Global ETF News Older than One Year
ETFS Precious Metals Weekly: Gold sell-off attracts bargain hunters as Bernanke tempers QE3 Optimism
August 30, 2011--Gold spot price holds above $1,750/oz despite second CME gold futures margin hike in as many weeks. The CME raised margin requirements on COMEX gold futures positions by 27%, with COMEX gold margin requirements up 56% in the past two weeks. The potential for further hikes looks more limited based on the historical relationship between gold price volatility and COMEX margin requirements
as a percent of the gold price. The rise comes amidst a similar hike in gold futures investment on the Shanghai Gold Exchange.
Gold buyers emerge as prices drop in the run-up to Bernanke’s eagerly anticipated monetary policy speech. A rebound in equity and cyclical assets early in the week, together with a second gold futures margin hike by the CME, put initial pressure on gold prices. However prices failed to drop below $1,760, with UBS reporting the emergence of strong physical buying interest in no.1 global gold market India as prices dropped back after seven consecutive weeks of gains.
Silver, platinum, palladium prices constrained by growth worries as Bernanke refuses to give further elaboration on the possibility of ‘QE3’. Prices for the three metals gave up early gains last week as data confirmed that ongoing bank sector anxieties, slowing growth, and political infighting over the sovereign debt bailout are weighing heavily on consumer and business confidence in European manufacturing powerhouse Germany. US Q2 growth was also revised down more than expected late last week.
World no.2 platinum miner Impala Platinum warns Zimbabwe demands for indigenous ownership threatens up to $10 billion of investment. Almost onethird of Impala’s platinum reserves are located in Zimbabwe, home to the world’s second largest platinum reserves behind South Africa. Impala figures show that its reserves declined 5% yoy in the year to June 30, reflecting changes to its mining plan and depletion of reserves.
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Source: ETFS Securities
Public Debt in Advanced Economies and its Spillover Effects on Long-term Yields-IMF Working paper
August 30, 2011--Summary: Several models establish a positive association between public debt ratios and long-term real yields, but the empirical evidence is not always conclusive. We reconsider this issue, focusing in particular on possible spillover effects of large advanced economies’ debt levels to other economies’ borrowing yields, especially in emerging markets.
We extend the existing literature by using real time expectations of fiscal and other macroeconomic variables for a large sample of advanced and emerging economies. We show that an increase in the public debt levels of large advanced economies - especially the United States - spills over to both emerging markets and other advanced economies’ long-term real yields and that this effect is significant at the current levels of advanced economies’ debt ratios.
Source: IMF
Institutional investors turning to private equity as source of alpha
August 31, 2011--Institutional investors are turning to private equity as a source of alpha at a time when low returns are expected for several asset classes in the current financial context.
According to a survey by SEI and Greenwich Associates, institutional investors are keen to increase their allocation to private equity but are asking fund managers to improve reporting and risk-management measures.
Source: IP&E
Communication of Central Bank Thinking and Inflation Dynamics
August 29, 2011--Summary: This paper studies the role of central bank communication of its economic assessment in shaping inflation dynamics. Imperfect information about the central bank’s assessment - or the basis for monetary policy decisions - could complicate the private sector’s learning about its policy response function.
We show how clear central bank communication, which facilitates agents’ understanding of policy reasoning, could bring about less volatile inflation and interest rate dynamics, and afford the authorities with greater policy flexibility. We then estimate a simple monetary model to fit the Mexican economy, and use the suggested paramters to illustrate the model’s quantitative implications in scenarios where the timing, nature and persistence of shocks are uncertain.
view IMF paper-Communication of Central Bank Thinking and Inflation Dynamics
Source: IMF
ETF Securities-Research Update-CME Hikes Gold Futures Margins Another 27% - What Does it Mean for the Gold Price?
August 26, 2011--Summary:
The CME raised margin requirements on COMEX gold futures positions by 27%, effective at the end of trade
on 25 August. The margin increase is the second in two weeks, coming on top of a 22% hike on 11 August 2011.
The margin hikes have been compared to the five consecutive silver futures margin hikes in May 2011 that was viewed as helping to precipitate a nearly 30% fall in the silver price during that month. Below we take a closer look at the current situation, building on our last report released on 12 August 2011 and assess the likelihood of a similar situation developing for gold.
