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Euro, peripheral debt hit by contagion fears
Euro/dollar hits fresh 2-mth low
November 29, 2010--Portugal and Spain's bond yields rose sharply and the euro slumped to a two-month low on Wednesday on worries they will be the next victims of Europe's debt crisis.
Spanish and Portuguese government bond spreads to German Bunds both widened on concerns they will not prove able to see off the sort of debt and banking troubles that have pushed Ireland into seeking international aid.
Autumn forecast 2010-2012: EU recovery taking hold, but progress uneven
November 29, 2010--The European Commission's autumn forecast foresees a continuation of the economic recovery currently underway in the EU. GDP is projected to grow by around 1¾% in 2010-11 and by around 2% in 2012. A better than expected performance so far this year underpins the significant upward revision to annual growth in 2010 compared to the spring forecast. However, amid a softening global environment and the onset of fiscal consolidation, activity is expected to moderate towards the end of the year and in 2011, but to pick up again in 2012 on the back of strengthening private demand. With the economic recovery taking hold in the EU, labour-market conditions are expected to slowly improve over the forecast horizon, as is the budgetary situation. The unemployment rate is projected to fall to around 9% in 2012, with the public deficit declining to about 4¼% of GDP. Developments across Member States are nevertheless set to remain uneven.
European Commissioner for Economic and Monetary Affairs, Olli Rehn said: "The economic recovery has taken hold. I am encouraged by the prospect that employment is finally set to improve next year in Europe. Public deficits are starting to decline thanks to the consolidation measures taken and to the resumption of growth. However, this recovery is uneven, and many Member States are going through a difficult period of adjustment. A determined continuation of fiscal consolidation and frontloaded policies to enhance growth, are essential to set the sound basis for sustainable growth and jobs. The turbulence in sovereign debt markets underlines the need for robust policy action."
Broadly favourable developments so far
In line with the characteristics of previous recoveries following financial crises, the current upturn is proving rather muted overall. That said, the economic situation in the EU has significantly brightened of late, with GDP growth in 2010 so far exceeding expectations, especially in the second quarter. The recovery also appears to be broadening out. While export growth – the first stage of the traditional recovery pattern – has been solid for some time, the EU economy is now entering the next phase - whereby the pick-up in exports starts to spur (equipment) investment demand.
A gradual and uneven recovery
With the projected slowdown in global activity dampening export growth and temporary supports running their course, near-term prospects for the EU economy appear more subdued. The contribution of net exports to GDP growth is set to diminish over the forecast horizon; whereas the contribution of domestic demand is set to increase, owing to a gradual firming of investment and private consumption growth. On the investment front, improvements in the capacity utilisation rate and the profit situation of firms are among the factors expected to support growth, while ongoing balance-sheet adjustment and fiscal consolidation are set to act as constraints. As for private consumption, a slowly improving employment outlook, moderate income growth and subdued inflation underlie the projected pick-up, though consolidation and deleveraging on the part of households are set to have a dampening effect here too.
view Forecasts for EU Member States
Use of performance fees to increase again in 2011 according to Skandia Investment Group research
November 29, 2010--Major survey of fund management groups with combined $2 trillion AUM reveals:
Two-thirds expect use of performance related fees (PRFs) on equity funds to increase in 2011
Rise of passive products such as ETFs putting downward pressure on fixed fees
Fee polarisation will occur, says Skandia Investment Group
Almost two-thirds of fund groups (65%) expect the use of performance fees on equity funds to rise again in 2011 according to research by Skandia Investment Group (SIG), a leading provider of research-led investment solutions.
The research - which is part of a broader study by SIG into the future of fund management, to be published on 6th December 2010 - reveals that many global asset management firms believe the use of performance fees will increase across a range of asset classes next year. Equity funds and absolute return vehicles are expected to see the greatest increases, with 65% and 50% of those surveyed predicting rises across these two classes respectively.
The findings come at a time when the industry is also seeing investors change their focus from relative to absolute returns as a performance measure. While the figures show this is felt across the board, the biggest shift is among institutional investors (75%), compared with 58% of retail.
S&P launches liquidity weighted European equity index
November 29, 2010-- Standard & Poor’s, the index provider, has launched a new liquidity weighted European equity index, designed to provide exposure to 75 of the eurozone’s most heavily traded blue chip companies.
S&P has created its new liquidity index with an eye to appealing to the rapidly growing exchange traded funds market.
DB Global Equity Index & ETF Research : European Weekly ETP Review: Strong ETC product launch calendar as ETF investors continue to keep at bay
November 29, 2010--Investment Outlook: At crossroads, investors are pondering the next move
Following Ireland’s financial woes, ETF investors continued to stay out of the market for a second consecutive week, despite small gains in the equity market. The Euro Stoxx 50 index rose by 0.7%, the CAC 40 index: was up by 0.8%, the DAX: rose by 1.6% and the FTSE 100 was down 1.1%. The price of gold (USD/oz) continued to decline, losing 1.2%..
Similar to the prior week, inflows in the European ETF industry lagged well behind those observed in September and October of this year. Total European ETP inflows amounted to just €78 million, compared to €258 million of outflows in the previous week.
* Asset class investment patterns reflected the flat-lining trend that characterized overall ETP cash flows Equity ETFs netted outflow of €1 million vs. €115 million of inflows last week. Fixed Income registered outflows of €25 million, compared to €450 million outflow last week, primarily driven by sovereign benchmarked ETF outflows. Commodities netted inflows of €81 million, versus. €63 million inflow during previous week, primarily attributable to €106 million of gold inflows.
Product launch calendar: A busy week for ETCs
This week was especially busy with 19 new product launches and 2 share class cross-listings.
