to the US presidential elections in November. Hence, even the most vocal of Volcker opponents admit that change is unlikely to happen until after the new Congress convenes in January of next year.

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