Sunday 21st December 2014
NEWS TICKER: FRIDAY DECEMBER 19TH 2014: Scotiabank’s Commodity Price Index dropped -4.8% m/m in November (-6.1% yr/yr) and will end 2014 in a ‘deflationary’ mode, says economist Patricia Mohr. "Significant capacity expansion and the defence of market share by major oil and iron ore producers— against a backdrop of lacklustre world economic growth — account for the softness at the end of the year," she says. Mohr adds that the decision by Saudi Arabia not to reduce output to shore up international oil prices, but instead to allow prices to drop to levels curbing US shale development appears to be having a negative impact on confidence in a wide variety of other commodity as well as equity markets. She predicts prices will fall further this month, but will start to rebound in mid 201 - Jonathan Hill, the EU's financial-services commissioner, says he plans to pursue rules that separate a bank's proprietary trading from retail operations. "The sensible thing to do is to seek to make progress quickly" on the issue, Hill said. "There are still areas of risk in some of the biggest and most complicated banks,” reports Bloomberg- CME Group, said yesterday that it will change daily price limits in its CME Feeder Cattle futures effective today, pursuant to its emergency action authority. The current daily price limit for CME Feeder Cattle futures is $3.00 per hundredweight and will change to $4.50 per hundredweight effective on trade date December 18th Additionally, effective December 19th (tomorrow) these limits will have the ability to expand by 150% to $6.75 per hundredweight on any business day in the event that one of the first two contract months settles at limit on the previous trading day. CME Feeder Cattle futures have been locked limit for five consecutive days as a result of various factors. The change to daily price limits is necessary to ensure continued price discovery and risk transfer, says the CME. Daily price limits for CME Live Cattle futures will remain unchanged at $3.00 per hundredweight. Effective Friday, December 19th, these limits will have the ability to expand by 150 percent to $4.50 per hundredweight in the event that one of the first two contract months settles at limit on the previous trading day - The Straits Times Index (STI) ended +16.42 points higher or +0.51% to 3243.65, taking the year-to-date performance to +2.49%. The FTSE ST Mid Cap Index gained +0.29% while the FTSE ST Small Cap Index gained +0.71%. The top active stocks were Keppel Corp (+2.68%), SingTel (-1.02%), DBS (+2.36%), Global Logistic (-3.21%) and UOB (+0.30%). The outperforming sectors today were represented by the FTSE ST Basic Materials Index (+3.13%). The two biggest stocks of the FTSE ST Basic Materials Index are Midas Holdings (+6.38%) and Geo Energy Resources (unchanged). The underperforming sector was the FTSE ST Telecommunications Index, which declined -0.98% with SingTel’s share price declining -1.02% and StarHub’s share price declining-0.73%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+2.56%), DBXT CSI300 ETF (+0.42%), STI ETF (+0.61%). The three most active Real Estate Investment Trusts (REITs) by value were Ascendas REIT (-0.42%), Keppel DC REIT (unchanged), Suntec REIT (+0.26%). The most active index warrants by value today were HSI23400MBeCW150129 (+7.32%), HSI22600MBePW150129 (unchanged), HSI24000MBeCW150129 (+12.50%). The most active stock warrants by value today were KepCorp MBeCW150602 (+21.95%), DBS MB eCW150420 (+29.29%), DBS MB ePW150402 (-18.03%) - Spain’s Director of Public Prosecutions, Eduardo Torres Dulce, has resigned from the post for “personal reasons”, Spanish daily El Mundo reported this morning. A spokesman for the Public Prosecutor’s office confirmed the news by telephone to The Spain Report, saying that Mr. Torres Dulce had informed Justice Minister Rafael Catalá of his decision: “but that it perhaps would not come into effect until they find a replacement”. That decision is taken at cabinet level. The next cabinet meeting for Rajoy’s government is tomorrow morning - Hedge funds including Marshall Wace, Odey Asset Management and Lansdowne Partners are shorting OTP Bank Plc, a Hungarian lender with a Russian subsidiary whose shares have fallen almost 6% this month reports Albourne Village. All three London-based funds took or increased their position this month in OTP, Hungary’s largest lender, according to data compiled by Bloomberg. The ruble rose today in Moscow after plunging as much as 19%against the dollar yesterday, when Russia’s central bank increased interest rates to 17% percent from 10.5 percent in an attempt to stem the decline. The ruble is down 52% this year and has taken a disproportionate beating in the wake of sanctions and falling oil prices. The country still has the third largest currency reserves in the world and so is unlikely to default. According to Eric Chaney, Manolis Davradakis and Greg Venizelos from AXA IM’s Research and Investment Strategy team Russia will likely resort to fiscal stimulus to contain the risk of social and political unrest. Capital controls, political unrest and even default on private hard currency debts are possible outcomes they say. They credit default swaps market is pricing a one-third probability of sovereign default within five years - Indonesia is ramping up financing for its $439bn development program, planning an almost fivefold increase in sales of project sukuk. The government is seeking to raise IDR7.14trn rupiah (around $568m) from notes that will fund particular construction ventures next year, compared with IDR1.5trn this year, which say local press reports, will help finance its estimated spending of about IDR5,519trn from 2015 to 2019 to build roads, railways and power plants.
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.

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