Global ETF News Older than One Year
Stimulus Packages and Policy Reforms Boost EM
September 26, 2012--China plunge on geopolitical tensions and concerns over slowing economy
China stock market retreated last week, while Hong Kong marginally gained.
Stock markets were dragged down by growing tensions over the disputed island between China and Japan as well as concerns over slowing economic growth.
Protests rose in dozens of cities across China, objecting to Japan’s control of a group of islands in the East China Sea. Accordingly, Japanese-related businesses, from factories to restaurants, in mainland China were closed while Japan-related stocks plunged.
Economic news released also weighed down on investor sentiment; according to the Ministry of Finance, profits of China’s central government-owned enterprises dropped by 13% for the combined period of January through August.
The preliminary HSBC China Manufacturing Purchasing Managers Index rose slightly to 47.8 in September compared with a final reading of 47.6 in August. Despite the rise, markets reacted negatively as the index remained below the expansionary threshold of 50.
Losses for Hong Kong market were offset by: 1) additional easing package by Bank of Japan; and 2) gains in raw material producers after oil and metals prices rebounded.
India
Policy reforms push market up.
Indian stock markets rose last week as the government pushed through policy reforms. The Indian government formally opened its supermarket sector to foreign chains and eased foreign investment rules in airlines and broadcasters.
The government also announced changes in tax rules on overseas loans. Indian government reduced the withholding tax on overseas borrowings by domestic companies and included mutual funds in a plan aimed at luring individual investors to stocks.
Brazil
Macro indicators show gradual improvement in Brazil economy.
Brazilian equities trimmed recent gains in the week ending September 20th. Near-term equity performance will be influenced by developments within the Eurozone, with the Spanish Government reportedly close to finalizing a formal request for aid from the EC / ECB.
The Economic Activity Index (IBC-Br) posted a positive print of 0.42% in July compared to June on a seasonally adjusted basis. This result coupled with other recent indicators confirms the gradual improvement in economic activity in Brazil.
Russia
Russia outperformed peers on increase for risk appetite
Global markets have been buoyed by the Fed’s recent announcement of further liquidity provision via its QE3 asset purchase program, and the ECB’s OMT proposal, which has helped lower key stressed Eurozone sovereign debt yields.
Assuming Eurozone stability, the positive momentum created by the QE3 and OTM programs is likely to put a floor under equities in the near term, though further gains for the global asset class will increasingly depend upon the growth outlook for the US as it approaches the Presidential elections and the threat of the 2013 fiscal cliff of ~$600bn in expiring tax credits and spending cuts, and macro data from China, where the growth slowdown has been sharper than most expectations.
Source: Mirae Asset Financial Group
Swaps trading seen shifting to exchange-traded products
September 26, 2012--High margin requirements for more exotic products in the over-the-counter derivatives market are likely to shift market participants toward exchange-traded products as they seek to manage risk, according to a study commissioned by the World Federation of Exchanges.
"A war is being waged between forces of the status quo and forces of transformation of the global risk transfer market. It has the potential to shift product selection for hedging and trading purposes, from exotic and bespoke trade structures, to standardized and clearable swaps, futures and new futurized/hybrid swaps," said Paul Rowady, senior analyst at TABB Group and author of the study.
Source: SmartBrief
FTSE Announces 2012 Annual Country Classification Review Results
September 25, 2012--: FTSE Group ("FTSE"), a leading global index provider, has announced the results of its Annual Country Classification Review-2012.
This year, the FTSE Policy Group has not reclassified any countries but has added two further countries to the current Watch List of seven countries being considered for promotion or demotion between FTSE’s market classifications: Argentina is listed for possible removal from the Frontier classification while Mongolia is under consideration for possible inclusion in the Frontier category.
Argentina is listed for possible demotion from Frontier due to continuing stringent capital controls imposed on international investors and the perceived lack of an independent regulatory authority to protect the rights of shareholders. Argentina was demoted from Secondary Emerging to Frontier in 2010. Mongolia will join the Watch List for possible inclusion as a Frontier market based on its progress in developing a market infrastructure that is attractive to foreign investors through improvements to its trading, settlement and custody arrangements.
Source: FTSE
New EDHEC-Risk Institute study addresses Volatility ETNs following the Credit Suisse TVIX controversy of early 2012
September 25, 2012--Gaining exposure to volatility has become easier for investors after the introduction of volatility ETNs (exchange-traded notes) and volatility ETFs (exchange-traded funds) and some of these products have enjoyed a surge in popularity.
In the wake of the incidents of spring 2012 involving the TVIX ETN issued by Credit Suisse, EDHEC-Risk Institute has published a new study entitled “The Risks of Volatility ETNs: a Recent Incident and Underlying Issues,” which sheds light on the nature of volatility ETNs and the issues involved in the TVIX crisis.
EDHEC-Risk’s analysis of the incident indicates that the distortion was created by factors specific to ETNs, with no relation to the particular exposure to a volatility index. The main factors suggested by the academic literature are the inefficient share creation process and the speculative motive of uninformed, return-chasing investors. Under normal market conditions, short-selling can suppress the accumulation of positive premiums. However, if share creation is suspended during a significant surge in demand the security may become unavailable for borrowing, which limits short-selling activities.
view the The Risks of Volatility ETNs: A Recent Incident and Underlying Issues
Source: EDHEC
Global Financial Centres Index 12 Published Today
September 24, 2012--Today the Z/Yen Group publishes the twelfth Global Financial Centres Index (GFCI 12) sponsored by the Qatar Financial Centre Authority and covering 77 financial centres.
