CC-BY-SA-2.0, FlickrFoto: Dana Riza. Asia vuelve a repuntar: ¿Qué está pasando?
The decision by the PBoC to introduce the new FX regime serves two purposes, explains Global Evolution in its last analysis. First, the move should be seen as a step forward to comply with SDR eligibility. The IMF recently declined the Chinese calls for letting the CNY become a SDR currency as the fund criticized the gap between the CNY’s market level and daily fixings. In fact, the IMF and the US Ministry of Finance have both welcomed the Chinese policy shift.
Secondly, economic growth is in retreat and the export sector is in dire straits judged by recent export data. A weaker CNY could help stem the growth decline although most would agree that the 2.7% adjustment in USD/CNY since Monday August 10 will not make much of a difference, points out the firm.
Still, if the market believes that the CNY should weaken leading to capital outflows the CNY adjustment may have more legs in the weeks and months to come. The PBoC will lean against disruptive currency volatility but welcome a weaker currency as long as capital outflows are manageable and the CNY depreciation takes place in a controlled and orderly fashion. Inflation is a no worry for now. July’s headline CPI inflation may have increased to 1.6% YoY from 1.4% YoY in June but PPI inflation declined to minus 5.4% from minus 4.8% thereby hitting the lowest level since autumn 2009. To put things short, says Global Evolution, what we now have in China is a managed float and who can blame the Chinese authorities for letting markets determine the value of their currency.
Sin embargo, si el mercado cree que el yuan se debilitará esto provocará la salida de capitales y el ajuste de la divisa china podría continuar en los próximos meses. El Banco Popular de China luchará contra la volatilidad de la moneda, pero estará a favor de una divisa más débil, siempre y cuando las salidas de capital sean manejables y la devaluación del renminbi se lleva a cabo de una manera controlada y ordenada.
La inflación no es una preocupaciónpor ahora, afirma Global Evolution. La inflación subyacente del mes de julio podría haber aumentado hasta el 1,6% interanual desde el 1,4% interanual en junio, pero la inflación de los precios de producción industrial disminuyó hasta -5,4% desde -4,8%, marcando el nivel más bajo desde el otoño de 2009. Para resumir, lo que tenemos ahora en China es una fluctuación controlada y quién puede culpar a las autoridades chinas por dejar que los mercados determinen el valor de su moneda.
“The genie is out of the bottle and the Asian devaluation race is on as illustrated by the Vietnamese central bank’s decision to devaluate the Vietnamese dong by 2%. Elsewhere in Asia, depressed commodity prices will allow for easy monetary policies with central bankers happy to see their respective currencies staying weak and competitive”, explain the firm specialized in emerging and frontier markets debt.
In emerging Asia, Singapore, South Korea and Malaysia are the countries that are most exposed to the Chinese business cycle whereas in Latin America Chile stands out with an export to China worth around 7% of GDP.
In Asian frontier universe Mongolia stands out with an export exposure to China worth more than 30% of GDP whereas in Africa, Angola and Republic of Congo are the countries most exposed.
What are the consequences?
Asian local fixed income should perform well as headline CPI inflation stay subdued. The tricky part is FX, growth, the banking sector and budget performance. “We believe that local Asian currencies have limited upside potential over the next few months and have cut Asia significantly in our local currency strategies. India and Indonesia are the two countries where we still hold some exposure with our strongest conviction trade being India and with Indonesia offering a notable carry in compensation for currency risks”, point out.
“As to Asian hard currency debt, sovereign debt stocks are low and we do not see roll over risks as a problem (with FX reserves being amble). Spreads may face upside pressure should the overall economic outlook deteriorate but that is only a mark-to-market risk. Distressed market pricing or defaults are highly unlikely. Asia constitutes 23% in the typical hard currency benchmark (JPMorgan EMBI GD) and we typically hold only around 15% of AuM in Asian “pure” sovereign debt (no quasi-sovereigns) across funds within our hard currency strategy due to zero-weighting of China, Malaysia, India, Mongolia and Pakistan. Therefore we believe that our Asian exposure in hard currency debt is highly manageable”, concludes.
Global Evolution, an asset management firm specialized in emerging and frontier markets debt, is represented by Capital Stragtegies in the Americas Region.
The European funds industry faced estimated net outflows of €11.1 bn from long-term mutual funds for June. That said, mixed- asset funds enjoyed opposite flows with estimated net inflows of €12.1 bn during the month, followed by real estate products with €0.2 bn and commodity funds with €0.03 bn. However, bond funds faced estimated net outflows of €17.5 bn, bettered by equity funds (- €2.5 bn), alternative/hedge products (-€2.1 bn), and ”other” funds (-€1.3 bn). These flows added up to estimated net outflows of €11.1 bn from long-term investment funds for June.
