Global ETF News Older than One Year
Interest Rates Likely to Return Toward Pre-Pandemic Levels When Inflation is Tamed
April 10, 2023--How close will depend on the persistence of public debt, on how climate policies are financed and on the extent of deglobalization
Real interest rates have rapidly increased recently as monetary policy has tightened in response to higher inflation. Whether this uptick is temporary or partly reflects structural factors is an important question for policymakers.
Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining. Such long-run changes in real rates likely reflect a decline in the natural rate, which is the real interest rate that would keep inflation at target and the economy operating at full employment-neither expansionary nor contractionary.
The natural rate is a reference point for central banks that use it to gauge the stance of monetary policy. It is also important for fiscal policy. Because governments typically pay back debt over decades, the natural rate-the anchor for real rates in the long term-helps determine the cost of borrowing and the sustainability of public debts.
Source: imf.org
IOSCO Commits to Deliver on Sustainability Disclosures and Crypto Exchanges in 2023; publishes Work Program for 2023-2024
April 5, 2023--The Board of the International Organization of Securities Commissions (IOSCO) today published the 2023-2024 Work Program to further its core objectives of protecting investors, maintaining fair, efficient and transparent markets, and addressing systemic risks.
The work program, like the previous edition, covers a two-year horizon and will be reviewed and refreshed, as appropriate, at end-2023 to ensure its ongoing relevance.
Source: IOSCO
Geopolitics and Fragmentation Emerge as Serious Financial Stability Threats
April 5, 2023--Rising tensions could trigger cross-border capital outflows and increased uncertainty that would threaten macro-financial stability
Concerns about global economic and financial fragmentation have intensified in recent years amid rising geopolitical tensions, strained ties between the United States and China, and Russia's invasion of Ukraine.
Financial fragmentation has important implications for global financial stability by affecting cross-border investment, international payment systems, and asset prices. This in turn fuels instability by increasing banks' funding costs, lowering their profitability, and reducing their lending to the private sector.
Effects on cross-border investment
Geopolitical tensions, measured by the divergence in countries’ voting behavior in the United Nations General Assembly, can play a big role in cross-border portfolio and bank allocation, as we write in an analytical chapterof the latest Global Financial Stability Report.
Source: imf.org
WTO-Trade growth to slow to 1.7% in 2023 following 2.7% expansion in 2022
April 5, 2023--Global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall, WTO economists said in a new forecast on 5 April. Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.
The WTO's trade projections, set out in the new "Global Trade Outlook and Statistics" report, estimate real global GDP growth at market exchange rates of 2.4% for 2023. Projections for both trade and output growth are below the averages for the past 12 years of 2.6% and 2.7% respectively.
Source: World Trade Organization (WTO)
IMF Note-Internet Adoption Trends during COVID-19
March 31, 2023--Summary:
This paper examines the common perception that internet adoption accelerated globally during the COVID-19 pandemic. The data show little evidence of a faster expansion of access to internet (extensive margin) across all country income groups but strong evidence of acceleration in the improvement in the quality of connectivity (intensive margin).
The data also support that, despite a decline in internet prices over the past decade, affordability of digital services remains a concern for low-income developing countries.
Source: imf.gov
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
