Archiv: May 2007
Who is afraid of public investment funds
Until 2015 the volume of government investment fund could reach an amount of 12 000 billion US-Dollar. This forecasted development will certainly have a strong impact on the financial market landscape.
China has recently caused a stir in the financial press by annoucing its decision to create a special fund for investing its gigantic foreign exchange reserves. With $1200 bln China currently holds the world's largest foreign exchange reserves. This would be a significant change of direction, since China would no longer invest solely in US-government bonds, but also channel funds into stock markets and participate in direct investments. As a first step China announced on 21st May that it would invest $3 bln of its reserves in Blackstone, a New York-based private-equity firm soon to issue shares.
China's new public investment fund (in market language: Sovereign Wealth Fund; short SWF) is said to comprise $300 bln and has the capacity to acquire practically every company on the globe. It is only natural - against this background - that some critics wonder if China would also be driven by political motives. A few months ago Singapore's SWF Temasek was believed to have contributed to the fall of Thailand's prime minister Thaksin Shinawatra by investing in Thailand's telecom provider Shin.
Stephen Jen, analyst at Morgan Stanley, believes that SWFs would enable countries to acquire know-how by making bids on foreign firms. "High-tech firms and foreign banks" could be the primary targets of these funds, wrote Stephen Jen beginning of May. China is aware of these views and has already announced to waver its voting rights at Blackstone.
SWFs are continously gaining importance. Currently, the 25 countries which hold such a fund, have around $2500 bln assets under management. This almost equals to 50 percent of the worldwide foreign exchange reserves and is twice as much as the entire assets managed by the hedge fund branch. Here is certainly enough power to influence stock prices. Although nobody seems to know the exact investment details of the secretive funds, George Magnus, chef economist at UBS, is convinced that SWFs of oil-producing states were able to push up stock quotations in Malaysia, Indonesia or China as they are the biggest investors in these countries.
Incidentally, oil-exporting states were equally the first to create such funds. The Adia fund of the United Arab Emirates can already look back to a 30-year history. According to estimates of Morgan Stanley the latter fund is believed to be the worldwide largest with $875 bln assets. Russia, which until recently had invested its oil revenues primarily into the money market, recently announced that it would split its SWFs to enhance revenue.
But the biggest growth will certainly come from Asian countries in the years to come. Apart from China's SWF (of $300 bln), Korea wants to double the volume of its fund, whereas Taiwan and Japan are considering similar steps. Stephen Jen estimates that all SWFs would collectively grow at the rate of $500 bln per year to finally reach a total volume of $12 000 bln in the year 2015. This sum becomes even more gigantic when compared to the current global stock market capitalisation of $ 50 000 bln. George Magnus said: "The growth of public investment funds in the years to come is one of the most dramatic developments for the financial markets."
Source: NZZ am Sonntag
Nasdaq and OMX plan to merge
The US-based technology exchange Nasdaq and the North-European operator OMX have announced their intention to merge. As the two companies had announced last Friday, Nasdaq offers $3.7 bln or 208.1 Swedish Krona for each share of OMX. This offer is supported by the OMX management and by major stakeholders of both companies. Last Thursday the shares of the two companies were suspended from trading.
OMX operates exchanges in Stockholm, Kopenhagen and the Baltic states. Due to the current consolidation pressure, Nasdaq intends to extend beyond the American market.
Source: Neue Zürcher Zeitung
Brazil reaches for investment grade
During the past week major rating agencies have upgraded Brazil's government issues. Standard & Poor's, for instance, upgraded Brazil's foreign debt to BB+. Fitch made a similar upgrade. Therefore, Brazil has come very close to the much desired investment grade. Other emerging countries, such as Mexiko, China or Russia, have already reached this grade. Among the emerging countries, Brazil has accumulated one the largest foreign debts worldwide. End of March the government domestic debt was estimated 1143 bln Real (around $603 bln), whereas the foreign debt amounted to 136 bln. Real (around $72 bln). The resulting global debt made around 65 percent of the GDP.
The upgrade to investment grade would bring tangible benefits to Brazil. The lower risk expectancy for bonds would be reflected in lower interest rates. Investment gade equally allows large institutional investors, such as insurance companies or pension funds, to aquire Bazilian government bonds. This would considerably enlare the investor community and also reduce expenses for debt servicing. Apart from these monetary benefits, the effect of the investment grade is also a psychological one. Brazil has gone through many financial and economical turmoils during the past decades. So the upgrade would serve as example that the pragmatic approach of Brazil's president Luiz Inácio da Silva have paid off well in the end.
