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Global Emerging Markets- Increased volatility in equity markets
April 12, 2012--Global markets have seen extraordinary levels of volatility in the second half of 2011. Fiscal and regulatory uncertainty across the developed world has roiled markets and hampered growth prospects. Standard & Poor's (S&P) downgraded US sovereign debt below AAA for the first time in history, while the euro zone sovereign debt crisis engulfed France, Italy and Spain. US consumer confidence has dropped to crisis-level lows,[1] and the Misery Index[2] is at its highest in nearly 30 years.
Through mid-November, the MSCI Emerging Markets Index was down 15.8%, compared with a loss of 6.9% for the MSCI global benchmark.[3] The biggest underperformers are Brazil, Hungary and Poland, with each down more than 20% for the year. Indonesia has been the bright spot among emerging market equity performance with a year-to-date gain of nearly 4.5%.[4] Robust Gross Domestic Product (GDP) growth, strong domestic demand and declining inflationary pressures have boosted economic growth and profit forecasts for Southeast Asia’s largest economy.
Mirae-EMEA (Europe, Middle East, Africa)
April 12, 2012--Russia
Political uncertainty abates
Russia has fared better in the current market turmoil than in the 2008 crisis. Corporate debt levels are more manageable, with longer duration and a lower proportion of foreign currency loans. The central bank has allowed the ruble to float more freely and, thus, has avoided an attack on the currency. Inflation also remains under control.
CE3 (Czech Republic, Hungary, Poland) -
Proximity to euro zone remains a detriment
We remain cautious on the region given its close proximity to the euro zone. All three countries have close ties to euro zone countries, and especially to Germany. For example, exports make up 68% of GDP in the Czech Republic, two-thirds of which go directly to euro zone countries. Therefore, any slowdown in Europe directly affects these countries. On top of external shocks, Hungary continues to be plagued by policy uncertainty. To reduce the budget deficit, the government continues to go after profitable companies in the forms of higher taxes and mandated wage increases for workers (which then increases income tax revenue). In addition, currency weakness especially relative to the Swiss franc has put the consumer under pressure given the large amount of mortgage loans issued in Swiss francs. Poland, with a large domestic economy, a stable and generally market-friendly government and less exposure to the euro zone, is the best positioned country in the region. While some consumers are under pressure from having Swiss franc loans, and the government will look to consolidate fiscal policy further, economic growth is still likely in Poland.
Turkey - Unconventional monetary policies
]While Turkey has the best demographics and long-term economic growth potential of any major market in EMEA, the short-term outlook is uncertain. Turkey finds itself in an awkward position of trying to moderate the economy, while at the same time keeping the lira and inflation stable.
Deutsche Bank seeks revamp
April 12, 2012--Deutsche Bank's incoming co-chief executive is planning an overhaul of its operations, aiming to make its wealth and asset management operations work more closely with its investment banking arm in bid to emulate the business model of Swiss rivals Credit Suisse and UBS.
Anshu Jain will make such a deeper collaboration one of his top priorities in the first 18 months of his tenure which will start this June, people close to the situation said.
'Sticky' gold ETP investors holding on
April 12, 2012--Investors in gold exchange traded funds are living up to their reputation for "stickiness" as they have stuck with their holdings even as the price of bullion has retreated after hitting an all-time high in September 2011.
The price of gold has sunk by almost 14 per cent from its record $1,920.30 an ounce, breaking down through key support levels (100 and 200-day moving averages) and struggling to establish a solid floor.
Trade growth to slow in 2012 after strong deceleration in 2011
April 12, 2012--World trade expanded in 2011 by 5.0%, a sharp deceleration from the 2010 rebound of 13.8%, and growth will slow further still to 3.7% in 2012, WTO economists project. They attributed the slowdown to the global economy losing momentum due to a number of shocks, including the European sovereign debt crisis.
A significant braking of trade expansion had been forecast for 2011, but multiple economic setbacks during the year dampened growth beyond expectations and led to a stronger than anticipated easing in the fourth quarter.
"More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods," WTO Director General Pascal Lamy said.
“The WTO has so far deterred economic nationalism, but the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness. It is time to do no harm. WTO members should turn their attention to revitalizing the trading system and to ensuring such a scenario does not materialize.”
IMF Working paper-Financial Regulation and the Current Account
April 12, 2012--Summary: This paper examines the relationship between financial regulation and the current account in an intertemporal model of the current account where financial regulation affects the current account through liquidity constraints.
Greater liquidity constraints decrease the size and persistence of the current account response to a net output shock. The theory is tested with an interacted panel VAR model where the coefficients are allowed to vary with the degree of financial regulation. The current account reaction to an output shock is 60% larger and substantially more persistent in a country with low financial regulation than in one with high financial regulation.
view the IMF working paper-IMF Working paper-Financial Regulation and the Current Account
BlackRock New Report: ETP Landscape Industry Highlights, Q1 2012
April 11, 2012--The first quarter of 2012 marked the best ever start to a year for the Exchange Traded Products (ETP) industry, according to BlackRock's latest ETP Landscape Report, as investors continued to return to the market and selected ETPs to invest in a range of asset classes.
The ETP industry gathered net new assets of $67.3bn during Q1 2012, representing an increase of 50% on Q4 2011 when net new assets stood at $44.8bn, and an increase of 57% on the $42.8bn of inflows recorded in Q1 2011.
Investor interest in fixed income ETPs also hit new highs during the quarter. Fixed income products attracted inflows of $19.5bn, eclipsing the previous quarterly record of $14.7bn set in Q4 2011, and accounted for 29% of all inflows into ETPs globally. Within the asset class, investors showed a clear preference for investment grade and high yield corporate bonds, with these two categories accounting for 85%, or $16.5bn of total fixed income inflows.
EU carbon law dealbreaker for climate talks
April 11, 2012--A European Union law that charges airlines for carbon emissions is "a dealbreaker" for global climate change talks, India's environment minister said, hardening her stance on a scheme that has drawn fierce opposition from non-EU governments.
From January 1 all airlines using EU airports have come under the European Union Emissions Trading Scheme (ETS).
US airlines have said they would grudgingly comply, but China has barred its carriers from participating unless they are given permission to do so and India has said it would boycott the scheme.
Climate Change: Sector Results Profile
April 11, 2012--Overview
Creating climate-resilient and low-carbon development paths has become a development imperative.
The World Bank continues to face unprecedented demand from many countries for support in their efforts to address development and climate change challenges. The World Bank has responded with a broad range of assistance through a combination of financial and other resources.
view the Development and Climate Action Reinforcing Synergies report
IMF Working paper-Money and Collateral
April 10, 2012--Between 1980 and before the recent crisis, the ratio of financial market debt to liquid assets rose exponentially in the U.S. (and in other financial markets), reflecting in part the greater use of securitized assets to collateralize borrowing.
The subsequent crisis has reduced the pool of assets considered acceptable as collateral, resulting in a liquidity shortage. When trying to address this, policy makers will need to consider concepts of liquidity besides the traditional metric of excess bank reserves and do more than merely substitute central bank money for collateral that currently remains highly liquid.