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China Losing to U.S. Among Investments of Choice
January 21, 2010--Investors have turned bullish on the U.S. while tempering their enthusiasm for China as they worry about a market bubble there, according to a Bloomberg survey.
An overwhelming majority also see a government debt default on the horizon this year, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. Greece is considered the riskiest government, followed by Argentina, Russia, Ireland, Portugal, Italy, Spain and Mexico.
UN under attack over pension fund strategy
January 21, 2010-- The United Nations Joint Staff Pension Scheme has come under fire from a UN-related organisation for “under-investing” in developing countries while over-relying on external fund management.
The criticism comes from the Group of 77 (G-77), an organisation representing the interests of developing nations within the UN. Its key claim is the pension fund has failed to include appropriate emerging markets investments within its investment strategy.
Summary of Statements: Dow Jones Indexes 2010 Global Economic Outlook
Leading Experts Predict 2010 to be Marked by Global Recovery, U.S. Dollar Strength and Rising Company Earnings
January 20, 2010--Both developed and emerging market economies are expected to continue to recover from the global recession of the past two years, as the U.S. dollar recovers against other major currencies, share prices of global equities rise and the public perception of U.S. economic stimulus efforts remains underestimated said leading experts at the eighth annual Dow Jones Indexes Global Economic Outlook.
2010 - A Fast Start but Lingering Doubts about the Sustainability of the Recovery
"Two years after the start of a severe worldwide recession, a rebound in global economic activity is clearly underway with industrial production and international trade flows rising briskly. By the middle of this year, estimates for global GDP growth in 2010 are likely to be double what they were in the middle of 2009," said Kevin Logan, an independent global economist. "Growth is likely to be unbalanced across the globe, with important consequences for capital markets and exchange rates. Europe and the United States will be hampered by the ongoing process of deleveraging, by still fragile financial systems and by the gradual withdrawal of policy stimulus. In consequence, we are likely to see persistent pressure on the exchange rate system to adjust to unbalanced growth, rising protectionism in trade, the growing possibility of deflation, rather than of inflation, in the advanced economies, and better returns on capital assets -direct investments and securities- in the emerging economies," he added.
2010 Will Be the Tale of Two Halves for the U.S. Dollar
"The U.S. dollar is expected to weaken against the major currencies through mid-year, and then rally back in the second half on higher interest rates," said Michael Woolfolk, senior currency strategist at BNY Mellon. "By mid-year, the U.S. Fed is expected to lead a coordinated round of monetary tightening among major central banks, which will allow the U.S. dollar to recover lost ground and rebuild its tarnished image. The higher U.S. interest rates rise in 2010, the higher the U.S. dollar is likely to gain against the major currencies. The Japanese yen and British pound are expected to be the worst performing major currencies this year, undermined by negative interest rate differentials and the weakest economic performance among the G7. By contrast, the Chinese yuan could be one of the best performing currencies as a rebound in global demand is expected to bolster Chinese exports, giving Chinese authorities room to relax foreign exchange controls."
Twilight Zone in 2009 Leading to Earnings Recovery in 2010
"We are in a period towards the end of most global recessions when share prices rise even though profits are still falling. This twilight zone ends as the earnings recovery begins and this moment looks imminent," commented Robert Buckland, chief global equity strategist, Citi. "In these market conditions an aggressive pro-cyclical strategy tends to work best as global equities typically surge higher in the twilight zone and grind higher in the earnings recovery. We expect to see in a 10 per cent increase in major global stock market indexes."
2010 - The New Surge of Populism from the Right and its Implications
"Congressional and administration pandering to this new populist fervor from the right has contributed to public underestimation of the success of Fed's lending and the Treasury's TARP program, and an overestimation of their costs to taxpayers," states Bob Mc Teer, fellow, macroeconomics at the National Center of Policy Analysis. "Instead, the Fed lending and the Treasury's support of banks have been successful and are likely to have zero cost to taxpayers. Nevertheless, false public perceptions are putting Chairman Bernanke's reappointment and Fed independence in jeopardy and are now being used as cover to justify the continued vilification of banks and the imposition of punitive taxes. On an international perspective, most commentaries on the U.S. dollar weakness are misinformed, as are questions regarding continued Chinese purchases of U.S. debt."
