Sunday 1st February 2015
NEWS TICKER FRIDAY, JANUARY 30TH: Morningstar has moved the Morningstar Analyst Rating™ of the Fidelity Japan fund to Neutral. The fund was previously Under Review due to a change in management. Prior to being placed Under Review, the fund was rated Neutral. Management of the fund has passed to Hiroyuki Ito - a proven Japanese equity manager, says Morningstar. Ito recently joined Fidelity from Goldman Sachs, where he successfully ran a Japanese equity fund which was positively rated by Morningstar. “At Fidelity, the manager is backed by a large and reasonably experienced analyst team, who enjoy excellent access to senior company management. While we value Mr Ito’s long experience, we are mindful that he may need some further time to establish effective working relationships with the large team of analysts and develop a suitable way of utilising this valuable resource,” says the Morningstar release - The Federal Deposit Insurance Corporation (FDIC) today released a list of orders of administrative enforcement actions taken against banks and individuals in December. No administrative hearings are scheduled for February 2015. The FDIC issued a total of 53 orders and one notice. The orders included: five consent orders; 13 removal and prohibition orders; 11 section 19 orders; 15 civil money penalty; nine orders terminating consent orders and cease and desist orders; and one notice. More details are available on its website - Moody's Investors Service has completed a performance review of the UK non-conforming Residential Mortgage Backed Securities (RMBS) portfolio. The review shows that the performance of the portfolio has improved as a result of domestic recovery, increasing house prices and continued low interest-rates. Post-2009, the low interest rate environment has benefitted non-conforming borrowers, a market segment resilient to the moderate interest rate rise. Moody's also notes that UK non-conforming RMBS exposure to interest-only (IO) loans has recently diminished as the majority of such loans repaid or refinanced ahead of their maturity date - The London office of Deutsche Bank is being investigated by the Financial Conduct Authority (FCA), according to The Times newspaper. Allegedly, the bank has been placed under ‘enhanced supervision’ by the FCA amid concerns about governance and regulatory controls at the bank. The enhanced supervision order was taken out some months ago, says the report, however it has only just been made public - According to Reuters, London Stock Exchange Group will put Russell Investments on the block next month, after purchasing it last year. LSE reportedly wants $1.4bn - Legg Mason, Inc. has reported net income of $77m for Q3 fiscal 2014, compared with $4.9m in the previous quarter, and net income of $81.7m over the period. In the prior quarter, Legg Mason completed a debt refinancing that resulted in a $107.1m pre-tax charge. Adjusted income for Q3 fiscal was $113.1m compared to $40.6m in the previous quarter and $124.6m in Q3 fiscal. For the current quarter, operating revenues were $719.0m, up 2% from $703.9m in the prior quarter, and were relatively flat compared to $720.1m in Q3 fiscal. Operating expenses were $599.6m, up 5% from $573.5m in the prior quarter, and were relatively flat compared to $598.4min Q3 of fiscal 2014. Assets under management were $709.1bn as the end of December, up 4% from $679.5bn as of December 31, 2013. The Legg Mason board of directors says it has approved a new share repurchase authorisation for up to $1bn of common stock and declared a quarterly cash dividend on its common stock in the amount of $0.16 per share. - The EUR faces a couple of major releases today, says Clear Treasury LLP, and while the single currency has traded higher through the week, the prospect of €60bn per month in QE will likely keep the euro at a low ebb. The bigger picture hasn’t changed, yesterday’s run of German data was worse than expected with year on year inflation declining to -.5% (EU harmonised level). Despite the weak reading the EUR was unperturbed - The Singapore Exchange (SGX) is providing more information to companies and investors in a new comprehensive disclosure guide. Companies wanting clarity on specific principles and guidelines on corporate governance can look to the guide, which has been laid out in a question-and-answer format. SGX said listed companies are encouraged to include the new disclosure guide in their annual reports and comply with the 2012 Code of Corporate Governance, and will have to explain any deviations in their reporting collateral. - Cordea Savills on behalf of its European Commercial Fund has sold Camomile Court, 23 Camomile Street, London for £47.97mto a French pension fund, which has entrusted a real estate mandate to AXA Real Estate. The European Commercial Fund completed its initial investment phase in 2014 at total investment volume of more than €750m invested in 20 properties. Active Asset Management in order to secure a stable distribution of circa 5% a year. which has been achieved since inception of the fund is the main focus of the Fund Management now. Gerhard Lehner, head of portfolio management, Germany, at Cordea Savills says “With the sale of this property the fund is realising a value gain of more than 40%. This is the fruit of active Asset Management but does also anticipate future rental growth perspectives. For the reinvestment of the returned equity we have already identified suitable core office properties.” Meantime, Kiran Patel, chief investment officer at Cordea Savills adds: “The sale of Camomile Court adds to the £370m portfolio disposal early in the year. Together with a number of other asset sales, our total UK transaction activity since January stands at £450m. At this stage of the cycle, we believe there is merit in banking performance and taking advantage of some of the strong demand for assets in the market.” - US bourses closed higher last night thanks to much stronger Jobless Claims data (14yr low) which outweighed mixed earnings results. Overnight, Asian bourses taken positive lead from US, even as Bank of Japan data shows that inflation is still falling, consumption in shrinking and manufacturing output is just under expectations. According to Michael van Dulken at Accendo Markets, “Japan’s Nikkei [has been] helped by existing stimulus and weaker JPY. In Australia, the ASX higher as the AUD weakened following producer price inflation adding to expectations of an interest rate cut by the RBA, following other central banks recently reacting to low inflation. Chinese shares down again ahead of a manufacturing report.” - Natixis has just announced the closing of the debt financing for Seabras-1, a new subsea fiber optic cable system between the commercial and financial centers of Brazil and the United States. The global amount of debt at approximately $270m was provided on a fully-underwritten basis by Natixis -

