Tuesday 26th July 2016
NEWS TICKER: JULY 25TH 2016: Moody's says that Vedanta Ltd's (unrated) revised merger terms with Cairn India Ltd. (unrated) have no immediate impact on Vedanta Resources plc's B2 corporate family rating (CFR), Caa1 senior unsecured notes rating and negative outlook. While the revised terms entail a rise in debt/cash out flow of an estimated $447m -- compared to $120munder the original terms -- they will give Vedanta Ltd. complete access to Cairn India's large cash holdings, as well as provide the flexibility to reduce debt, thereby lowering leverage and reducing subordination within the group. As such, the successful execution of the merger, to the extent that it leads to de-leveraging, will be credit positive. Positive rating implications could emerge if adjusted leverage improved to less than 4.5x on a sustained basis. Should the merger proceed as announced -- subject to approval, in some cashless, all-stock transaction -- minority shareholders will receive one equity share and four 7.5% preference shares in Vedanta Ltd. for every share held in Cairn India. Shareholders will have the option of redeeming the preference shares within 30 days, or holding until maturity for 18 months. Following completion of the transaction, Vedanta Resources' shareholding in its subsidiary Vedanta Ltd will fall to 50.1% from 62.9%. At the end of June this year, Cairn India had $3.5 billion in cash and no external debt outstanding." Although delayed from the initial announcement in June 2015, the revised terms are a step forward in the merger proceedings -- the merger will provide Vedanta Ltd. better access to Cairn India's large cash balances of $3.5 billion, as previous access was only possible through the up-streaming of dividends," says Kaustubh Chaubal a Moody's Vice President and Senior Analyst. - The World Bank is beginning work on a new project, aimed at supporting the poorer regions of Poland by better utilising European Union funds made available to the country through the European Union Financial Framework 2014-2020. Representatives from Podkarpackie and Świętokrzyskie, the two regions selected for this work, will cooperate with experts from the World Bank, the Ministry of Development, and the European Commission during this project. The project - part of a European Commission initiative - will also include two regions in Romania. Poland and Romania are the first to implement this pilot project, whose objective is to increase the absorption of European Union funds and support socioeconomic development at the local level. “We are happy that we will be able to use our global experience, as well as our knowledge of the conditions in Poland, to support the Polish authorities in developing the country’s lagging regions,” says Arup Banerji, World Bank regional director for European Union countries - The Straits Times Index (STI) ended 4.87 points or 0.17% higher to 2945.35, taking the year-to-date performance to +2.17%. The top active stocks today were Singtel, which gained 1.66%, DBS, which declined 0.06%, Wilmar Intl, which declined 0.97%, UOB, which gained0.26% and ComfortDelGro, with a1.73% fall. The FTSE ST Mid Cap Index declined 0.84%, while the FTSE ST Small Cap Index declined0.24%. Elsewhere in Asia, Taiwan stocks retreat from over 1-year high; TSMC down. Taiwan stocks retreated from more-than-one-year highs on Monday as investors took profits on recent winners such as Taiwan Semiconductor Manufacturing Co (TSMC). The main index fell 0.6 percent at 8,954.58 points. It reached as high as 9,085.91 earlier in the session, an intraday level not seen since July 2015. The electronics subindex and the financial sub-index were both down about 0.7%. TSMC, the world's top contract chip maker, was off nearly 1%. The yen traded weaker with trade data showing better than expected figures though exports and imports declined notably ahead of a week that will see the Fed and the Bank of Japan comment on monetary policy. The adjusted trade balance came in at a surplus of ¥33bn while and imports eased 18.8%, less than the 19.7% drop expected and exports fell 7.4%, less than the 11.6% decline anticipated. The overall trade balance came in at a surplus of ¥693bn, better than the ¥495bn expected. USD/JPY changed hands at 106.32, up 0.18%, while AUD/USD traded at 0.7478, up 0.17%. GBP/USD traded at 1.3135, up 0.19%. -- Rangold Resources will be announcing its Q2 results at the London Stock Exchange on Thursday, August 4th – Most equity markets kicked off higher today, buoyed by the firm tone of the G-20 Finance Ministers meeting which promised “to use all policy tools –monetary, fiscal and structural- individually and collectively” to achieve the goal of “sustainable, balanced and inclusive growth” in view of lingering concerns over spillover effects from Brexit. Central bank meetings will be the focus of market attention this week. The Fed is widely expected to leave its monetary policy unchanged this week. However, a recent string of better than expected U.S. data reignited speculation that the Federal Reserve will raise interest rates before the end of the year. Interest rate futures are currently pricing in a 45% chance of a rate hike by December, compared with less than 20% a week ago and up from 9% at the start of this month. The Fed monetary oversight committee starts its two-day meeting tomorrow. However, the story this week will focus on the Bank of Japan: will it, won’t it expand its monetary policy, without ‘helicopter money’? According to Russell Matthews, a portfolio manager at Russell Matthews, “Core government bond markets have largely moved sideways and very short dated US rates have repriced the probability of a Federal Reserve interest rate hike in 2016 meaningfully higher. Corporate bonds have continued to perform well as the insatiable demand for yield is unabated, with spreads compressing in all sectors… Rate and sovereign credit have had a good run of late but the question we are asking ourselves is are we at the point where policy makers and investors have become complacent? Our mantra has always been that policy makers are likely to be lazy and under deliver if there is no pressure from markets. We have been through two major risk events in the last six weeks (Brexit, Turkey) and risk assets have continued to perform. We expected and anticipated this outcome, but that does not prevent us from becoming uneasy at the level of calm that we are witnessing, and the growing confidence that the market has with policy makers.” The other trend on investors’ minds will be the EU’s stance on Italy’s growing banking crisis: will the EU stick its ostrich like head in the sand? Elsewhere in Europe, Greek Minister of Finance Euclid Tsakalotos stated in an interview on Saturday that the primary surplus targets until 2018 are attainable and the government will not have to activate the automatic spending cuts mechanism. Beyond 2018 and in the medium term, however, the Greek government will pursue through negotiations primary surplus targets below 3.5% of GDP -

