Global ETF News Older than One Year
OECD-Corporate bond debt continues to pile up
February 18, 2020--The volume of corporate debt reached an all time high in real terms of USD 13.5 trillion at the end of 2019, driven by the return of more expansionary monetary policies early in the year. At the same time, the overall quality of corporate debt has declined, according to a new OECD report
Corporate Bond Market Trends, Emerging Risks and Monetary Policy says that non-financial companies borrowed USD 2.1 trillion in the form of corporate bonds in 2019. However, the data show that, in comparison to previous credit cycles, today's stock of outstanding corporate bonds has lower overall credit quality, higher payback requirements, longer maturities and inferior investor protection. This may amplify the negative effects that an economic downturn would have on the non-financial corporate sector and the overall economy.
Source: OECD
Finding Solid Footing for the Global Economy
February 19, 2020--As the Group of Twenty industrialized and emerging market economies (G-20) finance ministers and central bank governors gather in Riyadh this week, they face an uncertain economic landscape.
After disappointing growth in 2019, we began to see signs of stabilization and risk reduction, including the Phase 1 U.S.-China trade deal. In January, the IMF projected growth to strengthen from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021.
This projected uptick in growth is dependent on improved performance in some emerging market and developing economies.
Monetary and fiscal policy have been doing their part. In fact, monetary easing added approximately 0.5 percentage points to global growth last year. Forty-nine central banks cut rates 71 times as part of the most synchronized monetary action since the global financial crisis.
Source: IMF
BIS-No global real estate market despite higher price synchronisation and growing role of international investors, central banks find
February 18, 2020--Although residential and commercial real estate prices are increasingly moving in sync and the role of international investors is growing, this does not mean that there is a global real estate market, a report by the Committee on the Global Financial System finds.
Property price dynamics: domestic and international drivers documents recent trends in residential and commercial property prices in over 20 countries, gives an overview of key drivers of price developments and describes policy initiatives used to manage associated risks to the economy and financial stability.
Property prices have been rising, reaching record highs in many countries. As prices appear high in comparison to simple rule-of-thumb valuation benchmarks, such as rents and incomes, some central banks are concerned about the consequences of a potential correction. In many cases, however, current price developments can be largely explained by fundamental drivers such as interest rates and income, the report finds.
Source: BIS
Bassanese Bites: Bubble trouble
February 17, 2020--Top events of the past week
Global stocks continued to shrug off coronavirus fears last week with the S&P 500 up a lazy 1.6% to reach a new record high. Reports of a possible peak in the number of new coronavirus cases was the main (positive) market development, notwithstanding a surge in reported cases in China-due to an apparent change in reporting methods.
At this stage global markets are still attempting to "look through" the viruses' hit to global growth-as it's still only likely to be short-term-though this could change if the (still relatively small) number of cases outside of China begins to rise.
Also noteworthy late last week was more Washington talk of a US "middle class tax cut" plus a proposed plan to encourage everyday American's to invest in the surging stock market. This could be just the talk Wall Street could latch onto to support a further rally this year, especially if looks like Trump will win in a canter.
Source: Betashares
World Gold Council-The relevance of gold as a strategic asset
February 12, 2020--Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one's liability, carries no credit risk, and is scarce, historically preserving its value over time.
Source: World Gold Council (WGC)
IOSCO publishes key considerations for regulating crypto-asset trading platforms
February 12, 2020--The Board of the International Organization of Securities Commissions today published a report that describes the issues and risks associated with crypto-asset trading platforms (CTPs) and sets out key considerations to assist regulatory authorities in addressing these issues.
The development of crypto-assets is an important area of interest for regulatory authorities around the world and has been identified in the IOSCO work program as an on-going Board priority in 2020.
The report published today, titled Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms, describes the issues that IOSCO has identified regarding CTPs. The report sets out key considerations intended to assist regulatory authorities in evaluating CTPs within the context of their regulatory frameworks.
Source: IOSCO
Construction Activity Can Signal When Credit Booms Go Wrong
February 12, 2020--No global real estate market despite higher price synchronisation and growing role of international investors, central banks find.
In Spain, private sector credit as a share of GDP almost doubled between 2000 and 2007. This increase was accompanied by a boom in housing prices-which doubled in real terms over the same period. The economy as a whole also grew at a record pace.
But then in 2008, Spain's credit bubble burst, and with it came loan defaults, bank failures, and a prolonged economic slowdown.
A less-noticed development in Spain was in the construction sector, where employment grew by an astounding 47 percent, compared to the economy-wide increase of 27 percent.
view the IMF Staff Discussion Note-Discerning Good from Bad Credit Booms:The Role of Construction
Source: IMF
South Africa: Bridging the Income Divide
February 7, 2020--South Africa suffers among the highest levels of inequality in the world. As our Chart of the Week shows, the country's wealth is concentrated in the upper levels of society. The top 20 percent of the population holds over 68 percent of income, while the poorest 40 percent possess only 7 percent of income.
That inequality isn't only seen in income distribution; it also manifests itself in unequal access to opportunities-education, health, and jobs-and regional disparities. Meanwhile, low growth and rising unemployment have perpetuated inequality. High unemployment is a major factor. South Africa's unemployment rate is significantly higher than other emerging markets, and nearly 60 percent of the country's youth (aged 15-24) are unemployed.
Source: BIS
Interest Rate Controls, Capital Flow Restrictions, and Other Potentially Costly Financial Market Regulatory Tools
February 6, 2020--With the surge in public debt in the wake of the global financial crisis, financial repression-administrative restrictions on interest rates, credit allocation, capital movements, and other financial operations-has come back on the agenda.
In our recent working paper, we argue that countries would be better-off without financial repression. By distorting market incentives and signals, financial repression induces losses from inefficiency and rent-seeking that are not easily quantified.
Source: IMF
Growth and economic well-being: third quarter 2019, OECD Household income growth continues to outpace GDP growth
February 6, 2020--Growth in real Household income per capita provides a better picture of changes in households' economic well-being than real GDP growth per capita, which it outpaced for the fourth straight quarter in the third quarter of 2019.
Growth in real household income per capita in the OECD area increased slightly to 0.5%, while GDP growth per capita was stable at 0.3%.
Source: OECD
