Global ETF News Older than One Year
Emerging market bubble more likely in equities than debt, says FSI
August 11, 2011--A bubble is less likely to develop in emerging markets debt than in equities, according to First State Investments (FSI).
Gary Withers, FSI's regional managing director for EMEA, told IPE: "Due to the inflow of money and high level of returns, we have been concerned about asset bubbles potentially developing on the emerging markets equity side.
Source: IP&E
Crude oil prices have plunged for the third time in three months
Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market - August Oil Market Report
August 11, 2011--Crude oil prices have plunged for the third time in three months, reviving all the old clichés about roller-coaster volatility. In passing, we note that just as a certain asymmetry in pump prices is often remarked upon, so too policy makers seem rather less concerned with price volatility when it is to the downside (although arguably there are bigger problems to worry about with financial meltdown on the horizon).
Brent and WTI futures at the time of writing are flirting with lows near $100/bbl and $80/bbl respectively. Brent at $125/bbl back in late-April seems a long time ago. Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double-dip recession.
From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come. With extra crude volumes now hitting the market after OPEC boosted supply and the IEA released emergency stocks, this has been sufficient to sharply weaken prices. Lower energy input costs are well and good, but not if they are achieved at the cost of another economic crisis. Arguably, political paralysis has played a greater role in the current situation than has the financial sector. Either way, earlier bullish oil market prognoses are being hastily re-examined.
Our own base case demand trend remains remarkably unscathed, partly since our view of 2011 demand growth was already below that of some of our peers. That said, our global 2011/2012 GDP growth assumption in excess of 4% might seem optimistic in the present climate. Downward adjustments to recent US and Chinese demand data carry forward through 2012. But there are inter-fuel substitution offsets, notably in Japan.
Source: IEA
Systemic Risk and Optimal Regulatory Architecture-IMF working paper
August 10, 2011--Summary: Until the recent financial crisis, the safety and soundness of financial institutions was assessed from the perspective of the individual institution. The financial crisis highlighted the need to take systemic externalities seriously when rethinking prudential oversight and the regulatory architecture. Current financial reform legislation worldwide reflects this intent.
However, these reforms have overlooked the need to also consider regulatory agencies’ forbearance and information sharing incentives. In a political economy model that explicitly accounts for systemic connectedness, and regulators’ incentives, we show that under an expanded mandate to explicitly oversee systemic risk, regulators would be more forbearing towards systemically important institutions. We also show that when some regulators have access to information regarding an institutions’ degree of systemic importance, these regulators may have little incentive to gather and share it with other regulators. These findings suggest that (and we show conditions under which) a unified regulatory arrangement can reduce the degree of systemic risk vis-á-vis a multiple regulatory arrangement.
view IMF working paper-Systemic Risk and Optimal Regulatory Architecture
Source: IMF
Trading volumes hit record levels
August 10, 2011--Trading in equities and derivatives has hit record levels this week as investors traded frantically in response to a tumult of factors such as the US Federal Reserve’s decision to stick with near-zero interest rates until 2013, fears over the US’s credit rating and the eurozone debt crisis.
Trading in currencies and gold, seen by many investors as a “safe haven” alternative to dollars, have spiked as central banks in the US, Europe and Japan have intervened to attempt to pump liquidity into currency, equity and sovereign debt markets.
Source: FT.com
ETFS Precious Metals Weekly: US Loses AAA Rating, Gold Above $1700/oz
August 9, 2011--Gold spot price hits record high above $1700/oz as US government debt
downgrade sparks gold buying. Standard & Poor’s unprecedented downgrade to
the US government debt rating on Friday, despite the US debt deal, has driven the gold price to a new record level as investors have poured assets into perceived safe havens.
Investor concerns about potential currency debasement were exacerbated by the ECB’s renewed bond buying program and Japan and Swiss central bank intervention in foreign exchange markets to weaken their currencies.