“Despite these flows for June, the European investment industry enjoyed outstanding estimated net inflows of €296.5 bn into long-term investment funds for the first six months of 2015”, said Detlef Glow, Head of EMEA research.
Even money market products, an asset class that can be seen as a safe haven, faced massive outflows (-€34.7 bn) for June. Despite these outflows, money market funds still showed net inflows of €1.2 bn for the first half of 2015.
The flows for the money market segment brought the overall net flows for June to minus €45.8 bn and to a positive €297.8 bn for the first six months of the year.
The single fund market with the highest net inflows for June was Luxembourg (+€7.9 bn), followed by Switzerland (+€0.7 bn) and Denmark (+€0.2 bn). France (-€25.7 bn), Ireland (-€10.2 bn), and Italy (-€8.1 bn) stood on the other side.
Mixed-Asset EUR Flexible-Global (+€4.2 bn) was the best selling sector among the long- term funds, followed by Mixed-Asset EUR Conservative-Global (+€3.3 bn), Mixed-Asset EUR Balanced-Global (+€2.7 bn), and Equity Japan (+€1.9 bn) as well as Equity Eurozone (+€1.2 bn). At the other end of the spectrum Bond EUR suffered net outflows (-€5.0 bn), bettered somewhat by Absolute Return EUR (-€5.0 bn) and Bond EUR Corporates (-€3.5 bn) as well as Bond EMU Government (-€2.5 bn) and Equity Asia Pacific ex-Japan (-€2.3 bn).
Commerzbank has been authorized by the Brazilian Central Bank to set up a subsidiary in Sao Paulo. It is now expected that business operations for the target group of small and medium-sized enterprises as well as major and capital market companies will be launched in the first quarter of 2016, according to PR Newswire.
“Even though the growth momentum in Brazil has slowed recently, the country still remains the seventh largest economy in the world and is by far the most important economy in Latin America and thus a major economic partner for Germany and Europe. Even in times of volatile markets, it is important for our Mittelstandsbank, the market leader in Germany for SMEs, to have a local presence to support our customers outside Germany,” says Bernd Laber, Divisional Board Member International of the Corporate Banking segment (“Mittelstandsbank”).
Harald Lipkau will take on the position of General Manager of Commerzbank in Brazil. A native of Brazil, he started his career in his home country and, after progressing through various positions, was most recently responsible within Commerzbank for financial institutions in Asia.
Around 1,400 German companies are currently represented in Brazil, of which approximately 900 are located in the metropolitan area of Sao Paulo. The majority of these companies are already customers of Commerzbank in Germany. It is now planned to serve their local units through the new Commerzbank subsidiary in Sao Paulo. A total of around 50 staff will be available locally for these customers.
Commerzbank plans to offer its comprehensive range of corporate and investment banking services in Brazil. Commerzbank will serve European companies operating in Brazil, and also provide support for international companies aiming to do business in Europe.
CC-BY-SA-2.0, FlickrPhoto: Esparta Palma. Investec Wealth & Investment Strengthens Research Team with Four New Appointments
Investec Wealth & Investment is pleased to announce the appointment of four new members to its research team. Dominic Barnes joins as a fixed income portfolio manager, Esther Gilbert as a fixed income analyst, while Marcus Blyth and Adrian Todd both join as fund selection specialists.
The decision to further strengthen IW&I’s research team stems from its conviction that increased market volatility over the medium term will create more challenging conditions in which to generate meaningful risk-adjusted investment returns for its clients. IW&I’s research team has, therefore, broadened its coverage to include an expanded range of sophisticated collective and fixed income instruments. The additional complexity of these products requires greater breadth and depth of resource in order to ensure they are thoroughly analysed for their suitability.
John Haynes, Head of Research at Investec Wealth & Investment, said: “I am delighted to welcome Dominic, Esther, Marcus and Adrian to the research team. They bring significant expertise in the fixed income and collectives sectors and will enhance the capabilities and performance of an already well-resourced team. Best-in-class research is an integral part of the service we offer our clients and gives Investec Wealth & Investment a significant advantage in the UK wealth management industry.”
Prior to joining IW&I, Dominic was a Director at Credit Suisse Private Bank & Wealth Management and, before this role, a Fixed Income Specialist at Merrill Lynch International. Esther joins IW&I from AXA Investment Managers, where she was a Portfolio Manager and Fixed Income Investment Analyst covering a range of securities such as global bonds, High Yield, emerging market debt and convertibles.
