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Financial Stability Review December 2009
December 18, 2009--The extraordinary remedial actions taken by central banks and governments since late last year have been successful in restoring confidence in, and improving the resilience of, financial systems around the world. Financial system support measures have been addressing the funding challenges of key financial institutions and have bolstered their capital positions. These measures, together with sizeable macroeconomic policy stimuli, set in motion a mutually reinforcing process between financial system conditions and real economic performance, fostering improving business cycle prospects, as well as a fading of systemic risk.
An important reason for lowered systemic risk was an abatement of tail risk, thanks primarily to the downside protection by governments of financial institutions’ balance sheets. A recovery of risk appetite, underpinned by lowered systemic risk, contributed to the remarkable turnaround in financial markets since March 2009 and supported the trading income of large and complex banking groups (LCBGs). Many of these institutions also benefited from a considerable boost to net interest income on account of very steep yield curves. These better financial conditions strengthened the profitability of many LCBGs to such an extent that they were able to absorb considerable write-downs on securities and loans while still, on average, reporting material improvements in profitability over three consecutive quarters. Some were even able to return the capital they had received from governments, thus exiting from financial support.
Despite the recovery in financial markets and improved financial performance of euro area LCBGs, there are several grounds for caution in assessing the outlook for financial stability in the euro area. In particular, the main risks identified outside the euro area financial system include the possibility of:
vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions;
greater-than-expected household sector credit losses if unemployment rises by more than expected;
the surge of government indebtedness raising concerns about the sustainability of the public finances, as well as the crowding out of private investment; and
an adverse feedback between the financial sector and public finances as a result of financial system support measures, fiscal stimuli and weak economic activity.
view the full report-Financial Stability Review December 2009
read summary of the Financial Stability Review December 2009
Source: European Central Bank (ECB)
Ordinary share of Volkswagen AG to leave DAX
Volkswagen AG Vz to be included in DAX/ Unscheduled change effective 23 December 2009
December 18, 2009--Deutsche Börse has announced an unscheduled change in the composition of DAX. The freefloat of the ordinary share of Volkswagen AG has dropped below ten percent and does therefore no longer fulfill the requirements of the index.
The preferred share of Volkswagen AG (Vz) is to be included in DAX and will replace the ordinary share of Volkswagen AG (St). The Guide to Equity Indices of Deutsche Börse states that if a share of a company leaves the index, further classes of shares of that same company may rank among the candidates to be included in the index provided they qualify in agreement with the index rules.
This change will be effective 23 December 2009. The next equity index review is scheduled for 3 March 2009.
Source: Deutsche Börse
Ireland opens doors to hedge funds
December 18, 2009--The Irish government has passed legislation to make it easier for hedge funds based in the Cayman Islands and other tax havens to move to Dublin.
Brian Lenihan, the Irish finance minister, has identified the importance of the industry for the Irish economy, particularly at a time of high unemployment and with the public finances under strain.
He said opportunities “exist for Ireland to become the European hub for the international funds industry following recent European legislative changes”. He is to bring forward changes in the finance bill early next year to “strengthen Ireland’s competitive edge in this important sector”.
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Source: FT.com
Bank lists obstacles on path to stability
December 18, 2009--Strenuous efforts to steady the global financial system have borne solid results in recent months but the path to stability is strewn with potholes, the Bank of England warned in its half-yearly Financial Stability Report.
“Notwithstanding recent progress, many banks internationally still have high levels of leverage and unbalanced funding structures,” the Bank said, noting that financial institutions need to reduce their borrowings and extend the maturity dates on their remaining debt.
The financial sector faces a host of challenges, according to the report. Many institutions are heavily exposed to a commercial property sector where both rental incomes and values have fallen sharply. Some have made hefty loans to households whose finances will be strained as interest rates return to normal levels.
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Source: FT.com
EU employers concerned about Chinese protectionism
December 18, 2009--European employers complained Friday about China's treatment of foreign companies, raising concern about a new policy that could block access to Chinese markets.
