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Deutsche Bank- Europe-Global Equity Index and ETF Research :Declining equity markets offset healthy weekly inflows
March 17, 2011--Investment Outlook: European equity re-allocations mark the week
The week just passed registered positive cash flows, of close to €1 billion, shared among all major ETP asset classes. Cash flows withstood a generally negative market environment, affecting both for equities as well as commodities (especially gold and crude oil). These cash flow trends do not reflect any impact from the earthquake and subsequent events that hit Japan last Friday.
In European investing, ETFs tracking the DAX index gathered €1.1 billion in the last week a trend that is in line with the activity of the prior week, when inflows into DAX ETFs totaled €547 million. Interestingly this week’s inflows into DAX ETFs coincided with the outflows of €412 million from Euro Stoxx 50 benchmarked ETFs.
European sectors and emerging markets experienced outflows of €282 million and €246 million respectively. These outflows offset the DAX inflows and overall equity flows for the week totaled a modest €259 million.
Gold and broad commodity ETFs were the pick of the week in commodities, receiving inflows of €235 million and €118 million respectively.
Sovereign and money market benchmarked ETFs contributed equally towards overall fixed income cash flows by gathering €113 million each for the week. Fixed Income ETFs received a total of € 232 million in the previous week.
Assets Under Management (AUM): Weak equity markets and fall in commodity prices cause asset decline
Most European equity benchmarks closed lower than the previous week’s levels: DAX, FTSE 100, CAC & the Euro Stoxx 50 declined by 2.8%, 2.7%, 2.3% and 2.2% respectively. This led to the European equity ETFs shedding close to €2.2 billion in market cap and to end the week at €151.4 billion. Commodity assets were flat at €39.9 billion, with positive cash inflows and falling commodity prices .Overall market declines had a negative impact on the overall ETP assets which lost €1.8 billion to end the week at €236 billion.
Commodity assets remained flat at €39.9 billion with precious metals gathering an additional €262 million mostly on account of positive cash inflows. Fixed Income ETFs experienced moderate increase of 0.8% and ended the week with €42.1 billion in assets.
On-Exchange Total Weekly Turnover: Dip in equity and fixed income volumes lead to moderate overall decline
Declines in equity and fixed income ETF trades pushed overall ETP turnover to a 3.6% drop and ended with a weekly total of €11.9 billion. Fixed income and equity ETF turnover decreased by 17.7% and 3.6% week on week. Commodity trading activity was muted with the weekly total turnover of €1.9 billion, almost at the same level as the prior week.
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Source: Deutsche Bank Global Equity Index & ETF Research
FSA publishes its Prudential Risk Outlook
March 17, 2011--The Financial Services Authority (FSA) has today published the Prudential Risk Outlook (PRO), which sets out its assessment of macro economic and financial trends as a context for its micro-prudential regulation and supervision of firms.
The analysis which lies behind the PRO helps inform how the FSA sets priorities and deploys its resources. The FSA’s Business Plan, published next week, describes those priorities and the resulting resource requirements.
Over the past two years the capital and liquidity position of the UK banks has improved significantly, increasing resilience to shocks. But the PRO describes still important risks to financial stability. It highlights in particular:
Incomplete progress in deleveraging required to create a less vulnerable system.
Progress towards improved global capital and liquidity standards and the need, as that progress is achieved, to understand possible risk transfers and migrations to other parts of the financial system.
A number of important areas of credit risk, relating in particular to vulnerable euro-zone countries, to commercial real estate, and potentially, in emerging markets facing rapid property price inflation.
view the Prudential Risk Outlook 2011
Source: FSA.uk.gov
February 2011-Euro area annual inflation up to 2.4%
EU stable at 2.8%
March 16, 2011--Euro area1 annual inflation was 2.4% in February 20112, up from 2.3% in January. A year earlier the rate was 0.8%. Monthly inflation was 0.4% in February 2011.
EU3 annual inflation was 2.8% in February 2011, unchanged compared with January. A year earlier the rate was 1.5%. Monthly inflation was 0.4% in February 2011.
These figures come from Eurostat, the statistical office of the European Union
Inflation in the EU Member States
In February 2011, the lowest annual rates were observed in Ireland (0.9%), Sweden (1.2%) and France (1.8%), and the highest in Romania (7.6%), Estonia (5.5%) and Bulgaria (4.6%). Compared with January 2011, annual inflation rose in fifteen Member States, remained stable in three and fell in eight.
The lowest 12-month averages4 up to February 2011 were registered in Ireland (-1.1%), Latvia (0.0%) and the Netherlands (1.2%), and the highest in Romania (6.5%), Greece (5.0%) and Hungary (4.4%).