Marcus Blyth joins from Kleinwort Benson, where he covered collective investment schemes across all sectors. Adrian Todd joins from private bank Coutts, where he analysed third-party funds across discretionary investment portfolios globally.
Foto: juantiagues
. Los hedge funds captaron 76.000 millones hasta junio
The global hedge fund industry has seen a $76bn net inflow of assets through the first half of 2015, bringing the size of the industry to $3.22tn. The second quarter saw the greater amount of inflows from investors, with $48bn in Q2 compared to $29bn in first quarter. Single-manager hedge funds specifically saw net inflows of $52bn in Q2, three times as much as the $18bn net inflow of assets they recorded in the first quarter. CTAs, on the other hand, had a net outflow of $5bn in the second quarter, eroding the $11bn growth they had seen in Q1.
49% of multi-strategy funds saw net inflows in Q2, the highest proportion of all major hedge fund strategies. Conversely, only 29% of niche strategy funds saw net inflows, with 65% of funds in these niche strategies witnessing outflows.
Funds based in North America, Europe, and Asia-Pacific all had similar asset flows in Q2, with 41-44% of funds seeing inflows, and 38-39% seeing outflows. In contrast, funds based outside these regions had net inflows in only 33% of cases, while 62% of funds had outflows.
43%of all hedge funds have seen an increase in allocation from North American investors, and 20% have seen increases from Asia-based investors. Conversely, 14% of funds with Europe-based investors saw decreases from that group, the highest of any region.
60% of hedge funds with more than $500mn in assets under management had net inflows in Q2, almost twice the proportion that saw net outflows. Only 38% of funds worth less than $100mn grew in the quarter, with net outflows experienced by 43% of funds in this group.
57% of hedge fund managers reported increased allocations from high-net-worth individuals (HNWIs) and family offices respectively during H1 2015
Amy Bensted–Head of Hedge Fund Products at Preqin comments:“Despite recent Preqin research indicating that investors are growing impatient with the returns of hedge funds, the industry has continued to accumulate assets in the first half of the year. Hedge funds now manage over $3.2tn in assets, amassing net inflows of more than $76bn in the first six months of 2015. The largest funds continue to see the highest inflows, with approximately 60% of funds with more than $500mn in assets gaining net inflows in Q2 2015.
The growth of the hedge fund sector highlights the continued need for these products by institutional investors, despite any short-term concerns around performance and fees. In light of recent equity market turbulence, the ability of hedge funds to provide consistent and non-correlated returns may prove even more valuable to investors in the second half of the year and we could see continued inflows over the rest of 2015.”
Photo: Jorge Díaz Barros / Courtesy Photo. Credit Suisse Names Jorge Diaz Barros Country Manager for Chile
Credit Suisse announces that Jorge Diaz Barros joined the bank this month as the new Head of the Chile Advisory Office and Chile Country Manager, a role in which he will partner with representatives from across our fully integrated Investment Bank and Private Bank to ensure a coordinated approach to all of our activities in the country.
Jorge Diaz Barros, who brings nearly 20 years of experience in the financial industry to his new position, joined Credit Suisse from JP Morgan Private Bank, where he worked in Miami and Santiago de Chile as a Relationship Manager and a Business Developer for UHNW clients in Latin America.
Jorge holds an MBA in International Business from Gabriela Mistral University, Business School in Chile.
With the arrival of the new Country Manager, Credit Suisse confirms its commitment to Chile, reinforcing the bank‘s growth strategy with a priority focus on the global offerings of our integrated bank in the country and across Latin America.
Photo: TrentStrohm, Flickr, Creative Commons. Bruno Colmant, New Head of Macro Research at Bank Degroof Petercam
Bruno Colmant will join the executive committee of the group that will result from the merger between Bank Degroof and Petercam, subject to regulatory approvals.
He will be appointed Head of Macro Research at Bank Degroof Petercam and will also perform some specific assignments as Group Economic Advisor.
Bruno Colmant holds a PhD in applied economics sciences and is a commercial engineer from the Solvay Business School Economics & Management (ULB). He is a member of the Académie Royale de Belgique. He holds a Master of Sciences from the Purdue University (USA) and a Master in Fiscal Sciences (ICHEC-ESSF).
Bruno Colmant began his career at Arthur Andersen, Dewaay and Sofina. He was managing director at ING (1996-2006), Cabinet head of the Belgian Finance ministry (2006-2007), CEO of the Brussels Stock Exchange, member of the management committee of NYSE Euronext and chairman and CEO of Euronext Brussels (2007- 2009) and Deputy CEO at AGEAS (2009-2011). Since 2011 he is academic advisor AGEAS and partner of the consulting firm Roland Berger.