The new launch calendar was dominated by sixteen new currency ETCs issued by ETF Securities on the London Stock Exchange. The new currency products track a variety of currency pairs and they offer both long and short exposure.
Deutsche Bank launched two additional ETCs on LSE and Deutsche Boerse. The new products track a mean reversion benchmark, an index that is intended to reflect the performance of 12 commodities from 4 broad commodity sectors: energy, precious metals, base metals and agriculture. The weights of the commodities in the index are systematically adjusted depending on the relative richness or cheapness of the commodity.
UBS launched an MSCI Emerging Markets equity ETF on the Swiss Stock Exchange. Two additional share classes of the EM equity ETF were also cross listed on the same exchange
On-exchange ETP turnover: mild gains
Average rolling 22-day on-exchange turnover rose by 1.4% to €2.02 billion. This was supported by moderate rises in all major asset classes. Equity ETF turnover was up by 0.5% to €1.47 billion, fixed income ETF turnover rose by 4.7% to €218 million and commodity was up by 3.7% to €326 million
Assets Under Management (AUM)
The European ETP industry finished the week with €216.7 million, showing a decline of 0.3% from the previous week. The slight decline is attributable to slow weekly flows. Year to date, the European AUM are up by 27.7%.
CESR finds Member States broadly compliant with Prospectus Directive
November 29, 2010--CESR publishes today an executive summary (Ref. CESR/10-123) of a mapping on the actual use and application of the Prospectus Directive (herein referred to as the PD) in Member States.
The executive summary contains the key findings of the full report and gives a picture of the practices applied in Member States in relation to different organisational aspects and controls in place regarding prospectus controls. The mapping shows existing divergences in practices and in the day-to-day application.
view Executive summary of the Report Prospectus Directive Selective Mapping
Turkish economy dissociates in a positive sense, Deloitte report says
November 29, 2010--The Turkish economy dissociated in a positive sense, a monthly report prepared by Deloitte Turkey said.
According to the report prepared by Deloitte's Economic Consultant Dr. Murat Üçer, the Turkish economy as well as many other developing economies dissociated themselves from other world economies based on their strong performance.
The most important matter for Turkey is how it will manage its successful economy in the future. Turkey must continue the economic momentum by continuing reforms. We believe that Turkey can reach figures of high growth by making reforms and strengthening its institutions.
Eurex Clearing Introduces New Pre-Trade Risk Limit Functionality
“Advanced Risk Protection” solution launched for Clearing and Trading Members/ Further expansion of Eurex Clearing’s industry leading real-time risk management tools
November 29, 2010--Today, Eurex Clearing, Europe’s leading clearing house for securities and derivatives transactions, launched its “Advanced Risk Protection” solution. The new service enables clearing members and non-clearing members to control their trading and operational risks by setting pre-trade limits on aggregate risk metrics such as the total margin requirement. All members can define the level of protection for themselves, and clearing members are able to set limits for their non-clearing members.
Up to three staggered limits are activated when the pre-defined risk metrics are breached. The risk checks are performed in real-time based on actual positions using real-time market prices.
“A reactive risk management approach is not sufficient to cope with the increasing speed in the trading environment. That’s why we give our customers the tools they need to proactively set risk limits in advance”, explained Thomas Book, member of the Eurex Executive Board responsible for clearing. “Our Advanced Risk Protection solution contributes to market safety and is our response to the market’s desire for powerful risk controls that are both latency-neutral and can easily be expressed in terms of real risk figures”, said Book.
The Advanced Risk Protection solution has been developed in close cooperation with market participants to ensure that the new limits are simple and effective to use. Members can configure different risk metrics such as total exposure, profit and loss, cash flow or market risk. These metrics are actual aggregated risk measures covering both futures and options positions and provide great flexibility to adequately reflect individual risk management practices and trading patterns. In addition, a member can specify which of three actions will be activated when a breach of each level or risk limits occurs. At the first level, an alert message is sent to the respective clearing member. In the second stage, the system automatically throttles orders and quotes. In the third level, the stop button functionality is automatically triggered, thus halting all trading activities.
First iShares ETF on High-Yield Bonds Tradable on Xetra
November 26, 2010--Since Friday, a new exchange-traded bond index fund from the issuer iShares (BlackRock Inc.) has been tradable in Deutsche Börse’s XTF segment.
ETF name: iShares Markit iBoxx Euro High Yield
Asset class: bond index ETF
ISIN: DE000A1C8QT0
Total expense ratio 0.5 percent p.a.
Distribution policy: distributing
Benchmark: Markit iBoxx Euro Liquid High Yield Index
The iShares Markit iBoxx Euro High Yield gives investors the opportunity, for the first time, to invest in high-yield corporate bonds denominated in euros with issuers in or outside the euro zone. The bonds have a sub-investment grade rating. These bonds have a higher risk of default, but therefore pay higher yields. Only the largest and most liquid bonds with an amount outstanding of at least €250 million are included. The weighting per issuer is limited to 5 percent in the reference index.
The product offering in Deutsche Börse’s XTF segment currently contains a total of 753 exchange-listed index funds, making it the largest offering of all European stock exchanges.
Competition Policy and Growth:International experience and implications for the Russian Federation
November 26, 2010--Potential gains that can be realized through the introduction of a well designed competition framework also include greater consumer welfare and economic efficiency in form of lower prices, greater choice and variety of goods and services, innovation, reduced costs and better allocation of resources.
Empirical evidence shows strong correlation between higher GDP per capita and local markets where competition is more intense in most industries. Similarly, higher frequency of entry of new competitors into a local market is also associated with higher GDP per capita and, to some extent, with higher growth rates. Measures of mark-ups also indicate that low domestic competition translates into lower international price-competitiveness.