Euro area
The main components with the highest annual rates in February 2011 were transport (5.7%), housing (4.9%) and alcohol & tobacco (3.5%), while the lowest annual rates were observed for clothing (-2.6%), communications (-0.4%) and recreation & culture (0.0%). Concerning the detailed sub-indices, fuels for transport (+0.62 percentage points), heating oil (+0.23), electricity (+0.11) and gas (+0.10) had the largest upward impacts on the headline rate, while garments (-0.25) and telecommunications (-0.09) had the biggest downward impacts.
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Source: Eurostat
European Parliament: Toughening Up Credit Rating Agency Rules
March 16, 2011--New rules for credit rating agencies should clarify their working methods, boost competition and reduce reliance on their ratings, said Economic and Monetary Affairs Committee MEPs on Wednesday, two months before the Commission is to table legislative proposals. MEPs also advocated creating a European credit rating foundation, and called for special attention to sovereign debt ratings.
The committee's own-initiative resolution, drafted by Wolf Klinz (ALDE, DE), did not however find unanimous support. The Socialists chose to abstain, with a view to amending the resolution before Parliament as a whole votes on it. The key points of discord were to do with methods for rating sovereign debt and with the structure of the proposed European credit rating foundation (ECRaF).
The thorny issue of sovereign debt
The resolution refrains from significantly reducing the scope for private CRAs to rate sovereign debt, as had initially been advocated by the Socialists and the GUE/NGL group. It nonetheless calls for more light to be shed on how CRAs arrive at their sovereign ratings, and says they should explain their methodologies and why their ratings deviate from the forecasts of the main international financial institutions. The resolution also notes that ratings have tended to accentuate spreads and demands special consideration of this issue.
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Source: European Parliament
NASDAQ OMX starts trading in new ETFs from SEB
March 16, 2011--NASDAQ OMX today launched trading in a new series of ETFs (Exchange Traded Funds) from SEB. The ETF portfolio from SEB is named SpotR and today (March 16) three new ETFs were listed on NASDAQ OMX Stockholm: SpotR OMXS30, SpotR Bull OMXS30 and SpotR Bear OMXS30.
All three ETFs track the OMXS30 (OMX Stockholm 30) index, which is calculated by NASDAQ OMX and comprises the 30 most actively traded companies on NASDAQ OMX Stockholm. The Bull and Bear products are leveraged ETFs that offer twice the return of the daily change in the underlying OMXS30 index. The leverage increases the chance for higher return but also the risk level and is intended primarily for experienced customers.
"We are delighted to add SEB as a customer on NASDAQ OMX's ETF market, and this launch underscores the rising interest in these products in the Nordic region," says Jenny Rosberg, Deputy President NASDAQ OMX Nordic. "During 2010 trading in NASDAQ OMX listed ETFs amounted to over SEK 200 billion in the Nordics, and we are hopeful that the market will continue to grow as we expand our offering."
Peter Dahlgren, Global Manager, Institutional Customers, SEB Asset Management, commented as follows:"SEB foresees great potential in the ETF market and through the SpotR portfolio we are complementing our total offering of financial products. Going forward, we intend to increase our offering of ETFs linked to other underlying assets in order to develop a broad portfolio aimed at both private and institutional investors."
An ETF fund is a security that tracks an index, a commodity or a basket of assets, at the same time as it is traded as a share on an exchange.
Source: NASDAQ OMX
EEX harmonises Trading Hours
March 16, 2011--As of 24 March 2011, the European Energy Exchange AG (EEX) will standardise the trading hours on all markets of the exchange to the hours from 08:00am to 06:00pm (CET).
As a result, trading on the Spot Market for CO2 Emission Allowances and on the Derivatives Market for Power, CO2 Emission Allowances and Coal will be open from 08:00am to 06:00pm (CET). The registration of over-the-counter (OTC) transactions for clearing on the Derivatives Market via the EEX subsidiary European Commodity Clearing AG (ECC) will also be possible in all Derivatives Market products from 08:00am to 06:00pm (CET).
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Source: European Energy Exchange AG (EEX)
ETF Securities Adds Second Counterparty to Commodities Platform
March 16, 2011--ETF Securities Limited, pioneers in specialist exchange traded products (ETPs), has enhanced its exchange traded commodity (ETC) platform, ETFS Commodity Securities Limited (CSL), with the addition of Bank of America Merrill Lynch, via Merrill Lynch Commodities Inc., (MLCI), as a second counterparty.
Bank of America Merrill Lynch will join UBS AG as a Commodity Contract Counterparty to CSL. Such appointment will become effective on or after 13th April 2011. This new arrangement is expected to generate even greater liquidity for investors and provide additional capacity to create Commodity Securities. The appointment of Bank of America Merrill Lynch is designed to reinforce further the growth of the platform and to provide even greater protection for investors.
