Global ETF News Older than One Year
: FSB to review foreign exchange benchmarks
February 14, 2014--The Financial Stability Board was tasked by the G20 in 2013 to co-ordinate and guide work on the necessary reforms to short-term interest rate benchmarks, to ensure that widely-used benchmarks are held to appropriate standards of governance, transparency and reliability.
Within its broader mandate, the FSB will promote adoption and implementation of principles and good practices that emerge regarding the benchmark setting process. A high-level Official Sector Steering Group (OSSG) of regulators and central banks is taking this work forward[1].
Source: FSB (Financial Stability Board)
Morgan Stanley Sees Bond Evolution in Trade Jump: Credit Markets
February 14, 2014--Corporate-bond trading volumes are surging to the highest ever to start the year as investors adapt to a new reality of reduced dealer balance sheets by turning to electronically exchanged debt and smaller transactions.
Even as issuance of the securities slowed, the amount of investment-grade and junk bonds changing hands increased to $20.3 billion on average each day this year, 3 percent more than during the same period in 2013, Financial Industry Regulatory Authority data show.
Source: Bloomberg
EPFR Global News Release-Europe and Japan Equity Funds extend record start to year while EM outflows moderate
February 14, 2014--Year-to-date inflows for EPFR Global-tracked Japan and Europe Equity Funds pushed past the $9 billion and $17 billion marks respectively during the second week of February as both fund groups maintained their record setting start to 2014.
With equity markets in both developed and some emerging markets rebounding, flows into US Equity Funds bounced back and redemptions from Emerging Markets Equity Funds ran at half the levels seen during the previous two weeks.
Overall, Equity Funds posted collective net inflows of $11.5 billion for the week ending Feb. 12 while Bond Funds took in $4.72 billion and Money Market Funds $16.7 billion. Dividend Equity Funds posted back-to-back weekly outflows for the first time since early September as their attraction continues to wane despite further performance gains.
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Source: EPFR
IMF Working paper-Debt and Growth: Is There a Magic Threshold?
February 13, 2014--Summary: Using a novel empirical approach and an extensive dataset developed by the Fiscal Affairs Department of the IMF, we find no evidence of any particular debt threshold above which medium-term growth prospects are dramatically compromised.
Furthermore, we find the debt trajectory can be as important as the debt level in understanding future growth prospects, since countries with high but declining debt appear to grow equally as fast as countries with lower debt. Notwithstanding this, we find some evidence that higher debt is associated with a higher degree of output volatility.
view the IMF Working paper-Debt and Growth: Is There a Magic Threshold?
Source: IMF
IMF Working paper-Commodity Price Shocks and Imperfectly Credible Macroeconomic Policies in Commodity-Exporting Small Open Economies
February 13, 2014-- Summary: In this paper, we analyze how lack of credibility and transparency of monetary and fiscal policies undermines the effectiveness of macroeconomic policies to isolate the economy from commodity price fluctuations. We develop a general equilibrium model for a commodity-exporting economy where macro policies are conducted through rules. We show that the responses of output, aggregate demand, and inflation to an increase in commodity price are magnified when these rules are imperfectly credible and lack transparency.
If policies are imperfectly credible, then transparency helps private agents to learn the systematic behavior of the autorities, reducing the effects of commodity prices shocks. Coherent with the model, we show cross-country evidence that monetary policy transparency and fiscal credibility reduce the incidence of export price volatility on output volatility. Also, our results indicate that having an explicit fiscal rule and an inflation targeting regime contribute to isolate the economy from terms of trade fluctuations.
Source: IMF
Active fund managers welcome return of volatility
February 13, 2014--It is the year of the stock picker, or at least that is what stock pickers are saying.
These active fund managers tend to make bold promises every year that they can beat the market and the passive funds that follow the indices. This year, though, they might be on to something.
Source: FT.com
Turkey most vulnerable emerging market, FED says
February 12, 2014--An index built by the US Federal Reserve (Fed) analysts, measuring economic vulnerability across 15 major emerging markets, found Turkey was the most vulnerable, followed by Brazil and then India.
Policies in Turkey--among two other emerging markets--made it especially vulnerable to external shocks and led to significant losses in its national currency, the lira, the Fed said in a report on Tuesday.
Source: Sunday's Zaman
IMF Working paper-Emerging Market Local Currency Bond Yields and Foreign Holdings in the Post-Lehman Period-a Fortune or Misfortune?
February 12, 2014--Summary: The paper shows that foreign holdings of local currency government bonds in emerging market countries (EMs) have reduced bond yields but have somewhat increased yield volatility in the post-Lehman period. Econometric analyses conducted from a sample of 12 EMs demonstrate that these results are robust and causal.
We use an identification strategy exploiting the geography-based measure of EMs financial remoteness vis-à-vis major offshore financial centers as an instrumental variable for the foreign holdings variable.The results also show that, in countries with weak fiscal and external positions, foreign holdings are greatly associated with increased yield volatility. A case study using Poland data elaborates on the cross country findings.
Source: IMF
IMF Working paper-Monetary and Macroprudential Policies to Manage Capital Flows
February 12, 2014--Summary: We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism.
In response to fluctuations in world interest rates, inflation targeting dominates standard Taylor rules, but leads to increased volatility in credit and asset prices. The use of a countercyclical macroprudential instrument in addition to the policy rate improves welfare and has important implications for the conduct of monetary policy. "Leaning against the wind" or augmenting a standard Taylor rule with an argument on credit growth may not be an effective policy response.
IMF Working paper-Monetary and Macroprudential Policies to Manage Capital Flows
Source: IMF
EMs are paying the price of ETF liquidity
Volatility inflamed by ability of exchange traded funds to exit quickly
February 12, 2014--Are exchange traded funds the best way to invest in emerging market equities?
Last week, I wrote a column arguing that the structure of ETFs, which allows trading through the day, had contributed significantly to the scale of the recent sell-off in emerging markets, and was helping to make the sector more volatile.
Source: FT.com
