Global ETF News Older than One Year
Next-Generation Algorithms: High Frequency for Long Only
December 9, 2010--Executive Summary
As the pace of the market and its participants quickens, finding liquidity will become even more of a challenge. The buy side continues to struggle in routing orders, accessing hidden order flow and extracting maximum liquidity at minimum cost from the public markets.
Unfortunately, traditional algorithms only offer solutions to some of these problems. Indeed, slicing and dicing large orders into small pieces, using SOR technology to seek out liquidity across venues and using limit orders to hide intent are all valuable mechanisms for actively managing orders. However, the level of sophistication required to trade in today’s market has grown tremendously.
This is not a challenge that the buy side should shirk from but rather embrace. The key to navigating today’s market lies in utilizing lessons learned from high frequency trading. More specifically, the buy side should be mimicking their approach to measuring and minimizing transaction costs, technology infrastructure and reacting to risk limits. A new breed of algorithms are entering the market that utilize this very approach. These algorithms are adopting the techniques of trading outfits who look to profit from the market microstructure rather than treat it as an automatic loss. With the arrival of this practice, the execution landscape is now becoming a level playing field rather than a minefield for long only institutions.
In the past, the buy side may have felt they suffered from an unfair advantage.
Source: TABB Group
New MIGA Report: FDI into Developing Countries Expected to Increase by 17 Percent in 2010
December 9, 2010-- Investors are optimistic about prospects for a global economic recovery led by the developing world, notes a report launched today by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) at a Financial Times Summit in London. The report, World Investment and Political Risk, says that foreign direct investment flows (FDI) into developing countries are projected to increase by 17 percent in 2010. Investors from the extractive industries, as well as those based in developing countries, are particularly bullish in their investment intentions. This finding represents the business world’s confirmation of economists’ projections: FDI is expected to recover over the next couple of years, having declined sharply by 40 percent last year.
“This upsurge in FDI into developing countries is welcome news, especially considering last year’s drop,” said MIGA Executive Vice President Izumi Kobayashi. “FDI flows directed to productive assets can spur economic growth and reduce poverty.”
For the second year running, MIGA surveyed multinational executives and found that their top worry when operating in developing countries over the next three years is political risk. Political risk tops business concerns such as market size, lack of finance, and quality of infrastructure. About a fifth of the investors surveyed use political risk insurance to mitigate this risk.
This year’s report also focuses on FDI into conflict-affected and fragile economies, where investors are primarily concerned about adverse government intervention (for example changes in regulations, breach of contract, non-honoring of sovereign guarantees, currency restrictions, and expropriation) rather than overt political violence. In fact, adverse changes in regulations not only rank first among investors’ concerns in conflict-affected and fragile economies, but also are most often responsible for losses in these destinations.
view the World Investment and Political Risk report
Source: World Bank
Oil price rise puts pressure on Opec
December 9, 2010--Opec’s oil ministers will gather in Ecuador on Saturday as prices rise above the cartel’s informal ceiling of $90 per barrel.
A faster-than-expected recovery in global demand, aided by the cold winter in Europe and inflows of speculative capital, pushed the price of a barrel of Brent crude, the most important benchmark, to $90.92 on Thursday.
Source: FT.com
Investing in Frontier Markets
December 9, 2010--As the world emerges from one of the biggest shocks to financial markets a bigger surprise is taking place as frontier economies, the economies previously written off as un-investable, are powering ahead of developed regions in delivering premium market returns.
Frontier market investing, the concept of investing in pre-emerging economies is a subject many schemes approach with caution. However in recent years governments in Africa, Central Asia, Eastern Europe, Latin America as well as the Middle East have embraced market reforms and open door policies to foreign investment creating unseen opportunities since the emergence of Chin-India onto the world stage.
‘Investing in Frontier Markets' is the first report to be written primarily by end-investors into frontier markets, commenting on the opportunities and perceived drawbacks to allocating to these regions. Presented from a macro perspective, the report will assess opportunities across the world and is set to include thought provoking ideas from some of the world's most influential personalities.
Key issues to be addressed include:
Has the previous decades 'world poor' become the 'next generation' food supply?
Who's investing in frontier markets and what are the likely impacts on your portfolio of fellow investors altering their allocations?
Understanding the demographic, governmental and economic drivers behind frontier market performance
Source: Clear Path Analysis
ETFs not ideal for all allocation aspects, says S&P
December 9, 2010--Although exchange-traded funds (ETFs) have been gaining significant traction ever since the global financial crisis, investors should be fully aware of their capabilities as an investment.
That is the view supported by the research house Standard & Poor’s Fund Services (S&P) in its latest report entitled ‘Exchange-Traded Funds Increasingly Popular in the Australian Market’.