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FTSE Group’s March review of countering bribery criteria and FTSE4Good

Friday, 09 March 2012
FTSE Group’s March review of countering bribery criteria and FTSE4Good FTSE Group, the global index provider, has announced changes following its March FTSE4Good and ESG Ratings semi-annual review; including the roll-out of new countering bribery criteria to be applied to the assessments of over 1200 companies.  http://www.ftseglobalmarkets.com/

FTSE Group, the global index provider, has announced changes following its March FTSE4Good and ESG Ratings semi-annual review; including the roll-out of new countering bribery criteria to be applied to the assessments of over 1200 companies. 

The changes are expected to lead to improvements in the index; supported by new research from Edinburgh University that shows that the engagement FTSE carries out with companies regarding new FTSE4Good criteria has led to hundreds of companies globally improving their environmental, social and governance practices.

The FTSE4Good Index Series is designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies. The index series is now being complemented with the launch of the FTSE4Good ESG Ratings, to provide a broader range of ESG data and services.



The indices are governed by an independent ‘FTSE4Good Policy Committee’ which meets in March and September for index reviews.  This committee directs the evolution and development of the criteria for the index series, and approves additions and deletions to the index at reviews in line with the inclusion criteria and index ground rules. 

The FTSE4Good ESG Ratings can be used in a variety of ways, building a basis for active portfolio management, company engagement, customised indices, ESG risk analysis or research and analysis.

24 additions, 13 deletions to the FTSE4Good Index Series

The March semi-annual review has seen 24 new additions to the FTSE4Good Index Series from ten countries. This includes Siemens, a company which has faced up to the very costly and damaging bribery scandals of its past, through making considerable changes throughout its business to embed new governance and compliance systems.  Another company that has made significant changes and is added is EDF.

As a result of stringent criteria for nuclear safety and waste disposal being introduced in 2010, companies involved in nuclear power generation are no longer excluded from the index series. EDF has become only the fifth company globally to meet the detailed industry-specific criteria. The largest number of additions at this review are from the USA, contributing seven of the companies. Representation of South Korea has also seen a significant increase with four companies joining the existing eleven. At the same time, 13 companies are being deleted from the index for no longer meeting the FTSE4Good criteria. More details on additions and deletions are available on FTSE’s website (see notes section for more details). The changes to the index will be effective after the close of markets on 16 March 2012.

Details of the new criteria can be found at the following link upon free registration http://www.ftse.com/analytics/ftse4good-esgratings/

Countering Bribery Criteria Roll-Out

The practice of bribery is a risk to long term investors.  Although it can allow companies to secure lucrative contracts in the short term it can have disastrous consequences when these acts are uncovered, through litigation and impacts on intangible value such as brand and reputation.  As new bribery regulations, such as the 2011 UK Bribery Act, are introduced around the world, and with increased global communication, the risks associated with bribery are increasing.  FTSE is responding by providing investors with more detailed corporate bribery data through the FTSE ESG (Environmental Social and Governance) Ratings service and will also be incorporating this within the criteria assessments for the FTSE4Good Index Series.

Previously only those companies deemed to be facing the very greatest potential risk of bribery were being assessed, now the criteria will be rolled out to cover an additional 1200 companies that are defined as “medium risk” based on their industrial sector, countries of operation and public sector contracts.  Of these, approximately 550 are in the FTSE4Good Index Series, and 130 companies will need to make improvements in order to maintain inclusion in the index.  The criteria, set out in full on FTSE’s website, consider how well companies are reducing the likelihood of bribery and draws on Transparency International’s Business Principles for Countering Bribery Details of the new criteria can be found at the following link upon free registration http://www.ftse.com/analytics/ftse4good-esgratings/.

Edinburgh University research on the impact of FTSE4Good on corporate practices

Established over a decade ago now in partnership with EIRIS, the FTSE4Good Index has a track record of regularly strengthening the eligibility criteria. These enhancements provide investors with a more detailed analysis of ESG investment risk but also act to stimulate change in corporate practices.  FTSE’s Responsible Investment Unit undertakes a direct engagement programme with companies facing potential deletion from the index series. Research from Edinburgh University has identified that this form of engagement has been highly effective at stimulating improvements in corporate practices.  From an analysis of the responses of over a 1000 companies they found that the rate of improvement on ESG practices doubles when the company is in direct engagement with FTSE regarding FTSE4Good criteria. See Mackenzie et al (Nov 2011) at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1966474 It is expected that FTSE’s engagement with companies on the countering bribery criteria will also have this impact.

 

2 See Mackenzie et al (Nov 2011) at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1966474

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