Bank of America Merrill Lynch will be appointed as a counterparty on substantially the same terms as UBS and so will collateralise its obligations to CSL on a daily basis as occurs with UBS. Bank of America Merrill Lynch’s obligations are also guaranteed by Bank of America Corporation; in the event of default in payment obligations by MLCI, Bank of America Corporation will meet any outstanding payment obligations of MLCI.
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Source: ETF Securities
ETF Landscape: European STOXX 600 Sector ETF Net Flows for Week Ending 11-Mar-2011
March 16, 2011--For the week ending 11 March 2011, there were US$293.7 Mn net outflows from STOXX Europe 600 sector ETFs. The largest sector ETF net outflows last week were in basic resources with US$113.7 Mn followed by utilities with US$83.0 Mn net outflows while telecommunications experienced net inflows of US$133.6 Mn.
Year to date, STOXX Europe 600 sector ETFs have seen US$1,115.1 Mn net inflows. Banks has seen the largest net inflows with US$492.7 Mn, followed by oil and gas with US$467.4 Mn net inflows while automobiles and parts experienced the largest net outflows with US$105.8 Mn.
As of 11 March 2011, there is US$11.0 Bn AUM invested in the STOXX sector ETFs which is almost double the US$6.7 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 16 out of 19 sectors.
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Source: Global ETF Research & Implementation Strategy Team, BlackRock
Eurex Clearing prepares for upcoming regulatory reforms by expanding its services to interest rate and equity swaps
New services focus on risk management and safety for OTC derivatives/ Client Asset Protection solution to be launched in Q2 2011
March 16, 2011-- Eurex Clearing, Europe’s leading clearinghouse, announced today that it plans to expand its Eurex OTC Clear service to include OTC-traded interest rate and equity derivatives. The new services will be introduced in the context of the upcoming regulatory reforms expected to require mandatory clearing for standardized OTC derivatives in the U.S. and Europe.
Currently, Eurex's OTC Clear service comprises OTC-traded Eurex look-alike futures and options on equities and interest rates as well as Eurex Credit Clear, a clearing service for OTC credit default swaps. In 2010, Eurex Clearing processed 774 million contracts in OTC-traded products.
“The further expansion of our product coverage is an important part of our strategic agenda enabling our customers to prepare for the new regulatory environment”, said Thomas Book, Eurex Executive Board member responsible for Eurex Clearing. “We will offer all clearing services in the relevant asset classes to our clearing members and buy-side clients to comply with new requirements in the most effective and capital efficient way.”
In addition to the expansion of the Eurex OTC Clear service, Eurex Clearing’s strategic agenda includes two further major initiatives focusing on risk management and safety for OTC derivatives. First, Eurex Clearing will introduce a new Client Asset Protection service for its listed and OTC markets, which will be launched beginning in Q2 2011 in close coordination with market participants. The Client Asset Protection service will offer full protection of client assets within the clearinghouse and allow for immediate portability of positions and assets in case of a clearing member default. Second, Eurex Clearing plans to introduce a new risk methodology for the clearinghouse, which will be portfolio-based rather than instrument focused as in many current CCP risk management approaches. The new portfolio-based risk methodology will allow cross-margining between Eurex’s listed derivatives and OTC interest rate swaps and equity derivatives (except CDS), offering buy-side and sell-side firms significant margin and collateral efficiencies.
“Our objective is to be the industry leader in risk management standards. The new risk management approach will further contribute to the safety of the derivatives market, while delivering capital efficiencies to our clients by providing offsets particularly between Eurex’s listed derivatives and OTC-traded derivatives,” explained Book.
Source: Eurex
FSA chairman spells out regulatory challenges beyond Basel III
March 16, 2011--Lord Turner, chairman of the Financial Services Authority (FSA), will say this evening that already agreed regulatory reforms will have a major beneficial impact but further reforms are needed to make the financial system stable. He will also say that regulators need to recognise that the financial system will continually mutate, creating new risks, and requiring a continually evolving regulatory regime.
"The pre-crisis delusion was that the financial system, subject to the then defined set of rules, had an inherent tendency towards efficient and stable risk dispersion. The temptation post-crisis is to imagine that if only we can discover and correct specific imperfections – such as bad incentives or industry structure – that a permanently more stable financial system can be achieved."
Lord Turner will argue that while popular anger often focuses on the direct costs of public rescue of banks, these are likely to be small relative to the overall harm produced by financial crises. This harm derives from volatile credit supply, first too easily and cheaply available then restricted, producing a credit crunch and recession. Such volatile credit supply could moreover, arise in a world where no large banks ever failed or needed public support.
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Source: FSA.gov.uk
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