Saturday 23rd August 2014
slib33
South Africa’s central bank has disagreed with a ratings decision by Moody’s to downgrade Capitec Bank Limited (Capitec) by two notches, and place it on review for a further downgrade. The central bank says it respects the independent opinion of rating agencies but that it does not “agree with the rationale given in taking this step”. Two reasons are given for the rating action: a lower likelihood of sovereign systemic support based on decisions recently taken in relation to African Bank Limited (African Bank), and heightened concerns regarding the risk inherent in Capitec’s consumer lending focus. “With regard to the first point, it is important to reiterate that the approach taken by the SARB to any resolution to address systemic risk will always be based on the circumstances and merits of the particular prevailing situation. Decisions will also be informed, as was the case with African Bank, by principles contained in the Key Attributes for Effective Resolution Regimes proposed by the Financial Stability Board (FSB), which have the objective that a bank should be able to fail without affecting the system,” notes the central bank in an official statement. “This is in keeping with evolving international best practice. In the case of African Bank bond holders and wholesale depositors are taking a 10% haircut, which is generally regarded as being very positive given that the trades following the announcement of African Bank's results were taking place at around 40% of par. Therefore in fact substantial support was provided, not reduced. Moreover, all retail depositors were kept whole and are able to access their accounts fully,” it adds - According to the Hong Kong Monetary Authority (HKMA) credit card receivables increased by 2.1% in the second quarter to HKD112, after a reduction of 6.7% in the previous quarter. The total number of credit card accounts edged up by 0.7% to around 16.8m.The rollover amount, which reflects the amount of borrowing by customers using their credit cards, increased by 2.9% during the quarter to HKD19.2bn. The rollover ratio also rose marginally from 17.0% to 17.1% in the same period. The charge-off amount increased to HKD569mduring the quarter from HKD528m in the previous quarter. Correspondingly, the quarterly charge-off ratio rose to 0.51% from 0.46% in the previous quarter. The amount of rescheduled receivables transferred outside the surveyed institutions’ credit card portfolios reduced to HKD94m from HK$109m in the previous quarter. The delinquent amount increased to HKD249m at end-June from HKD239m at end-March. However, the delinquency ratio remained the same at 0.22% because of an increase in total card receivables. The combined delinquent and rescheduled ratio (after taking into account the transfer of rescheduled receivables mentioned above) edged up to 0.29% from 0.28% during the same period - Harkand has been awarded a contract to support Apache with inspection, repair and maintenance work (IRM) as well as light construction (LC) across their assets in the North Sea, following completion of a competitive tender exercise. The award includes the provision of vessels, ROV and diving services for a three-year period, plus two one-year options. The firm will also support offshore marine construction contractor EMAS AMC who have been awarded a separate contract for pipe lay and heavy construction as part of the same tender process. Harkand Europe managing director, David Kerr, said: “This contract is an important step in strengthening our close working relationship and growing our North Sea business with Apache.
Investors come back to the markets in search of returns Photograph © Xy/ Dreamstime.com, supplied March 2013.

Investors come back to the markets in search of returns

Tuesday, 19 March 2013
Investors come back to the markets in search of returns The markets this year have started with a bullet. The current bull market hints that investor confidence might be rising as the debt crisis in Europe looks to be under control and the US is managing its fiscal cliff. What are the implications of this sea-change? Carey Olsen, which advises on the largest total number of funds and assets under management in Guernsey, believes there will be slow and steady growth in both fund creation and the breadth of investments they adopt. Corporate partner, Graham Hall, examines where this growth will come from and what innovations investors and private equity houses are employing to realise returns. http://www.ftseglobalmarkets.com/media/k2/items/cache/e37cb185c8f2dc5dd52ce2fc045570ec_XL.jpg

The markets this year have started with a bullet. The current bull market hints that investor confidence might be rising as the debt crisis in Europe looks to be under control and the US is managing its fiscal cliff. What are the implications of this sea-change? Carey Olsen, which advises on the largest total number of funds and assets under management in Guernsey, believes there will be slow and steady growth in both fund creation and the breadth of investments they adopt. Corporate partner, Graham Hall, examines where this growth will come from and what innovations investors and private equity houses are employing to realise returns.

Equities have started to move this year. Having locked up money for four years, keeping their money in ‘safe’ investments, investors now look to be interested again in assets which they think offer potential for higher yields. There is, of course, some residual skittishness but recent movement in the markets indicates there is a lot more confidence and enthusiasm.