In a letter to new EU Trade Commissioner Benita-Ferrero Waldner, BusinessEurope chief Philippe de Buck urged her and the EU's executive arm to urgently raise the matter with the Chinese authorities.
The recently issued rules for developing a catalogue of 'national indigenous innovation products' are a further worrisome example in a gradual trend towards impeding access for non-Chinese companies," he wrote.
Beijing stipulates that sellers of high-tech goods must have them accredited based on "indigenous innovation" -- meaning they must contain Chinese intellectual property -- to be included in a government procurement catalogue.
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Source: EU Business
DB Index Research -- Weekly ETF Reports -- Europe
December 17, 2009--ETF Liquidity Trends
ETF Volume
Exchange based Equity ETF turnover remained at about the same level on the previous week. Daily turnover for the previous week was E1.3bn. European fixed income ETF turnover rose by 4.7% to E180.2m.
In exchange based bond ETFs, iShares € Corporate Bond has the highest daily turnover of E12.03m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E62.05m.
There were 7 new listings last week. HSBC issued one new ETFs on NYSE Euronext Paris. Barclays Capital issued two new ETNs and Source issued four new ETCs on Deutsche Borse. All new listings were primary listings.
European Style ETFs, led by short and leveraged products, kept its position as the leading product area with total turnover of E377m accounting for 29.78% of total ETF turnover, followed by European Regional ETFs with total turnover of E344m with 27.20% of total turnover. The DAX ETFs remain the dominant country products with total average daily volume of E172m across the fourteen listed products and accounting for 13.6% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 12.7% of turnover trading E160m per day with liquidity split across 17 ETFs and 44 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 37.4% of total turnover. The Euronext NextTrack platform has 20.7% market share. The LSE’s combined Italian Exchange and London market share is now 25.1%.
Assets under Management (AUM)
Total European Equity related AUM remained at about the same level at E107.2bn during last week. AUM for DJ Euro STOXX 50 ETFs was E21.1bn accounting for 19.7% of total European AUM. Fixed Income ETF AUM remained at about the same level at E34bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.1bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
To request a copy of the report
Source: Aram Flores and Shan Lan -DB Index Research
NYSE Euronext welcomes first Total Market and AMX Midcap ETF’s
December 17, 2009-- NYSE Euronext is delighted to announce that Think Capital, an independent Dutch issuer of Exchange Traded Funds (known as ETFs or Trackers) has launched five new ETFs on NYSE Euronext, Amsterdam. With these ETFs Think Capital is focusing specifically on the Dutch market.
The new products also include innovations, in the form of the new AMX Midcap Tracker and the Total Market Trackers.
ThinkCapital has launched five ETFs on NYSE Euronext; the Think AEX® Tracker, the Think AMX® Tracker and three Total Market Trackers: Think TMT Defensief, Think TMT Neutraal and Think TMT Offensief.
The Think AEX Tracker is linked to the best-known index in the Netherlands, the AEX Index, and its unit price is approximately one-tenth of the leading Dutch index.
The Think AMX Tracker is the first ETF to be linked to the Amsterdam midcap-index. It offers investors the opportunity to invest in this popular index in a transparent structure and at low cost.
The Total Market Trackers invest in a mix of equities, bonds and real estate in a previously set allocation depending on the chosen profile: defensive, neutral or aggressive. The investments are spread over 40 equities in different sectors and different European countries, 10 different government bonds with varying maturities, and 10 different real estate funds.
Joost van der Does de Willebois, CEO of NYSE Euronext, Amsterdam, said “We are delighted to welcome Think Capital as one of the first Dutch ETF issuers. It shows that these products are becoming increasingly known and popular in the Netherlands as well.”
“We are extremely pleased to welcome ThinkCapital as a new issuer to the NYSE Euronext ETF markets. The introduction of Think ETFs on the AEX and AMX indexes is a welcome response to strong demand from investors for products based on the most important benchmarks for Dutch blue-chip and midcap stocks, and the three new Total Market Trackers based on multi-asset indexes are the first of their kind on Euronext”, said Scott Ebner, Senior Vice President, European Exchange Traded Products of NYSE Euronext.
