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Investors drawn to Turkey’s banking sector
October 21, 2010--International groups paid high prices to enter Turkey’s banking sector in the boom years between 2005 and 2007 – but for many, it has proved to be worth the money.
The National Bank of Greece’s acquisition of Finansbank in 2006, near the peak of the market, has been a lifeline. Growth at the Turkish subsidiary allowed NBG to report a net profit at group level in the first half of 2010 in spite losses in its home market; it is now floating a stake in Finansbank as it rebuilds its balance sheet.
Turkish banks, radically restructured after a severe crisis in 2001, continued growing throughout last year’s recession thanks to solid capital cushions, a lack of exposure to toxic assets and the lowest interest rates the country has ever experienced.
UK debt cost falls to lowest since 1980s
October 21, 2010--Britain’s borrowing costs have dropped to the lowest in a generation, falling below those of Germany, Europe’s biggest and strongest economy, reflecting in part investor confidence that the government can bring the deficit under control.
George Osborne, the chancellor, vowed on Thursday that he would not retreat on his plans to rein in the deficit, the most ambitious effort to cut public spending announced by any major economy.
Benchmark five-year gilt yields fell to 1.43 per cent on Thursday, almost a quarter of a percentage point below those of Germany, which traditionally benefits from much lower interest rate costs, and the lowest level since at least the 1980s.
Singapore Exchange expands its presence in Europe
October 20, 2010--Prior to SGX, Mrs McGroarty worked in Citigroup London as the Head of Corporate Access for Eastern Europe, Middle East & Africa regions.
Singapore Exchange (SGX) is expanding its presence in Europe and the surrounding regions for its Listings business.
Paulina McGroarty, will join SGX’s Listings Unit as Head of Europe, Middle East and Russia on 5 November 2010, bringing with her a wealth of capital market experience in her area of coverage. Prior to SGX, Mrs McGroarty worked in Citigroup London as the Head of Corporate Access for Eastern Europe, Middle East & Africa regions.
Before joining Citigroup in 2004, McGroarty was the Managing Director of the Corporate Client Group at NASDAQ Stock Market, overseeing relationship management and new business development in Europe, Russia, South Africa, and the Middle East. Mrs McGroarty will report to Lawrence Wong, Head of Listings, Singapore Exchange.
IMF Sees Continued Recovery in Europe, Risks Remaining
October 20, 2010--Europe continues to recover from its deepest recession in the postwar period with GDP projected to expand by 2.3 percent in 2010 and 2.2 percent in 2011, after a 4.6 percent contraction in 2009, the International Monetary Fund (IMF) said today.
In its latest Regional Economic Outlook (REO) for Europe, the IMF said that the recovery has been boosted by the resurgence of the world economy, with export growth especially strong in countries that export capital goods. However, the recovery is sluggish and projected growth rates are low by historical standards.
In advanced Europe, where policy actions helped contain sovereign debt troubles in early 2010, growth is projected at 1.7 percent in 2010 and 1.6 percent in 2011. Despite recent strength, however, the upswing is projected to remain weak compared with previous recoveries and also with advanced economies in other regions. In part, these growth differentials are due to the lingering impact of the crisis and the accelerating fiscal adjustment in 2011. But they also reflect well-known structural rigidities in the labor, product, and services markets that will limit the euro area’s potential growth.
The REO also noted that significant risks remain, and urged policymakers to implement appropriate policies. Fiscal consolidation, while inevitable, should be undertaken in a way that minimizes the negative impact on growth and unemployment; if growth threatens to slow appreciably more than we expect, countries with fiscal room could postpone some of the planned consolidation. Monetary policy must steer carefully between the need to normalize policies on the one hand and the necessity to mitigate sovereign market volatility and ensure bank liquidity on the other; and the recent checkup of European banks should be followed by rapid action to eliminate remaining weaknesses in balance sheets while continuing to safeguard lending capacity.
“Policymakers need to focus on strengthening bank balance sheets,” said Ajai Chopra, Acting Director of the IMF’s European Department. “Vulnerable financial institutions should be restructured, recapitalized, or resolved without delay. The results of the recent European Union-wide stress tests provide a rough guide of the banks that may need to be merged or recapitalized. Better government supervision with enhanced cross-border cooperation can help build market confidence. A number of initiatives are already in train. We need to wrap them up, get regulatory clarity, and implement.”
view the report-Regional Economic Outlook: Europe-Building Confidence October 2010
New data on the daily traded volume and percent share of members
October 20, 2010--A report in csv format (name of file: “uyehissiraYYYYAAGG.csv), including the TL traded volume and percent share on a member basis, sorted from largest to smallest for the E, Y, F, V feature code normal order transactions on a daily basis, will be published on the Istanbul Stock Exchange web site under Data/Stock Market Data/Market Data directory, starting from October 19, 2010.