He is a member of the Central Council for the Economy and lecturer in finance at the Vlerick Management School, UCL and at the Solvay Business School Economics & Management (ULB).
Foto: ChemaConcellon, Flickr, Creative Commons. Casi un tercio de las entidades de banca privada en Suiza desaparecerán del mercado en los próximos 3 años
A recent study conducted by KPMG Switzerland and the University of St. Gallen has shown that the gap between Swiss private banks is widening. While many private banks are in the process of adapting their business models to the changing environment, very few have succeeded in increasing their profitability. Only a small group of private banks have been able to pull away from the rest of the industry and make lasting improvements to their managed assets, efficiency and profitability. Meanwhile, smaller financial institutions in particular have felt increasing pressure this year.
As the study «Clarity on Performance of Swiss Private Banks – The widening gap» shows, the pressure on smaller banks in particular continued to increase this year. For many, the decision is clear: either they must leave the market or they must make fundamental changes to their business model so that they can continue to operate their business profitably and sustainably. «However, they don’t have much time left to make the necessary changes», warns Christian Hintermann, Head of Advisory Financial Services at KPMG Switzerland. «In general, many banks still appear to be undecided on which path to choose. We can expect the face of the industry to change significantly over the coming years.»
Banks must decide: Flight or fight?
According to the study, smaller financial institutions in particular have felt increasing pressure this year. They face a stark decision: either leave the market or adapt their business models. However, not much time remains to make the necessary changes. In general, many banks still haven’t decided and lack a clear strategy despite the continued decline in their development. The further decrease in the number of banks in Switzerland can be attributed to M&A transactions and – to an even greater extent – liquidations and the withdrawal of primarily Anglo-American private banks from the market. “We anticipate that around a further 30% of Swiss private banks will disappear from the market over the next three years through acquisitions and liquidations. This will reduce the number of private banks from 130 at the last count to fewer than 100″.
The study also shows a pause in mergers and acquisitions for 2015 despite driving forces remaining strong: The first seven months of this year saw a pause in M&A transactions, in contrast with 2014’s flurry of activity. This is largely due to a lack of sellers as well as potential buyers’ concerns about unforeseeable risks related to undeclared client funds and business practices that are no longer accepted. However, we expect M&A activities to regain momentum, in part thanks to the increase in settlements between banks and the US Department of Justice. The study shows that, even within the first two years of undertaking a major acquisition, banks see a significant increase in return on equity and revenue per employee.
The gap
«While private banks are attempting to adapt their business models, only a small group of very strong institutions have managed to increase their profitability», says Philipp Rickert, Head of Financial Services and Member of the Executive Committee at KPMG Switzerland, summarizing the results. He also points to the falling number of banks that still rely on undeclared legacy assets, predicting that «this concept will not survive in the medium term.»
Market drives growth in managed assets while net new money inflows remain negligible: The 7.3% growth in managed client assets last year is attributable to positive market developments and a strengthening US dollar. In contrast, net new money inflows made up a modest 0.5% of assets. There were marked differences between the various banks: those in the groups «Strong Performers» and «Turnaround Completed» achieved net inflows of 24.9 billion Swiss francs in total in 2014. Meanwhile, banks in the groups «Decline Stabilized» and «Continuing Decline” saw net outflows amounting to 17.9 billion Swiss francs. Overall, the median for managed assets among the «Strong Performers» group has increased by 146% since 2008 thanks to higher net new money inflows, inflows from mergers and acquisitions, and returns on managed assets. Consequently, the ability to grow is a critical success factor.
«Strong Performers» stay in the fast lane while the rest grapple with poor returns on equity: The private banks in the study had more to contend with than just weak growth. With a median value of 3.5%, returns on equity stayed at modest levels and saw little improvement in 2014. 80% of the private banks surveyed achieved returns of below 8% for the year. Only «Strong Performers» generated returns of above 9%, while most banks in the «Continuing Decline» group posted operating losses. Smaller financial institutions with less than 10 billion Swiss francs in managed assets are feeling the pressure in particular, with 41% of these falling into the «Continuing Decline» group. Returns on equity for the smaller banks were less than half those achieved by banks with more than 10 billion Swiss francs in managed assets.