Source: Neue Zürcher Zeitung
MiFID could lead to 'proactive' compensation
Changes to the Financial Services Authority’s Conduct of Business rules, known as NEWCOB, could require companies – including IFAs – to offer compensation to clients on a proactive basis, claims Reynolds Porter Chamberlain.
The law firm says the FSA is using the Markets in Financial Instruments Directive (MiFID), which comes into force on 1 November, as an excuse to rewrite both the COB Dispute Resolution Rules which cover all financial services business, even though many – such as IFAs and insurance brokers – are not covered by the EU Directive.
Jonathan Davies, partner at RPC, says the new dispute resolution rules could see many companies being required to offer compensation on a proactive basis once they become aware of a recurring problem, while at the moment they can wait until a customer complains.
He adds: “This institutionalises the Pensions Review. This will be a costly exercise that will inevitably hit the pockets of customers by pushing up the price of financial products.”
Read the full article by Nyree Stewart (ifaonline.co.uk).
OECD praises benefits of hedge funds
In its latest financial market study the OECD takes a closer look at the question if hedge funds or private equity funds have a beneficial or detrimental effect on financial markets. One opinion is that economic volatility was reduced to a point where high liquidity would not lead to speculative bubbles or other market excess. The opposite opinon states that enourmous amounts of liquidity go from one market to another which leads to over-evaluation of real estate and financial instruments.
The OECD concludes that the emergence of hedge funds and private equity normally leads to beneficial developments in the market. While politicians demand stricter regulation for these funds due to their alleged power and to secure the resistence of financial markets, the OECD praises their stabilizing functions. Private capital funds are seen as important drivers of change and market efficiency. They can react quickly to market signals thereby eliminating market inefficencies and distortions.
The OECD is more critical with regards to the emergence of structured products. They are focused to a larger investment community and promise capital protection combined with higher revenues. These instruments would also be based on a complex trading structure which even technical analysts find hard to fully understand at times, let alone the many retail clients. The OECD also states that these products have not yet been tested under conditions of drastic market volatility and their resistence to it. The OECD estimates that the current market for structured products amounts to $3800 bln. Hedge funds hold $1400 bln. Their financial "strenght" is estimated to be $5500 bln.
Focus on Asia: Market frenzy worries Chinese government
For a long time the Chinese government has been motivating its fellow countrymen to spend more money in order to stimulate domestic consumption. Presently, the Chinese savings quote makes up to 40 percent of the country's GDP. Money saving has become a second nature for those who witnessed the turmoil and economic uncertainties of the Chinese cultural revolution. The Chinese pension system is another reason for the unwillingness to spend. In times of the one-child-policy many especially urbanized Chinese can no longer lean back on the pension-wise advantages of big family structures.
Currently the word has definitely gone round in China that stock exchanges are places where dreams come true. After a long period of stagnation the Shanghai and Shenzen indices have been producing record figures for the last 18 months. And the recent warnings of market observers had no greater impact on the continuing euphoria of small investors. Chinese newspapers report how newcomers finance their investment through borrowed capital or use their properties as collateral. The high volumes in the market or rapid ownership transfers for shares clearly indicate that many small investors experience a genuine gold rush frenzy.
In fact, there are only a few possiblities for Chinese to invest their savings. The savings account is one of them and some might even keep the money in the cooky jar. Both ways do not really generate high revenues, so the promise of easy-made money is luring many to the stock exchange. Recently, newspapers have reported that Chinese authorities were worried about the ongoing reduction of saving funds. According to statistics of the Chinese central bank private savings were reduced by Yuan 167.4 bln in April. The same period of last year, however, saw an increase in savings by Yuan 60.6 bln. Authorities presume that a large portion of savings were used for stock exchange transactions.
It is the declared aim of the Chinese government to avoid a speculative bubble within in the scope of their sustainable growth policy, especially focusing on the real estate and stock market. Recent economic figures show that the government's call for moderation still remains unheard. The aimed growth rate of 8 percent is already largely exceeded. The 1st quarter 2007 saw a growth rate of 11.1 percent. While experts discuss a possible interest raise and other measures, the "man in the street" seems unimpressed as the interest paid on savings doesn't even cover the current inflation rate.
Source: Neue Zürcher Zeitung
Balls warns EU states of single market delays
Ed Balls, minister of the City of London, has sharply criticised Britain's European partners for dragging their feet over the creation of a single market in financial services.