Year-to-Date Performance of Major Market Indexes (as of 1/19/10)
| Dow Jones Industrial Average | 2.85% |
| Dow Jones U.S. Total Stock Market Index | 3.24% |
| Dow Jones Europe Index | 2.1% |
| Dow Jones BRIC 50 Index | 1.53% |
| Dow Jones Asian Titans 50 Index | 4.58% |
| Dow Jones Asia/Pacific Index | 4.12% |
| The Global Dow | 2.25% |
| Dow Jones Global Titans 50 Index | 2.22% |
| Dow Jones Global Total Stock Market Index | 3.13% |
| Dow Jones UBS Commodity Index | -0.5% |
OPEC Monthly Report for January 2010
January 19, 2010-Oil Market Highlights
Crude oil price developments saw two distinct patterns in December. After falling to a two-month low of $70.7/b in mid-December, the OPEC Reference Basket rebounded on the back of positive economic sentiment and colder weather in the Northern Hemisphere, which triggered a surge in
speculative activity.
As a result, the Basket price averaged $74.01/b in December, the second
highest monthly figure in 2009 after November. The Basket increased further in the New Year to hit $80.29/b on 7 January, the highest since early October 2008. Since then, prices have reversed on economic concerns, milder weather and inventory builds to stand at $75.79/b on 18 January.
The world economy is expected to grow by 3.1% in 2010, revised up from the previous forecast of 2.9%. Most of the challenges for the OECD have not gone away entirely and the region is still dependent on government-led support. In the US, which is now forecast to grow by 1.9%, private consumption remains weak. Japan is expected to grow by only 1.1%, despite the recent stimulus package, while the Euro-zone forecast is now at 0.6%. China and India remain the bright spots for this year’s recovery with an expected growth of 8.8% and 6.7% respectively, although concerns are emerging that these economies might be overheating.
World oil demand declined by 1.4 mb/d in 2009. A cold winter, economic recovery and a low base for the previous year returned oil demand growth to positive territory by the end of the year. In 2010, world oil demand is forecast to grow by 0.8 mb/d. The decline in OECD consumption is expected to shrink as economic activity increases. Similarly, non-OECD countries are forecast to grow at a higher rate of 1.0 mb/d, compared with 0.5 mb/d in the previous year.
BofA Merrill Lynch Fund Manager Survey Finds Risk Appetite at Four-Year High as Investors Embrace Equities
Portfolio Managers Urge Corporates to Step up Investment
January 19, 2010--Investors have rediscovered their risk appetite and are putting cash reserves to work across the equity markets, according to the BofA Merrill Lynch Survey of Fund Managers for January.
For the first time since January 2006 the survey shows investors are taking above average risk, relative to their benchmark. A net 2 percent is taking "higher than normal" risk, compared with a net 7 percent taking "below normal risk" in December. These figures follow several months of investors displaying optimism about the economy but maintaining a more cautious risk and investment profile.
Average cash balances have fallen to 3.4 percent, the lowest reading since mid 2007 and down significantly from 4.0 percent in December. Appetite for equities is strong. A net 52 percent of asset allocators are overweight equities, up sharply from a net 37 percent in December.
Fewer investors are protecting themselves against a fall in equities. A net 55 percent have no protection against a fall in the next three months, compared with a net 48 percent in December. Investors have been moving into cyclical stocks, are positive about profits and are urging management teams to invest in growth.
"This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs," said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. "We are, however, seeing early signs that might alert contrarians looking for a selling opportunity - namely low cash allocations and possible complacency against a sell off in stocks," said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research.
The Governance of Financial Market Infrastructure Report
January 19, 2010--Oxford Finance Group has released its report-The Governance of Financial Market Infrastructure by Rubin Lee.
Executive Summary
The governance of infrastructure institutions in the financial markets – namely exchanges, central counter-parties (CCPs), and central securities depositories (CSDs) – has become a matter of significant commercial, regulatory, legislative, and even political concern. Such institutions play a fundamental role in the operation of financial markets and more generally in economic development, and the manner in which they are governed critically affects their performance.
There is, however, great debate both about how they are governed, and about how they should be governed. This report analyses these two fundamental issues.
