Global ETF News Older than One Year
Volatile Commodity Prices Reduce Growth and Amplify Swings in Inflation
March 28, 2023--Resurgent volatility in commodity markets will likely pose economic challenges in coming years even as prices decline
Food and energy prices surged to near historic highs in recent years amid the pandemic and the war in Ukraine, which prompted major supply disruptions.
This was accompanied by a sharp rise in the volatility of commodity prices as well.
Worryingly, the up-and-down swings in commodity prices will likely pose economic challenges in coming years. We explore the effects of volatile commodity prices in a new report on food and energy insecurity that was prepared for the Group of Twenty.
Specifically, we examine how economic growth and inflation are affected by volatility in commodity terms of trade-that is, the movement in the prices that a country pays for commodity imports and the prices it receives for commodity exports.
Source: imf.org
World Bank-Global Economy's "Speed Limit" Set to Fall to Three-Decade Low
March 27, 2023--March 27, 2023--Systemic Banking Crises, Recessions Have Lasting Effects on Growth, Development
The global economy's "speed limit"-the maximum long-term rate at which it can grow without sparking inflation-is set to slump to a three-decade low by 2030. An ambitious policy push is needed to boost productivity and the labor supply, ramp up investment and trade, and harness the potential of the services sector, a new World Bank report shows.
The report, Falling Long-Term Growth Prospects: Trends, Expectations, and Policies, offers the first comprehensive assessment of long-term potential output growth rates in the aftermath of the COVID-19 pandemic and the Russian invasion of Ukraine. These rates can be thought of as the global economy's "speed limit".
The report documents a worrisome trend: nearly all the economic forces that powered progress and prosperity over the last three decades are fading. As a result, between 2022 and 2030 average global potential GDP growth is expected to decline by roughly a third from the rate that prevailed in the first decade of this century-to 2.2% a year. For developing economies, the decline will be equally steep: from 6% a year between 2000 and 2010 to 4% a year over the remainder of this decade. These declines would be much steeper in the event of a global financial crisis or a recession.
Source: worldbank.org
Hundreds of funds to be stripped of ESG rating
March 24, 2023--Unpublished BlackRock research also reveals thousands more will be downgraded in wide-ranging MSCI shake-up
Hundreds of funds are about to be stripped of their environmental,social and governance ratings and thousands more will be downgraded in a shake-up being pushed through by index provider MSCI.
The impact could be particularly acute in Europe where a growing number of institutions will only invest in funds that are deemed to be compliant with ESG-investing principles. In 2022,ESG exchange traded funds accounted for 65 per cent of inflows into European ETFs,according to Morningstar.
Source: ft.com
Could crypto assets jeopardise the financial system?
March 23, 2023--The role of crypto assets was a much-discussed topic during this year's Global Money Week, an OECD initiative which aims to raise awareness of the need for financial education. What opportunity do crypto assets present and how might they jeopardise financial stability?
Crypto assets represent about 1% of the global markets, and as such, they are not threatening to replace the traditional financial system. That is because they suffer from two important shortcomings.
First, they allow for no legal recourse and therefore lack accountability, and second, they are self-referential in that they do not perform the main purpose of financial services, which is to finance growth.
Even if small in scale, crypto assets can be a source of financial instability, which is why regulators need to up their game. In finance, there are no shortcuts. Lending and borrowing need to be done on the back of collateral and reserves. The fall of FTX, Terra and Luna exposed the fragility of a system that does not have sufficient quality reserves and showed what happens when pegging is done on algorithms rather than on broadly accepted assets.
Source: bruegel.org
Global Portfolio Asset Holdings Decrease Amid Elevated Uncertainty
March 20, 2023--Elevated risk aversion amid heightened geopolitical and inflation risks and tightening monetary policies in advanced economies weighed on sentiment
A Chinese insurance company buys listed shares of a Swiss bank. A UK pension fund invests in US Treasury bonds. A multinational tech company holds shares of an investment fund in the Cayman Islands.
All the above are examples of portfolio investment assets. These can include both equity and debt securities, though they differ from direct investments in that investors do not control the management of the units in which they invest.
Foreign portfolio investments help global financial markets function and provide investors with the benefits of international diversification. These investments are also beneficial as a source of financing for host economies.
Source: imf.org
Urgent climate action can secure a liveable future for all
March 20, 2023--There are multiple, feasible and effective options to reduce greenhouse gas emissions and adapt to human-caused climate change, and they are available now, said scientists in the latest Intergovernmental Panel on Climate Change (IPCC) report released today.