In a letter to the EU's markets commissioner Charlie McCreevy, Mr Balls warned that failure to implement the Mifid directive - that creates the single market - on time would undermine the "competitiveness and reputation of Europe's markets and financial services industry". He also urged the commissioner to maintain pressure on member states to ensure they met implementation deadlines. So far only Britain and Romania have implemented Mifid into their laws, with the other 22 EU member states missing the deadline of 31 January.
The directive is supposed to take effect at the end of November.
Mr McCreevy himself warned that member states could face legal action from private parties if they lost money because of late implementation. "I urge member states to keep to the timetable that they themselves have agreed," he said. "Further delays could well expose Europe's firms and banks to serious competitive disadvantage."
Mr Balls has already announced the publication of the paper, "Britain & Europe - a City Minister's perspective", in which he will argue that "hard-headed pro-Europeanism" is the approach Britain must take when engaging with Europe. He said his approach to Mifid was an example of this. "Getting the best deal for the UK, which will also benefit Europe, through constructive engagement, winning the debate and having the confidence to be public and express concerns when Europe is taking the wrong course," he said.
Source: The Independent
Record year for SWX Group
In the 2006 financial year, the SWX Group achieved a record turnover and profit. The SWX Group’s net profit increased by 84% to CHF 163.9m against the previous year.
Last year, the SWX Group exceeded its previous record, established in 2005. Its net profit in 2006 was CHF 163.9m, which corresponds to an 84% gain compared to the previous year. According to SWX Group this result was achieved thanks to the solid markets and the optimisation programme carried out the year before. Proceeds increased by 12% to CHF 423.6m against the previous year. At the same time, operating costs dropped from CHF 253.1m to CHF 207.2m. Earnings before interest and tax increased by 78% to CHF 197.1m against the previous year, and liquid assets and securities increased by 41% to CHF 585.5m. Due to the trading-fee waiver of Q4 2006, proceeds from the spot market barely changed from the year before. Proceeds from data vending rose by 20% to CHF 37.9m, proceeds from the Admission Division rose by 25% to CHF 24.6m, and proceeds from the Eurex trade rose by 24% to CHF 182.4m. As of 31 December 2006, 424 full-time jobs were occupied compared to 465 full-time jobs the year before.
Source: SWX Group
SWX Group, SIS Group and Telekurs Group intend to merge
The boards of directors of the SWX Group, SIS Group and Telekurs Group have signed a letter of intent to merge the three organisations. Within the framework of the contemplated merger, the business activities of all three companies are to be combined under one roof. Subject to approval by the owners and responsible authorities, the transaction is expected to take effect in early 2008. Read the full text of the joint press release (download 78 kb).
IPO of VTB Bank raises USD 8 bln
Probably one of this year's largest IPO comes from Russia. The VTB Bank, Russia's second largest bank was able to raise $8 bln in its homeland and abroad. VTB Bank will be the first Russian stock traded on a Western stock exchange.
So far, Russia's stock market has been dominated by shares of energy and commodity firms, which also explains the rather weak growth of Moscow's RTS-index. Energy shares such as Gasprom, Lukoil and Surgutneftegas, which make one third of the index, have even been loosing around 15 - 20 percent of market value since January.
Still, investors are stil prepared to bet on the growth potential of the Russian econmy. Especially bank shares have moved into the focus of the invesment community. The Russian Sberbank, specialised in private banking, is the current market leader with a market share of around 50 percent. VTB Bank, a former external trade bank of the Soviet Union, has a current market share of around 5 percent. $1.6 bln of the IPO was subscribed by small investors of Russia.
Telekurs Financial announces launch of the new Fair Value Service
Telekurs Financial is pleased to announce the launch of its new Fair Value Service for valuing bonds, which has been developed to help clients meet their obligations under International Accounting Standards.
As the majority of bond prices remain illiquid after launch, administrators need to find a way to value client holdings. Recent Financial Accounting Standards changes mean that the price used must be “objectively determinable” and internal or fund manager valuations are placed at the bottom of a preferred hierarchy.
Fair Value Service calculations are made systematically to a large universe of bonds denominated in five currencies, EUR, GBP, CHF, JPY and USD. Valuations are calculated in a fully transparent manner, allowing independent validation and are delivered four times a day.
Fair Value Service calculations are available through Telekurs Financial's display products or as a structured data feed.
For more information on the Fair Value Service and its benefits please click here.
If you would like to speak with a representative from Telekurs Financial in the UK or Ireland, please email email@example.com or call on Tel. +44 (0)20 7550 5000.
Real estate derivatives: a new growth segment?
