Tuesday 25th November 2014
NEWS TICKER: TUESDAY, NOVEMBER 25TH 2015 - Morningstar has downgraded its Analyst rating for the Fidelity European Opportunities fund to Neutral. Jeremy Beckwith, director of manager research, Morningstar UK comments: “We have assigned the Fidelity European Opportunities fund a Morningstar Analyst Rating™ of Neutral. The fund had previously been placed Under Review following the fund’s management change announced in the summer. It was previously rated Silver. Alberto Chiandetti—who has gained most of his investment experience in the Italian market—took over from former manager Colin Stone on 1 October 2014. He is also responsible for two single-country strategies: Fidelity Italy since 2008, which has a Morningstar Analyst Rating of Silver, and Fidelity Switzerland since 2011, rated Neutral”. According to Beckwith: “This is Chiandetti’s first time running a European mandate and we expect to see him bring in relevant changes to the strategy. Over a full market cycle, he has proven able to execute his process well at the helm of Fidelity Italy; that said, his past results are not fully relevant for this product, given the differences in the investable universe and the opportunity set compared to the country funds. We have therefore assigned a Neutral rating to reflect the uncertainties surrounding the future of this strategy.” - Among the five China ETFs listed on Singapore Exchange (SGX), the three most active China ETFs in the 2014 year-to-date have been db x-trackers CSI 300 UCITS ETF, db x-trackers MSCI CHINA INDEX UCITS ETF, and United SSE50 China ETF. These first two are traded in US dollars, and the latter in Singapore dollars. These three China ETFs are synthetic ETFs that use derivative instruments such as swaps to track the reference index as compared to physical ETFs that hold the securities or assets of the reference index. These three ETFs generated an average 2014 year-to-date total return of 8.4% - The Straits Times Index (STI) ended +4.46 points higher or +0.13% to 3344.99, taking the year-to-date performance to +5.69%. The FTSE ST Mid Cap Index gained +0.21% while the FTSE ST Small Cap Index declined -0.47%. The top active stocks were SingTel (+0.26%), Olam Intl (-2.27%), DBS (+0.20%), ComfortDelGro (-2.71%) and CapitaLand (+0.30%). Outperforming sectors today were represented by the FTSE ST Technology Index (+1.14%). The two biggest stocks of the FTSE ST Technology Index are Silverlake Axis (+2.40%) and STATS ChipPAC (-1.11%). The underperforming sector was the FTSE ST Basic Materials Index, which declined -0.84% with Midas Holdings’ share price declining -1.70% and Geo Energy Resources’ share price unchanged. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (-0.77%), SPDR Gold Shares (+0.43%), STI ETF (unchanged). The three most active Real Estate Investment Trusts (REITs) by value were Suntec REIT (+1.58%), Ascendas REIT (+1.76%), CapitaMall Trust (+0.25%). The most active index warrants by value today were HSI23800MBeCW141230 (unchanged), HSI23600MBePW141230 (-3.23%), HSI24400MBeCW141230 (unchanged). The most active stock warrants by value today were DBS MB eCW150602 (-2.96%), OCBC Bk MBeCW150413 (+1.08%), UOB MB eCW150415 (+6.25%) - Inter-American Development Bank (IDB) is providing financing under a Regional Public Goods Programme (RPG) that will be managed by Caribbean Export Development Agency in its capacity as the Secretariat for the Caribbean Association of Investment Promotion Agencies (CAIPA. The IDB has provided US$900.000 to CAIPA to support several initiatives geared towards increasing foreign direct investment (FDI) into the Caribbean and will be implemented over a two year period - Mexico has posted record FDI of $35.2bn inflow in 2013, nearly double the level seen in 2012, mainly due to Belgian brewer Anheuser-Busch InBev's acquisition of Mexican beer giant Grupo Modelo, which brought in over $13bn, according to figures released by the economy ministry - Eight Italian regions have hired banks to manage a round of bond buybacks for them, the treasury said on Tuesday, in a move aimed at giving indebted local administrations more time to repay their loans. Abruzzo, Campania, Lazio, Liguria, Lombardy, Marche, Piedmont and Puglia have hired Barclays, BNP Paribas, Citigroup and Deutsche Bank to manage any offers to buy back their bonds.

New ICMA European Repo Council paper examines role of ‘haircuts’

Wednesday, 08 February 2012
New ICMA European Repo Council paper examines role of ‘haircuts’ ICMA’s European Repo Council (ERC) has published a paper entitled: Haircuts and initial margins in the repo market, which calls for more detailed understanding of the precise impact of collateral haircuts in the repo market to inform the regulatory debate.The paper, written by Richard Comotto of the ICMA Centre, questions the popular view of the role played by collateral haircuts in the recent crisis. http://www.ftseglobalmarkets.com/

ICMA’s European Repo Council (ERC) has published a paper entitled: Haircuts and initial margins in the repo market, which calls for more detailed understanding of the precise impact of collateral haircuts in the repo market to inform the regulatory debate.The paper, written by Richard Comotto of the ICMA Centre, questions the popular view of the role played by collateral haircuts in the recent crisis.

A haircut is a percentage discount deducted from the market value of a security that is being offered as collateral in a repo in order to calculate its purchase price. The adjustment is intended to take account of the unexpected losses that one party to the repo trade might face in buying (or selling) the security if the other party defaults.

Regulators are concerned that the application of haircuts could amplify negative market trends. They worry that, in a situation when asset prices are falling, increases in haircuts in response to a loss of confidence could reduce liquidity of market users who may then sell assets, so reducing the price and causing haircuts to be increased again. This theoretical scenario has been blamed by some for exacerbating the market crisis.



The paper refutes this view, citing evidence, much of it from official sources, that haircuts did not in fact change much during 2007-2009. Rather market issuers initially responded to the crisis by reducing or withdrawing credit lines, shortening the terms for which they were willing to lend and narrowing the range of collateral they were willing to accept.

The author examines the data on which academic studies of this phenomenon have been based and finds that these have been largely focused on the use of structured credit as collateral in the US market. This has been extrapolated to the wider global market without adequate consideration of the differences in market structure. The paper concludes that there is no empirical evidence to suggest that the imposition of haircuts in Europe was a major contributor to the market crisis.

 “Repo market participants want to work with the authorities to ensure the operation of the market in Europe is well understood, so that regulatory proposals assist its efficient functioning. Industry efforts have always and continue to be directed at improving market practice and education,” says Godfried De Vidts, chair of the ERC.

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