"Mainstreaming effective and equitable climate action will not only reduce losses and damages for nature and people, it will also provide wider benefits," said IPCC Chair Hoesung Lee. "This Synthesis Report underscores the urgency of taking more ambitious action and shows that, if we act now, we can still secure a liveable sustainable future for all."
In 2018, IPCC highlighted the unprecedented scale of the challenge required to keep warming to 1.5℃. Five years later, that challenge has become even greater due to a continued increase in greenhouse gas emissions. The pace and scale of what has been done so far, and current plans, are insufficient to tackle climate change.
view the AR6 Synthesis Report: Climate Change 2023
Source: ipcc.ch
ETFGI reports the global ETFs industry gathered US$19.96 billion of net inflows in February 2023
March 16, 2023--ETFGI, a leading independent research and consultancy firm covering trends in the global ETFs ecosystem, reports the global ETFs gathered US$19.96 billion in net inflows during February bringing year to date net inflows to US$79.79 Bn.
During February 2023, assets invested global ETFs industry decreased by 2.7%, from US$9.87 trillion at the end of January to US$9.60 trillion, according to ETFGI's February 2023 global ETFs and ETPs industry landscape insights report, the monthly report which is part of an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted)
Highlights
Global ETFs industry gathered $19.96 Bn of net inflows during February.
YTD net inflows of $79.79 Bn are the sixth highest on record, while the highest recorded YTD net inflows are $224.30 Bn in 2021 followed by YTD net inflows of $182.45 in 2022.
45th month of consecutive net inflows.
Assets of $9.60 Tn invested in global ETFs industry at the end of February.
Assets increased 3.6% YTD in 2023, going from $9.26 Tn at end of 2022 to $9.60 Tn.
Equity ETFs and ETPs listed globally saw $1.47 Bn in net outflows in February 2023.
Source: etfgi.com
House Prices Continue to Fall as Borrowing Costs Rise
March 15, 2023--Property markets should enjoy greater stability when central banks slow or pause their campaign of raising interest rates to tame inflation
Global housing markets are retreating after years of steady gains. The Chart of the Week shows widespread declines in inflation-adjusted housing prices for two-thirds of the countries with recent data from the Organisation for Economic Co-operation and Development.
The moves underscore how housing markets are adjusting to rising interest rates as central banks try to contain inflation. Policy rates have increased on average by 4 percentage points across major economies, to levels that prevailed prior to the global financial crisis.
In the United States for instance, the Federal Reserve has increased the target rate to a range of 4.5-4.75 percent from near zero a year ago, the fastest pace of rate increases in two decades. This in turn led to a sharp increase in the average 30-year fixed mortgage rate, which rose to a two-decade high of 7.1 percent late last year.
Source: imf.org
IMF-Digitalization During the COVID-19 Crisis: Implications for Productivity and Labor Markets in Advanced Economies
March 13, 2023--Summary:
Digitalization induced by the pandemic was seen both as a possible silver-lining from the crisis that could increase longer-term productivity and a risk for further labor market inequality between digital and non-digital workers. The note shows that the pandemic accelerated digitalization and triggered a partial catch-up by less digitalized entities in advanced economies.
Higher digitalization levels shielded substantially productivity and hours worked during the crisis. However, the extent to which the pandemic-induced digitalization led to structural change in the economy is less clear. Less digitalized sectors have rebounded more strongly, albeit after stronger declines, and while workers in digital occupations were more shielded from the crisis, there does not appear to be a structural change in the composition of labor demand. Meanwhile, shifts in labor supply are more likely to be permanent, driven by the increase in working from home.
Source: imf
IMF Working Paper-Do Capital Controls Limit Inflow Surges?
March 10, 2023--March 10, 2023--Summary:
With rising financial integration, the magnitude and swings in capital flows have increased in the past two decades, intensifying the policy debate on how best to deal with these flows. This paper assesses the use and effectiveness of capital controls in limiting inflow surges.
Using a novel dataset on capital control changes across 40 advanced and emerging market and developing economies over 1995-2018, we find that the tightening of capital controls reduces the probability of future surges both at the aggregate and the asset flow levels. The results are robust to various definitions of surges and are stronger when controls are matched to the asset class they target. Finally, we also find significant multilateral spillovers from capital control actions, pointing towards the need for international cooperation in the use of these policies.
Source: imf.org