According to a study of Deutsche Bank Research the value of all outstanding derivatives, such as futures, options, swaps and structured products in mid-2006 was estimated at $450 trillion worldwide, which equals ten times the global GDP for 2006. But one of the derivative types is seldom mentioned or even integrated in these huge volumes: real estate derivatives. Real estate plays a minor role as underlying asset compared to shares, bonds or commodities. According to the study, the topic has been discussed for 15 years now, but only 2005 saw the emergence of a notable market, especially in the UK. The volumes of UK's real estate derivative segment at the beginning of 2007 (£7.6 bln) still seem moderate compared to the overall derivative market. On the other hand, volumes today are already six times higher than in 2005. Analysts of Deutsche Bank Research have forecasted a growth up to $100 bln until 2010.
Real estate derivatives are primarily focused on institutional investors. They enable investors to hedge their investments in real estate. Through the derivatives the counterpart has access to a broad real estate portfolio. Around 80 percent of the transactions are real estate swaps and are utilized to minimize risks. For instance, an investor with a large real estate portfolio can subscribe to a "total return swap" thereby securing a fixed or variable interest rate. Other types of derivatives include real estate bonds and real estate index derivatives.
Source: Neue Zürcher Zeitung
Uncertainties remain six months before MiFID deadline
Confusion continues to reign over the exact requirements of MiFID - and the implications of non-compliance - with just six months to go until the 1 November deadline. The new European investment banking regulations have prompted firms to race to put the necessary technology and processes in place in time - but some elements of the regulations, such as best execution, remain unclear.
As for the legal situation if companies are not compliant by November, Philip Buttifant, director of wholesale policy at the British Bankers Association (BBA), said: "It's really up in the air."
In general, it seems the UK financial industry is looking good to hit the November deadline and is ahead of other major European financial nations.
Ralph Silva, analyst at Tower Group, said: "The UK is probably a bit ahead of the rest of Western Europe. The British banks are well suited to this - basically they're not scared. They're all generally in the same situation." He rated UK MiFID readiness at eight or nine out of 10 and said the rest of Western Europe is at seven or eight.
Improved functionality for Intraday Pricing Service Clients
Telekurs Financial is pleased to announce improved functionality in the handling of input files in the Intraday Pricing Service.
UK and Irish clients of the Intraday Pricing Service can now upload universes containing multiple identifier types. The new feature is being introduced as another enhancement allowed by the migrations to a new production system earlier in 2007.
Until now, clients using multiple securities identifiers have had to split their universe into separate request files on an identifier by identifier basis. With immediate effect clients will be able to upload a single input file with mixed identifiers.*
As well as accepting mixed identifiers, the Intraday Pricing Service output file will also be configured to output multiple identifiers.
Both developments will allow clients to simplify processing of both input and output files where their databases may contain multiple identifiers, by avoiding the need to process multiple input and output files or to process identifiers through a cross reference table before loading.
Any client who would like a demonstration, or who would like to implement this additional functionality should contact their account manager or email to firstname.lastname@example.org
*Changes are necessary to the structure of the input file. Those clients with existing non-standard input files may not be able to use this function. Please contact your account manager in both cases.
Thomson bid for Reuters worth $17.6 billion
Thomson is in talks to buy Reuters for about £8.8 billion to create the world's biggest news and financial data company, the two firms said Tuesday. The Reuters chief executive, Tom Glocer, would become chief executive of the combined group under the terms of the proposed $17.6 billion deal, the companies said in a joint statement.
Read the full article by the International Herald Tribune.
Focus on Asia: Asia to pool financial reserves
Asian finance ministers have agreed plans to pool the region's vast financial reserves to protect their currencies from speculative attack. The agreement, reached at a meeting in Japan, comes almost 10 years after speculators triggered an economic crisis across the region in 1997. Its effects were felt across the region and exposed the Asian economic miracle as having very shaky foundations.
Read the full article by BBC News.
Deutsche Boerse in talks to acquire US-based ISE
Together with the Swiss exchange SWX, the German stock operator Deutsche Boerse made a bid of $2.8 bln to acquire the New York-based International Securities Exchange (ISE), the largest equity-options platform in the US. The management of ISE reacted positively to this offer. ISE will be managed by Eurex, the joint-venture options exchange of Deutsche Boerse and SWX.
Source: Neue Zürcher Zeitung
Rush to MiFID 'creating new threats'
Financial firms are exposing themselves to a range of damaging new threats by rushing to comply with the EU’s Markets in Financial Instruments Directive (MiFID) November deadline. The stark warning comes from a panel of security experts which say that institutions need to pinpoint potential flaws in their security – or face the financial consequences.