There have been rallies in the past which have not stuck and there is still a question mark as to whether (or how long) this one will hold. However, the market does seem to think there is a way to go before there will be any sort of correction.


If the past four years has taught anything it is that it often pays to be innovative and funds are seeking unusual opportunities where the risk is seen as manageable. With interest rates remaining at historic lows, investors are chasing yield and the focus is firmly on emerging, or high growth markets, particularly those with a history of under-investment. Eastern Europe is a particular case in point. Bulgaria, Hungary, Czech Republic, Slovenia, Poland, Slovakia, Estonia, Lithuania and Latvia joined the European Union club in the past eight years while Montenegro, Serbia, the Republic of Macedonia and Turkey remain in the wings, with EU membership only a function of time.


In spite of some structural economic problems, growth figures across the region remain attractive. The Polish economy, for instance, grew by 3.8% in 2011; Austria grew by 3.3%, while Moldova, Estonia and Lithuania all grew between 6% and 7% in real gross domestic product (GDP) terms.


These figures compare to Germany’s 2.7% growth and the Eurozone’s blended growth rate of around 1.6%, over the same year. The growth rates in the eastern European zone points to opportunities in the development of infrastructure and commercial property (where property values remain low, but high returns are predicted); it is an attractive combination for investors recently starved of promising investments in Western Europe and the United States.


Graham HallGraham Hall, corporate partner, Carey Olsen, Guernsey.Debt is also attractive as banks get rid of their loan books and finance houses adjust their loan-to-asset ratios. Much of this debt is now being sold off, sometimes their whole debt portfolios.  Debt books can be picked up relatively cheaply by smaller operators at significantly reduced rates. Of particular interest, but not openly discussed, are lease car debt books. These books are sold at significant discounts and it is an area of significant potential returns as the economy improves and the risk of holding this debt reduces.


Hedge funds also have appeal right now. They are performing better than they have in a long while and investors are beginning to recoup, or certainly looking to, the losses of the past. Whether it means more money being invested in hedge funds remains to be seen. It is difficult to give a time frame on when we might see a return to more halcyon days because, while there are individuals and select funds rallying, it is the big institutional pension funds that are needed to ensure a true return to performance. This sector is traditionally cautious and, having been severely hit in the crisis, their return will be slow and steady. It is really only 10% of the market that is prepared to take a risk and they appear to be a lot more open to the idea this year.


There was a flight to Luxembourg by many hedge funds during the economic crisis thinking they needed to be seen to be onshore. Many are now realising this was a false perception as Luxembourg is an expensive and bureaucratic place to do business which has an impact in the efficiency of the funds and the returns that can be made. These funds are starting to look at other jurisdictions that offer ­stability and pragmatic regulation without the expense or bureaucracy. As ever, Guernsey is ideally placed to reap these opportunities. According to the Guernsey Financial Services Commission, the net asset value of total funds under management and administration increased in the third quarter (Q3) in 2012 by £3.6bn (1.3%) to reach £274.4bn.


For the year since 30th September 2011, total net asset values increased by £3.3bn (1.2%). Guernsey is indicative of the worldwide trend where the interest in open-ended funds has decreased by £1.6bn (-3.2%) over the quarter to £51.5bn. The closed-ended sector increased over the quarter, by £4.2bn (3.3%) to reach £130.3bn. This represents an increase of £4.6bn (3.7%) over the year since 30th September 2011.


The market recognises Guernsey’s proven operating model with highly skilled professionals across the board. It is up to Guernsey to ensure it does not become too expensive but this is a secondary consideration to investors with the level of expertise and experience being far more important. Investors and funds, now more than ever, want to know that a jurisdiction has breadth and depth.


It would be overstating the case to suggest the fund markets are entirely out of the woods; but there are definitely strong ‘green shoots’. Guernsey certainly remains the most popular jurisdiction for private equity albeit with fewer funds being created. There is activity from global private equity houses investing in infrastructure (Terra Firma, Permira, and Apex). They continue to invest but at lower levels. For example, the focus has been on global farmland as a sound investment for some of these closed-ended funds with investments being made in cattle stations in Australia and New Zealand (beef and dairy) and in China.


It is tighter market and funds are looking much harder at efficiencies and costs. It is harder to raise the money and it takes longer and funds are launching with lower expectations which, arguably, is no bad thing.


Closed-ended funds are the majority of the market now and will continue to grow. 2013 has started as a bull market. The driving sentiment is one of optimism. There is a movement away from bonds and corporate gilts but there will not be a return the pre-2008 activity for a long time—slow and steady seems to be this year’s watchwords.

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