Key points:
The CME increased margin requirements on US gold futures positions by 27% yesterday, the second
increase in two weeks. There are some concerns that the current situation may be directly comparable to
the 84% increase in COMEX silver futures margins in May that helped drive a nearly 30% decline in the silver
price. Including yesterday’s hike, COMEX gold margin requirements will have increased 56% in two weeks.
Further margin hikes cannot be ruled out. It has to be remembered that the CME is not targeting a lower gold price, but ensuring its counterparty risk is covered to reflect higher price volatility. When price volatility falls, margins will also fall. On our calculations, based on the historical relationship between gold price volatility and COMEX margin requirements as a percent of the gold price, there is possibly another 10-25% of margin hikes ahead. This would bring total margin increases from June levels to around 65-80%. This is estimated using a base case of the gold price and gold price volatility remaining near current levels and that the historic relationship between gold margins and gold price volatility remain the same. These variables of course have the potential to move quite quickly so there is a relatively large margin of error around these estimates.
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Source: ETF Securities
Emerging market private equity deals rise in H1
August 26, 2011-Global emerging market private equity deal volume rose by 11 percent to $14.1 billion in the first half of 2011, and fundraising doubled to $22.6 billion, the Emerging Markets Private Equity Association said on Thursday.
Emerging market private equity deals dropped sharply during the global financial crisis, totalling $28.8 billion in 2010 compared with $47.8 billion in 2008, the association said in a statement.
Source: Reuters
The Taxation and Regulation of Banks -IMF Working paper
August 25, 2011--Summary: The financial crisis has prompted a reconsideration of the taxation of financial institutions, with practice outstripping principle: France, Germany, the United Kingdom and several other European countries have now introduced some form of bank tax, and the U.S. administration has revived its own proposal for such a charge. This paper considers the structure, appropriate rate, and revenue yield of corrective taxation of financial institutions addressed to two externalities,
consequent on excessive risk-taking, prominent in the crisis: those that arise when such institutions are simply allowed to collapse, and those that arise when, to avoid the harm this would cause, their creditors are bailed out. It also asks whether corrective taxation or a regulatory capital requirement is the better way to address these concerns. The results suggest a potential role for taxing bank borrowing, perhaps as an adjunct to minimum capital requirements, at marginal rates that rise quite sharply at low capital ratios (but are likely lower when the government cannot commit to its bailout policy), reaching levels higher than those of the bank taxes so far adopted or proposed.
view IMF Working paper-The Taxation and Regulation of Banks
Source: IMF
US funds show true state of eurozone banks
August 25, 2011--In any murder mystery film, it pays to watch the boring grey man (or woman) in the corner; quiet, unobtrusive characters can be deadly.
So, too, in finance. Four years ago, the giant US money market funds seemed some of the dullest actors in the global financial scene. But in 2007, they quietly helped to spark the crisis in the mortgage-backed securities world, when they silently stopped rolling over bonds. Then, in 2008, they furtively wielded the knife again, pulling funding from some American banks and the “repo” – repurchase – markets.
Source: FT.com
Gold drops $160 an ounce in two days
August 24, 2011--Gold suffered its largest two-day absolute fall in more than three decades, dropping $160 per ounce between Tuesday and Wednesday in a move that spotlighted the dangers of an asset viewed as a haven.
Investors risked further sharp moves as the leading US metals exchange announced it will demand larger good-faith deposits to own gold futures starting after Thursday’s close.
Source: FTcom
CPSS-IOSCO releases report on requirements for OTC derivatives data reporting and aggregation
August 24, 2011--The Committee on Payment and Settlement Systems and the Technical Committee of IOSCO have today released for comment a report on the OTC derivatives data that should be collected, stored and disseminated by trade repositories (TRs).
The committees support the view that TRs, by collecting such data centrally, would provide the authorities and the public with better and timely information. This would make markets more transparent, help to prevent market abuse, and promote financial stability.
The report addresses Recommendation 19 in the October 2010 report of the Financial Stability Board (FSB), Implementing OTC derivatives market reforms, which called on the CPSS and IOSCO to consult with the authorities and the OTC Derivatives Regulators Forum in developing:
1.minimum data reporting requirements and standardised formats, and
2.the methodology and mechanism for data aggregation on a global basis. A final report is due by the end of 2011.
Report on OTC derivatives data reporting and aggregation requirements- consultative report
Source: BIS