The panel of experts comprises security analyst Graham Titterington of Ovid, PJ Di Giammarino, CEO of financial services industry think tank JWG-IT, and Brookcourt’s Phil Higgins. They warn the cost of MiFID IT implementation in the UK alone, is set to top £1bn, with typical UK investment banks spending upwards of £10m each.
Read the full article by Simon Read (ifaonline.co.uk).
Moody's predicts bigger losses for 2006 subprime mortgage bonds
Losses for 2006 subprime mortgage bonds are likely to be bigger than previously estimated, Moody's Investors Service said in a report. Last month, the credit agency said the new anticipated range for cumulative losses over the lives of 2006 subprime bonds is 6 percent to 8 percent, up from last year's estimated loss range of 5.5 percent to 6 percent. The average life of a subprime bond is three years. As many subprime borrowers will soon face higher interest rates at the end of their initial fixed rate periods, many of them might be unable to afford the higher mortgage payments, leading to further increases in delinquencies. The new estimate is based in part on the still-worsening performance of the 2006 bonds — more than 3 percent of subprime loans securitized in the third quarter of 2006 were in foreclosure within six months, up from 2.5 percent in the second quarter, Moody's said in the report.
Read the full article published by the International Herald Tribune.
Annual report 2006 of Telekurs Group
This is an extract of Telekurs Group's Annual report 2006:
In 2006, Telekurs Financial Information Ltd achieved overall sales growth of 6 percent, while sales outside Switzerland increased by a doubledigit rate. Continuing development of existing products and the integration of additional data again enabled the firm to meet the ever-increasing demands of financial information users. The preparatory work it carried out in connection with the EU’s Market in Financial Instruments Directive (MiFID) provided renewed testimony of Telekurs Financial’s skill in supporting market participants in the implementation of new regulatory requirements.
Change of command at Telekurs Financial
Marc Carletti will assume his duties as CEO of Telekurs Financial on May 1st, 2007, and at the same time, will become a Member of the Telekurs Group Executive Committee. He was been the designated successor of Eugen Niesper since the beginning of February, who is retiring mid-year after a 20-year career at Telekurs, 10 of which he headed the Group company, Telekurs Financial. Read the full text of this press release (download 44 kb).
Telekurs Financial's User Group 2007
Telekurs Financial hosted their annual User Group on 26 April 2007 at their newly refurbished offices. Clients were updated with the latest industry news and product developments followed by round table discussions focussing on Evaluated Pricing and industry regulation.
The morning focused on three topical business updates:
>> New data initiatives
>> Product improvements - Adding value to services
>> Telekurs Financial's service offering
Sheena Clark, Head of Data Acquisition, spoke about New Data Initiatives such as MiFID, Structured Products and Islamic Banking.
Richard Newbury, Head of Product Services gave an overview of the changes made to the company's products over the last year. He highlighted the continuous improvement processes undertaken and included how we are preparing our product suite for MiFID.
The round table discussions offered clients the opportunity to discuss how their colleagues have responded to current pricing and regulatory issues.
We were again delighted to welcome back Thea George, editor of A-Team Group, to facilitate one round table discussion: "Regulations affecting Back Office now and in the near future". Feedback from the group showed a general concern of a lack of firm guidance on MiFID in the industry for their own companies. We directed the delegates’ attention to the efforts made by Telekurs Financial to provide MiFID data and demonstrated our efforts to keep up to date with further requirements.
Alexandra Wipf, Head of Account Management and Sales, Telekurs (U.K.) Ltd, facilitated our second round table: "Maximization of Evaluated Pricing". Our new Fair Value Pricing Service was enthusiastically received with great interest by the participants. This service focuses on the need of financial market players having to base their analyses on key figures that are uniform and transparent. As a unique service, Telekurs Financial provides the valuations as well as the method and origin of the price.
For more details on MiFID and Telekurs Financial please click here.
To find out more about the round table discussion Regulations affecting Back Office now and in the near future please click here.
To find out more about the round table discussion Maximization of Evaluated Pricing please click here.
To view the presentations shown during this User Group, please click here.
If you would like to get in touch with a representative from Telekurs (UK) Ltd please email: email@example.com or call us on Tel. +44 (0)20 7550 5000.
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- Who is afraid of public investment funds
- Nasdaq and OMX plan to merge
- Brazil reaches for investment grade
- MiFID could lead to 'proactive' compensation
- OECD praises benefits of hedge funds
- Focus on Asia: Market frenzy worries Chinese government
- Balls warns EU states of single market delays
- Record year for SWX Group
- SWX Group, SIS Group and Telekurs Group intend to merge
- IPO of VTB Bank raises USD 8 bln