“We are very happy with the listing of our products on the Amsterdam market of NYSE Euronext”, said Martijn Rozemuller, Managing Director van ThinkCapital, “Trackers already are successful for years in the countries around us and in the US. With our Trackers we hope to offer Dutch investors a good alternative for the Investment Funds that are common in the Netherlands.”
Source: NYSE Euronext
Egeli urges Turkish investors to invest in Greece during crisis
December 17, 2009--Turkish-Greek Business Council President Selim Egeli yesterday said that just as Greek banks had invested in the Turkish financial sector, Turkish investors should also look for possible investment opportunities in Greece despite the severe financial difficulties the country faces.
Speaking to the Anatolia news agency, Egeli said he does not expect the financial crisis in Greece to expand and influence other countries, such as Turkey, as he predicts the Greek government will take necessary measures to prevent such a thing from happening. However, he added that the Turkish private sector can take advantage of this crisis by attracting Greek consumers with its cheaper and high quality goods. “If Turkey’s exports to Greece increase by 5 percent, annual exports [to Greece] will rise from their current level of $3.5-5 billion to some $8 billion,” Egeli said, predicting that this figure can be reached within one to one-and-a-half years.
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Source: Todays Zaman
NASDAQ OMX And HQ Bank Launch New ETF Based On NASDAQ-100 Index
NASDAQ OMX Stockholm, part of the NASDAQ OMX Group (NASDAQ:NDAQ), today starts trading in a new Exchange Traded Fund (ETF), NASDAQ-100 ETF. The ETF, issued by December 17, 2009--Sweden-based HQ Bank, is based on the NASDAQ-100 Index and includes 100 of the largest domestic and international securities listed on The NASDAQ Stock Market in the U.S.
Jenny Rosberg, Deputy President at NASDAQ OMX Nordic said, "The NASDAQ-100 ETF allows Nordic investors easy and cost-efficient access to some of the world's largest and most well-known brands. This product is a great example of the possibilities of being a global exchange company, and how to transform this to benefits for our local customers."
NASDAQ-100 ETF, which is traded in SEK with USD as denominated currency, aims to give a daily return equivalent to NASDAQ-100 Index. The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The NASDAQ Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology.
The weight of the shares included in the underlying index (NASDAQ-100 Index) is based on the company's total market value but limited to ten percent. This is in line with the rules in the UCITS (Undertakings for Collective Investments In Transferable Securities) directive.
Companies encompassed within the NASDAQ-100 ETF include Apple, Cisco, Dell, Google, Intel, Microsoft, Oracle, Starbucks, Symantec and Yahoo. For a complete list of the companies included in NASDAQ-100 Index, visit: http://dynamic.nasdaq.com/dynamic/nasdaq100_activity.stm
Source: NASDAQ OMX
Eurex to Roll-out Enhanced Trader Development Program in 2010
December 17, 2009--The international derivatives exchange Eurex will continue to expand its global distribution network by launching an enhanced Eurex Trader Development Program in January 2010 based on the current successful program. The new scheme offers an extensive range of training, further education measures and lucrative trading conditions for new traders who start trading on Eurex next year.
Michael Peters, member of the Eurex Executive Board, said: “On 1 January 2010, Eurex will introduce the next generation of its Trader Development Program which will support traders new to Eurex markets by providing them with broad educational support and reduced trading and clearing fees. In particular, our program aims to support Eurex members who plan to extend their trading activities through the training of junior staff.”
The reduction and waiver of trading and clearing fees depends on the trader’s location and on the number of individually traded contracts per month. Preconditions are that they are performing proprietary trading via order routing systems and have not been admitted to trading on Eurex before.
Applications for the Trader Development Program will be accepted until 31 December 2010, and the benefits will be granted for one year from application.
Source: Eurex
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