The report claimed the current array of ETFs available on the Australian Securities Exchange was cost effective, transparent and efficient to transact, but warned investors should be aware that ETFs “do not necessarily provide investment solutions for all allocation aspects of portfolio construction, [such as] currency hedging or foreign equity exposures”.
Source: Money Management
Regular Review Results for Dow Jones Islamic Market Indexes
Fourth Quarter 2010
December 9, 2010-Dow Jones Indexes, a leading global index provider, today announced the results of the regular quarterly review of the Dow Jones Islamic Market Indexes. All changes will be effective after the close of trading on Friday, December 17, 2010-
In the Dow Jones Islamic Market World Index, 165 components will be added while 50 components will be deleted. That increases the number of components in the index to 2,479 from 2,364. The top five components by free-float market capitalization that will be added to the index are Rio Tinto PLC (United Kingdom, Basic Materials, RIO.LN), Bayer AG (Germany, Basic Materials, BAYN.XE), Norilsk Nickel Mining & Metallurgical Co. ADS (Russia, Basic Materials, MNOD.LN), Life Technologies Corp. (United States, Health Care, LIFE) and Coca-Cola Enterprises Inc. (United States, Consumer Goods, CCE).
The free-float market capitalization of the reconstituted Dow Jones Islamic Market World Index increased to US$13.374 trillion from US$13.141 trillion.
In the Dow Jones Islamic Market Asia/Pacific Index, with 114 additions and 24 deletions, the number of components in the index will increase to 1,168 from 1,078. The top five components by free-float market capitalization that will be added to the index are ASUSTeK Computer Inc. (Taiwan, Technology, 2357.TW), Petronas Chemicals Group Bhd (Malaysia, Chemicals, 5183.KU), BYD Co. Ltd. (China, Industrials, 1211.HK), Yangzijiang Shipbuilding Holdings Ltd. (Singapore, Industrials, BS6.SG), and Celltrion Inc. (South Korea, Health Care, 068270.KQ).
Source: Dow Jones Indexes
Thomson Reuters Monthly Market Share Reports For November 2010
November 9, 2010--Trading is fragmenting between exchanges and competing venues. But by how much and which venues? Find out in the Thomson Reuters summarised monthly reports.
Source: Thomson Reuters
IMF Working paper-Bank Capital: Lessons from the Financial Crisis
December 9, 2010--Using a multi-country panel of banks, we study whether better capitalized banks experienced higher stock returns during the financial crisis. We differentiate among various types of capital ratios: the Basel risk-adjusted ratio; the leverage ratio; the Tier I and Tier II ratios; and the tangible equity ratio.
We find several results: (i) before the crisis, differences in capital did not have much impact on stock returns; (ii) during the crisis, a stronger capital position was associated with better stock market performance, most markedly for larger banks; (iii) the relationship between stock returns and capital is stronger when capital is measured by the leverage ratio rather than the risk-adjusted capital ratio; (iv) higher quality forms of capital, such as Tier 1 capital and tangible common equity, were more relevant.
view the Bank Capital: Lessons from the Financial Crisis-IMF Working paper
Source: IMF
Emerging Markets Come of Age
November 9, 2010--These vibrant middle-income countries survived the global recession, but face bumps as they seek to solidify their place in the world economy.
The superlative performance of emerging market economies, a group of middle-income countries that have become rapidly integrated into global markets since the mid-1980s, has been the growth story of the past decade.
After being beset by various crises during the 1980s and 1990s, emerging markets came into their own during the 2000s, recording remarkable growth rates while keeping inflation and other potential problems largely under control.
Before the global financial crisis of 2008–09, there was a growing sense among investors and policymakers that emerging economies, with their new economic might, had become more resilient to shocks originating in advanced economies. Indeed, empirical evidence indicates that over the past two decades there has been a convergence of business cycles among emerging markets and a convergence among advanced economies, but a gradual divergence of cycles between the two groups—referred to as decoupling. Fluctuations in financial markets have become more correlated across these two sets of countries, but that has not translated into greater spillovers into the real economy, which produces goods and services.
Source: IMF
Hedge Funds Took in $16 Billion in October, Most in a Year
December 8, 2010--Hedge funds received net deposits in October of $16 billion, the largest since November 2009, as investors were willing to take more risk, according to TrimTabs Investment Research and BarclayHedge Ltd.
Distressed securities funds took in the most cash, receiving $3.8 billion in October, the research firms said today in a report. Fixed-income funds received the least of any strategy, taking in $506 million, the smallest amount since April.
Source: Bloomberg