Nature of Governance
Governance is about power, and three questions are critical in understanding the governance of market infrastructure institutions: Who has what power at such institutions? How and why do they obtain it? and, How and why do they exercise it? Answers to these questions for any particular market infrastructure institution are determined in large part by the formal, legal, and regulatory constructs within which it operates. These include the institution’s constitution and associated corporate governance attributes, namely its corporate status and mandate, its ownership structure, the composition and role of its board, the role of its management, the rights of its shareholders and other stakeholders, and the relationships between board, management, owners, and other stakeholders. Other legal and regulatory factors also influence the exercise of power at a market infrastructure institution, including key contractual arrangements, its regulatory status, and any regulatory powers or duties it is allocated. In addition, a range of informal, non-constitutional and non-contractual factors may affect an institution’s governance, such as the historical, cultural, and political framework within which it operates.
Concerns
Many factors have given rise to concerns about the governance of financial market infrastructure institutions. Financial crises have led to public and political interest in the workings of financial markets, and in particular about the infrastructure institutions that seek to guarantee their safe operation and investor protection. Extreme volatility in the markets has simultaneously both increased worries that the market infrastructure institutions central to the operation of financial systems may fail, and also increased pressures for trading, clearing, and settlement to be centralised on precisely such institutions.
There is controversy about what is the most efficient way of governing market infrastructure institutions. Market practitioners now realise that the manner in which these institutions are governed may affect both the fees they pay, and more generally the viability of their business models. There are also concerns both about whether the pursuit of private interests at market infrastructure institutions is leading to anti-competitive behaviour, and conversely about whether the pursuit of public interests at such institutions is adversely affecting efficiency. There is mounting anxiety about the presence of conflicts of interests at market infrastructure institutions, and about whether governance mechanisms should be put in place to minimise the occurrence of such conflicts, or to facilitate the management of them when they do arise. Concern about conflicts of interest has become particularly acute where market infrastructure institutions have been allocated regulatory powers or duties.
The global focus on corporate governance has brought to the fore questions concerning the governance of market infrastructure institutions. Recommendations from various international codes on corporate governance have sought to promote a range of mechanisms, such as the adoption of independent board directors, with the prime aim of protecting shareholder interests. Whether these mechanisms are appropriate for market infrastructure institutions has, however, been controversial.
Consolidation amongst market infrastructures, at both a national and an international level, and the perceived growing market power of such institutions, has lead to disagreement about whether there should be greater regulatory, legislative, and even political intervention in their governance. This debate has been complicated by differences of opinion about regulatory goals, and also by the pursuit of national interests by various jurisdictions.
Not only has no global consensus developed for the optimal way of governing market infrastructure institutions, no framework for deciding what governance model is appropriate in different circumstances has been developed either. Very distinct governance models are currently being implemented across the globe and across different types of market infrastructure institutions, with demutualisation, user governance, and public ownership and control, for example, all being actively promoted.
NASDAQ OMX's iPhone App Enhanced With Addition of Nordic Stocks
January 18, 2010--The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced that it has enhanced the stock market application called NASDAQ OMX Portfolio Manager (QFolio), which successfully launched in
October 2009. The enhancements include the addition of stock data from four Nordic markets (Stockholm, Helsinki,
Copenhagen and Iceland) as well as a currency converter for the following currencies: USD, EUR, SEK, DKK and ISK. The application is now available from the Apple App Store.
With the NASDAQ OMX Portfolio Manager, investors can use their iPhone or iPod touch to build a quick watch list or a
detailed portfolio of Nordic as well as U.S. stocks. The application permits users to track price performance in real
time and view dynamic charts. The NASDAQ OMX Portfolio Manager also provides access to StockTwits for U.S. stocks.
StockTwits is a rapidly growing community for private investors.
"When we became the first exchange company to launch an iPhone application for U.S. stocks last year, we saw that there was strong demand from investors for real-time market quotes from their iPhone and iPod,” said Hans-Ole Jochumsen, President of NASDAQ OMX Nordic. “Now we are very pleased to be able to extend our application to include the Nordic markets, making it the first and only iPhone application that provides Nordic stock quotes in local currency.”
The NASDAQ OMX Portfolio Manager is available for free from the App Store on iPhone and iPod touch or at
www.itunes.com/appstore/
Currency ETC Assets Rise $45mn in 2 Months and Trading Volumes Soar as Investors Build Long US Dollar Positions and Turn Negative on Yen
January 18, 2010--ETF Securities (ETFS), which launched the world’s largest and Europe’s first platform of Exchange Traded Currencies (Currency ETCs) in November 2009, has seen assets in the platform grow to $45 million after only two months of trading with weekly trading volumes rising over 400% over the period.