Significant differences in efficiency within bank clusters
Increased operating efficiency and economies of scale have a positive effect on returns. Last year, «Strong Performers» achieved revenues of 585,000 Swiss francs per full-time employee, with this figure only reaching 357,000 Swiss francs for banks in the «Continuing Decline» group. The «Strong Performers» had just under 15 full-time employees per billion Swiss francs of managed client assets, with other banks had almost twice as many at 26 full-time employees. The «Strong Performers» appear to owe their success to their stronger focus on core markets, their increased operating efficiency thanks to outsourcing and economies of scale, and their strong growth rates.
A new CEO does not improve financial results
More than one third of the private banks in the study have replaced their CEO at least twice in the last nine years. In many cases, this has done nothing to improve their financial position in the two years after the changeover. Therefore, there is little to suggest that private banks can improve their results only by making changes to the upper echelons of management. Financial institutions that had kept the same CEO for the last nine years or only changed CEO once achieved higher returns on equity than banks that changed CEO two or more times.
CC-BY-SA-2.0, FlickrFoto: Yi Yuan Ma. China: ¿Estallido de la burbuja o exceso de pánico?
China’s slowdown has been going on for five years now. After the extensive stimulus measures that kept China safe during the U.S. credit crisis of 2008 (and that benefitted the whole world), a growth decline was simply inevitable, points out Maarten-Jan Bakkum, Senior Strategist, Emerging Market Equities at NN Investment Partners. “Policy makers and economists agreed that China should rebalance its economy, with less dependence on investment and export growth and greater importance for consumer spending. In this process, overall growth would decline, but that would obviously be fine if growth would be more balanced and sustainable.”
It soon became clear that Chinese policy makers were only marginally interested in rebalancing the economy in the short term. The credit-driven investment model, in which the primacy for the most important economic decisions lies with the government, remained intact. The sectors with the largest excess capacity were rarely addressed, as local governments had major economic interests in those sectors. Overcapacity became even more significant in industries like steel and aluminum, and in parts of the housing market as well. “It gradually became clear that the economy only became more dependent on credit. So the most urgent measure – reducing the debt level in the economy – came to nothing. Since the massive stimulus package in 2008, the debt ratio has increased by 85 percentage points. This is unprecedented anywhere in the world, and leads to a significant risk of a credit crunch,” reminds Bakkum.
With the recent correction on the Shanghai stock exchange and the mini-devaluation of the renminbi, NN Investment Partners has clear that the confidence in the Chinese government is declining significantly, leading to stronger outflows and further increasing economic problems. “For the first time in decades, people begin to realise that the government in Beijing no longer has complete control over the economy. The capital flight is very difficult to stop.
Over the past sixteen months, China has faced outflows of about 700 billion euros. The authorities have clearly been overtaken by developments. Their monetary stimulus has not been enough to offset capital outflows. This makes an economic recovery increasingly unlikely, which in turn leads to more capital flight and makes further rate cuts necessary. In this process, the renminbi needs to depreciate further. But this would have undesirable effects on the financial system, as companies have accumulated a foreign debt of roughly 3 trillion US dollars during the years of renminbi appreciation,” explains the senior strategist.
“For a long time, investors considered a sharp slowdown in growth to be the biggest risk in China. In recent months, the focus has slowly shifted to a systemic crisis. This creates great uncertainty in the financial markets. And it’s not just affecting emerging markets. Finally, the realisation begins to dawn that there is a real risk of a Chinese credit crisis” concludes Bakkum.
Within internationally invested portfolios, currency fluctuations can have a significant impact on overall risk and return. Investors seeking purer exposure to the underlying investments of any international market can potentially reduce risk with a currency-hedged investment. Deutsche X-trackers currency-hedged, international equity ETFs offer investors a variety of potential investment solutions from broad core international holdings to targeted investments in specific countries. The ETFs seek currency-neutral market-cap exposure to designated international markets.
“As a European-based bank, we have been able to leverage our local insight to offer the most comprehensive suite of currency-hedged international equity ETFs in the US,” said Fiona Bassett, Head of Passive in the Americas. “We will continue to strategically expand our suite, providing strategies that meet the demands of investors.”
Offering the broadest suite of currency-hedged ETFs in the US, Deutsche’s X-trackers US platform has experienced breakthrough success. With assets totaling USD 20 billion as of August 7, 2015, the Deutsche X-trackers platform has increased by approximately 365% since year end, and continues to be among the fastest growing exchange-traded fund (ETF) franchises in the US.
Earlier this month, the Deutsche’s X-trackers US platform improved its market share position to a top-10 ETF provider in the US. The firm’s global exchange traded products platform is now the world’s fifth largest, with approximately USD 76.9 billion in assets under management as of June 30, 2015.