Such information will be available starting from October 8, 2010, when the ISE stopped displaying the trading party member codes included in inquiries of transactions executed in the Stock Market.
High-frequency trading is ‘chewing gum’
October 20, 2010--High-frequency trading in markets is little more than “chewing gum” and is pushing aside the “natural liquidity” provided by traditional investors, the head of the Prague Stock Exchange has warned.
In an outspoken attack on the fast growing practice of high-frequency trading, Petr Koblic, the exchange’s chief executive, said there had been a “dramatic drop” in liquidity, or trading activity, from long-standing market participants such as pension funds and smaller retail investors.
In their place have come high-frequency traders, who use sophisticated computers to trade in and out of stocks in fractions of a second. They can be independent groups, hedge funds or investment banks.
ECB official gives cool reaction to eurozone reforms
October 20, 2010--European Central Bank chief economist Juergen Stark replied cautiously Wednesday to a European Union deal hailed as the eurozone's "biggest reform" ever, saying that remained to be seen.
An agreement unveiled Tuesday would make it easier to sanction EU states that blow their budgets and create a permanent, Greek-style safety net for those that cannot cope.
This "was celebrated as a great day for Europe," Stark noted on the sidelines of an ECB conference in Frankfurt.
Commission sets out its plans for a new EU framework for crisis management in the financial sector
October 20, 2010--The crisis demonstrated clearly that when problems hit one bank, they can spread to the whole financial sector and well beyond the borders of any one country. It also showed that systems were not in place to manage financial institutions facing difficulties. Very few rules exist which determine which actions should be taken by authorities in the case of a banking crisis. That is why the G20 agreed that crisis prevention and crisis management frameworks had to be set up. Today, the European Commission responds by setting out its plans for an EU framework for crisis management in the financial sector. These pave the way for legislation due by spring 2011 which will create a comprehensive crisis management framework for banks and investment firms.
Internal Market and Services Commissioner Michel Barnier said: “First, we must try to avoid a financial crisis in the future. That is why our work to make the banking sector stronger and to create a real supervisory framework is so important. But banks will still face difficulties in the future. They might even fail and should be allowed to do so. We need to make sure that they can do so without bringing down the whole financial system, or risking that taxpayers are called on to pay the costs. No bank should be "too big to fail" or too interconnected to fail. That is why we need a clear framework which ensures authorities throughout Europe are well prepared to deal with banks in difficulty and handle possible bank failures in an orderly manner. That is the aim of today's plans.”
The Commission's Communication sets out the main elements that will be part of the Commission's legislative proposals next year, and is the result of extensive consultations over the past months ( see IP/09/1549). Beyond the immediate priority of putting in place efficient crisis management arrangements in all Member States, the Communication also includes a "roadmap" providing a longer term view of some of the major challenges which will need to be overcome in order to ensure smooth handling of crises.
Netherlands' pension system best, Mercer says
October 20, 2010--The Netherlands has the world's best pension system, according to a Mercer report ranking retirement systems in 14 nations with major pension systems.
The annual Melbourne Mercer Global Pension Index placed the Netherlands on top for the second year running with a score of 78.3 out of 100.
The system in the Netherlands, which the report called “sound,” scored top marks in adequacy, which considers factors such as the minimum pension level and how much an average earner would receive as a percentage of his salary upon retirement. The Dutch system also was first in integrity, which considers how much regulatory protection is available to an average pension fund participant.
Sweden, which is third overall, scored top marks in sustainability, which considers factors such as state pension age and labor-force participation. Sweden's total score is 74.5.
ETF Landscape: STOXX Europe 600 Sector ETF Net Flows, week ending 15-Oct-10
October 20, 2010--Last week saw US$37.7 Mn net outflows from STOXX Europe 600 sector ETFs. The largest sector ETF net outflows last week were in automobiles and parts with US$114.7 Mn and healthcare with US$44.5 Mn while retail experienced net inflows of US$95.3 Mn.
Year-to-date, STOXX Europe 600 sector ETFs have seen US$699.1 Mn net inflows. Banks sector ETFs have seen the largest net inflows with US$284.4 Mn, followed by media with US$141.3 Mn while food and beverage has experienced the largest net outflows of US$167.0 Mn YTD.
The US$10.5 Bn AUM invested in the ETFs is greater than the US$4.2 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 18 out of 19 sectors.