Currency ETCs which are Long USD and short G10 currencies have seen the most interest from investors, making up 74% of assets with USD strengthening 2.8% since the inception of the currency platform (as measured by the US Dollar Index, DXY). ETFS Short JPY Long USD (SJPY) has been the most popular trade, capturing 49% of assets, while the Canadian dollar held the most net long positions.
NYSE Euronext Leads Global Exchange Traded Products Market In 2009
January 14, 2010 −NYSE Euronext (NYX) today announced that 2009 was a robust year for Exchange Traded Products (ETPs) on both NYSE Arca, its fully electronic U.S. market, and its combined European markets in Paris, Amsterdam, Brussels and Lisbon.
In the U.S. , 107 new ETFs, 9 new ETNs and 85 new certificates were added to NYSE Arca’s growing roster of primary listings. That included 12 issuers that had not previously sponsored Exchange Traded Products on NYSE Arca. New issuers of ETPs in 2009 on NYSE Arca included AdvisorShares; Charles Schwab; Emerging Global; ETF Securities; FaithShares; Geary Advisors; Global X; Grail Advisors; Index IQ; Javelin; Old Mutual; and PIMCO.
In Europe , at the end of 2009, NYSE Euronext’s ETP segment consisted of 449 ETFs, 42 ETVs, five ETNs and approximately 12,762 warrants and certificates. The past year on NYSE Euronext’s European markets was highlighted by 107 new ETF listings, including two by new ETF issuers, HSBC and Think Capital, which launched their first ETF s on NYSE Euronext markets, and continued product expansions from CASAM ETFs, EasyETFs, DB x-Trackers, Lyxor, iShares, ETF Securities, and Invesco Powershares.
Depositary Receipts Show Resiliency in 2009 on Higher Global TradingVolume, Program Establishment, Capital Raisings and Price Returns, According to BNY Mellon Year-End Industry Report
BNY Mellon ADR Index finishes up 36%, more than 280 new DR programs created worldwide
January 14, 2010--As global equity markets experienced
dramatic volatility in 2009, depositary receipts (DRs) proved their
value to investors as a preferred vehicle for portfolio diversification
and cross-border investing, according to BNY Mellon’s annual year-end
report on the DR industry. DR program establishment and capital
raisings remained off historical highs but were stronger year-on-year.
Overall DR performance, as tracked by the BNY Mellon ADR IndexSM,
finished the year 36% higher, while total DR trading volume reached
record levels, up 2% from 2008, even with declining equity values.
"Investors are using DRs to access global equities as they seek new investment opportunities," said Michael Cole-Fontayn, chief executive officer of BNY Mellon's Depositary Receipts business. "In 2010, we see great opportunities from emerging markets, as evidenced by the continued shift in the flow of funds from developed to emerging markets, especially the BRIC (Brazil, Russia, India and China) countries.
"U.S. institutional and retail investor demand has driven the continued expansion of the unsponsored DR marketplace and the creation of the BNY Mellon Composite Depositary Receipt Index(SM), which benchmarks more than 870 DR programs from over 50 countries. BNY Mellon remains committed to providing the investment community with the widest array of investible products to satisfy the need for comprehensive international investing," Cole-Fontayn added.
Highlights include:
34 of the 35 BNY Mellon ADR country indices posted higher returns in 2009, with the Argentina, Brazil and India indices each posting returns above 100%
The world's largest DR issue as measured by value was Brazil's Petrobras, with nearly $58 billion worth of DRs outstanding
By the close of 2009, investors were able to select from a record 3,127 sponsored and unsponsored DR programs for companies from 74 countries
Issuers from emerging markets continued to dominate many DR market metrics, accounting for 69% of capital raisings, 55% of trading value and trading volume, and 50% of new sponsored programs
DR capital raisings totaled $32 billion, a 122% increase from 2008's $14.4 billion, led by issuers from China, India and Taiwan. The largest DR capital-raising transaction in 2009 was ING Group, which raised $11 billion.
Further results from BNY Mellon's year-end industry report follow.