COMEX Gold and NYMEX palladium speculative futures positioning hit their highest levels in over 1 year. The rise of long gold futures positions likely reflects market expectations of further price gains for ‘store of value’ assets and as a hedge for long risk asset positions, whereas palladium investment may reflect bargain hunting amongst the most cyclically sensitive precious metals. Exchange Traded Product (ETP) gold holdings climbed to a new record high of 2,182 tons last week according to Bloomberg data.
Risk aversion pushes platinum and palladium prices down by 4% and 13% over the past week. A general decline in the price of many cyclical assets was likely the main factor driving prices lower, though news of a new wage deal for striking workers at the world’s No. 2 platinum producer, Impala Platinum, also likely weighed on prices. Rising US car sales in June had little market impact, offset by reports of weakness in the Japanese automotive sector.
visit www.etfsecurities.com for more info
Source: ETFS Securities
The Global ETF Market is Coming of Age
August 9, 2011--The market for Exchange Traded Funds (ETF) has grown rapidly in the past decade, tilting the balance of power in favor of investors. ETFs are now utilized by a growing number of fund managers for tactical asset allocation, completion strategies, and as a liquid cash substitute, their attractiveness underpinned by their relatively lower costs, speed of execution, and transparency.
The expansion of the ETF market has reduced costs for asset managers and squeezed full-service brokerage commissions. The market is now entering a new phase of growth as ETF trading expands globally. Meanwhile, there is controversy over some of the newer ETF products that employ leverage and active management to enhance potential returns, but may have higher tracking errors and debatable outperformance compared with the older passive ETF structures. Studies have shown that the returns of active and passive structures aren’t significantly different, and in some cases, actively managed ETFs have posted a worse performance than their passive equivalents.
Source: Amba
NYSE Euronext Announces Trading Volumes for July 2011
August 8, 2011-NYSE Euronext (NYX) today announced trading volumes for its global derivatives and cash equities exchanges for July 2011[1]. Global derivatives average daily volume (“ADV”) of 8.0 million contracts in July 2011 increased 12.6% versus the prior year driven by a 33.7% increase in U.S. options ADV partially offset by a 6.2% decrease in European derivatives.
Cash equities ADV in July 2011 was mixed, with European cash ADV increasing 15.8% and U.S. cash trading ADV decreasing 23.9% from July 2010 levels.
Source: NYSE Euronext
NYSE Euronext outage due to messaging problems
August 8, 2011--NYSE Euronext has confirmed that a breakdown in the outbound messaging system from its trading engine was behind Thursday’s 90-minute outage on Liffe, Europe’s second-largest derivatives platform.
The group described the breakdown as a “serious incident” and it came amid heavy volumes as stock markets plunged. It puts further pressure on NYSE Euronext to ensure the reliability of its platforms at its European operations after Thursday’s problem became the sixth glitch in two months.
Source: FT.com
Possible Unintended Consequences of Basel III and Solvency II
August 8, 2011--Summary: In today’s financial system, complex financial institutions are connected through an opaque network of financial exposures. These connections contribute to financial deepening and greater savings allocation efficiency, but are also unstable channels of contagion.
Basel III and Solvency II should improve the stability of these connections, but could have unintended consequences for cost of capital, funding patterns, interconnectedness, and risk migration.
view the IMF Working paper-Possible Unintended Consequences of Basel III and Solvency II
Source: IMF
Capital Regulation and Tail Risk -IMF Working paper
August 8, 2011--Summary: The paper studies risk mitigation associated with capital regulation, in a context where banks may choose tail risk asserts. We show that this undermines the traditional result that high capital reduces excess risk-taking driven by limited liability.
Moreover, higher capital may have an unintended effect of enabling banks to take more tail risk without the fear of breaching the minimal capital ratio in non-tail risky project realizations. The results are consistent with stylized facts about pre-crisis bank behavior, and suggest implications for the optimal design of capital regulation.
view IMF working paper-Capital Regulation and Tail Risk
Source: IMF