Major developments since GFCI 11 was published in March 2012:
Only 49% of respondents based in London now feel that London will become more competitive over the next three years.
This compares with 63% of respondents based elsewhere in Europe, 73% of respondents based in Asia and 77% of respondents based in offshore centres. The Euro crisis continues to be reflected in the GFCI ratings of the financial centres within the weaker Euro economies. Madrid, Lisbon, Dublin and Athens were all down in GFCI 10 and GFCI 11. These declines have continued in GFCI 12. Frankfurt and Paris both rose slightly in GFCI 11 but GFCI 12 sees a reversal of these gains. There have however, been some improvements in Europe. Geneva has now re-entered the GFCI top ten.
view the Global Financial Centres Index (GFCI 12)
Source: Long Finance
Principles for the supervision of financial conglomerates released by the Joint Forum
September 24, 2012--The Joint Forum issued today its final report on Principles for the Supervision of Financial Conglomerates.
The Joint Forum, which comprises the Basel Committee on Banking Supervision, the International Organization of Securities Commissions and the International Association of Insurance Supervisors, addresses issues common to the banking, securities and insurance sectors, including the regulation of financial conglomerates.
The updated Principles for the Supervision of Financial Conglomerates supersedes the Compendium of documents produced by the Joint Forum in 2001. In revising its principles, the Joint Forum's aim was to focus on closing regulatory gaps, eliminating supervisory "blind spots" and ensuring effective supervision of risks arising from unregulated financial activities and entities. Importantly, these updated principles are structured in a manner that should facilitate their implementation across jurisdictions and over time.
view the Joint Forum-Principles for the supervision of financial conglomerates
Source: BIS
US Conflict minerals law could cut investments, harm livelihoods in DRC-study
A new study by the Chatham House think tank says that section 1502 of the Dodd Frank Act aimed at curbing trade in conflict minerals could harm the livelihoods of millions in the DRC.
September 24, 2012--A U.S. law aimed at tackling the trade in "conflict minerals" in Democratic Republic of Congo could cut U.S. investments in the country and harm the livelihood of millions of people, a research paper from think tank Chatham House said.
Eastern Congo has suffered nearly two decades of unrest as rebels, rogue Congolese soldiers and criminal gangs have prolonged violence to profit from its rich mineral resources, including the rare metal tantulum that is widely used in making cell phones, laptops and other electronics.
Source: MineWeb
Search for yield leads to derivatives funds
September 24, 2012--Investors are piling into specialised stock market funds that use derivatives to boost returns, highlighting how many money managers are searching for new strategies that can generate steady income amid the low interest rate environment.
These funds typically focus on high-dividend companies, but also sell “call options” on equity indices or stock they hold. They sacrifice a portion of potential share price gains in return for generating extra income from selling the derivatives.
Source: FT.com
ETFS Precious Metals Weekly: Gold Price Hits 10-Month High as Synchronized Central Bank Easing Increases Reserve Currency Debasement Concerns
September 24, 2012--The gold price hits 10-mth high near $1785/oz as synchronized central bank easing increases reserve currency debasement concerns
Lonmin agrees wage deal with workers, but at what cost?
Key events to watch this week: conditionality of Spain's rescue plan and German IFO and PMI
What Will Drive the Next Leg of the Gold Bull Market?
Since mid-July the gold price has rallied strongly, but remains 11% below the peak of USD$1900/oz. achieved in September 2011. European financial and economic turmoil continues to plague financial markets, yet officials have so far failed to find a comprehensive plan to solve the root causes of the crisis. Europe remains mired in deep recession, the US economy appears to have stalled, while Asian emerging market growth has slowed. In this environment most "safe haven" assets have performed well, with G-3 bond yields falling to all-time lows earlier this year. Prior to August, the stand-out exception was gold, which had performed relatively poorly in 2012. Gold's modest performance in an environment of high sovereign risk caused some investors to question its historic "store of value" credentials. In this note we look at some of the key factors that traditionally drive gold price performance, explain what has been behind the performance of the gold price so far this year, and assess the outlook and likely key catalysts for gold price performance for the rest of 2012 and into 2013.
visit www.etfsecurities.com for more info
Source: ETF Securities
Thematic Peer Review of Resolution Regimes-Questionnaire
September 21, 2012--Introduction
The global financial crisis demonstrated the urgent need to improve resolution regimes so as to enable authorities to resolve failing financial institutions quickly without destabilising the financial system or exposing taxpayers to the risk of loss from solvency support.
Following the crisis, a number of jurisdictions have adopted, or are currently preparing, legislation to strengthen their resolution regimes, while some progress has also been made in establishing crisis management groups and enhancing cross-border cooperation.1
In November 2011, the FSB issued the Key Attributes of Effective Resolution Regimes for Financial Institutions2 as part of the package of policy measures to address the moral hazard risks posed by systemically important financial institutions. The Key Attributes (KAs) set out the core elements of effective resolution regimes that apply to any financial institution that could be systemically significant or critical if it fails.3 A drafting team set up under the FSB’s Resolution Steering Group (ReSG) is currently developing an assessment methodology that provides greater technical detail on the various elements of the KAs.
Source: Financial Stability Board (FSB)