BlackRock's 2013 market outlook predicts improving investment prospects

Sunday, 23 December 2012
BlackRock's 2013 market outlook predicts improving investment prospects Prospects are improving for a positive albeit gradual turn next year in global economic and investment conditions, according to the BlackRock Investment Institute’s 2013 investment outlook.  The report, entitled ‘Slow Turn Ahead?’ urges investors to keep a close eye on the impact of government policy – first and foremost, the urgent effort to avoid the fiscal cliff in the US, which will drive the direction of both the US and global economies in the New Year. http://www.ftseglobalmarkets.com/

Prospects are improving for a positive albeit gradual turn next year in global economic and investment conditions, according to the BlackRock Investment Institute’s 2013 investment outlook.  The report, entitled ‘Slow Turn Ahead?’ urges investors to keep a close eye on the impact of government policy – first and foremost, the urgent effort to avoid the fiscal cliff in the US, which will drive the direction of both the US and global economies in the New Year.

“Our big questions for 2013 are whether the wave of ultra-loose monetary policies and quantitative easing has crested and if private sector credit can stage a modest recovery,” says Ewen Cameron Watt, BII’s chief investment strategist. “Trillions of dollars in monetary stimulus and record low interest rates have failed to spur much credit growth and economic activity so far. But what if this changes? Policy - fiscal, monetary and regulatory - drove markets in 2012 and will remain central to 2013 outcomes,” adds Cameron Watt.

With central banks apparently refocusing monetary stimulus away from preventing a financial sector collapse and towards targeting economic growth, next steps by the US Federal Reserve will merit particularly close attention, according to the report.



“We do not expect the Fed to raise rates any time soon. But it could take its foot off the monetary accelerator on signs of quickening job growth in the second half of 2013,”says Cameron Wat. “Markets need only a whiff of a Fed preparing to slow its QE programmes because of improving employment to empty some of the vast store of investor money in cash and low-yielding fixed income assets, and put it into equities.”

In the US, much hinges on efforts to avoid the fiscal cliff, a set of tax hikes and spending cuts set to go into effect on 1 January. "The United States may turn the corner on growth – if Washington can avoid falling off the fiscal cliff and negotiate a long-term budget reduction plan,” according to the report. Regulation remains an important focus too, whether it be financial sector reform in the developed world or social security and welfare reforms in emerging economies. Politics also will play a role again in 2013 with elections in, among other nations, Italy, Germany and Israel, alongside US budget reform.

BII’s Five-Point Summary for 2013

  1. We have become more upbeat about the prospects for risk assets and stabilising economic growth (albeit at low levels). Low expectations = potential upside surprises.
  2. The US economy should gain momentum and help boost global growth – IF Washington can avoid the “fiscal cliff” and compromise on a sustainable budget.
  3. Many investors lack conviction in markets where risk taking is often punished and trends last a skinny minute. Rome – and confidence – was not built in a day.
  4. The era of ultra-loose monetary policy may draw to a close, challenging “safe” fixed income assets and heralding a shift toward equities. Safety = new tail risk.
  5. Income investing works in a zero-rate world – but the hunt for yield has narrowed valuations between top-quality and not-so great income assets. Take out the garbage. 

So What Do I Do With My Money?

Here is a summary of the BII’s investment recommendations for 2013:

Fixed Income: Danger in Safety

Prices of safe-haven government bonds and similar assets could plunge when yields start to rise. Low yield = high price risk.  We like global high yield and US munis for income – but do not expect much capital appreciation. We favour emerging market debt.  In Europe, we prefer Italian and Spanish bonds over debt of weaker core countries. We are bullish on commercial mortgage-backed securities and collaterised loan obligations.

Equities: Global Smorgasbord

We like global companies with strong balance sheets, steady cash flows and growing dividends. We favour high-quality US stocks, global energy and emerging markets.  We are bullish on domestic consumption plays in Brazil and China, North Asian cyclical stocks, and Mexican banks and industrials. We like discounted exporters on Europe’s periphery and small “self-help” UK companies.

Commodities: Long View

We like metals with long-term supply gaps and agricultural commodities.  China’s appetite is huge.

Currencies: Dollar Bulls

We are bullish on the US dollar due to the country’s energy boom and long-term growth prospects.

Good and Bad Income

Income investing remains our strategy of choice in a zero-rate world. The hunt for yield has created pockets of overheating and narrowed valuations between top-quality and less desirable income assets. The report details the state of play in fixed income, high yield, emerging market debt, municipal bonds, dividends, and real estate investment trusts.

 

Pain Trades

Our biggest contrarian idea is buying Japanese exporters while selling the yen. Other pain trades include selling “safe” tobacco stocks, buying US companies with cash piles abroad, and buying securities of European and US financials. We have warmed up to Indian equities after the country’s reforms on foreign investment.

The Gift of Insurance

Short-term implied volatility is eerily low whereas policy uncertainties are near financial crisis levels. Consider options to hedge downside and upside risks.

Volatility Reversal?

The fire hose of monetary liquidity and investor hunger for yield has depressed short-term volatility, so maybe a reversal will have the opposite effect.

 

 

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