The past few weeks have been difficult for India as it struggles to stabilize its currency, the rupee, which has depreciated somewhat sharply against the U.S. dollar. The rupee has generally trended down over the past three years due to underlying fundamentals, but a widely anticipated tapering of stimulus by the U.S. Federal Reserve seems to have accelerated its fall. The currency movement has greatly impacted investor nerves and led them to increasingly question India’s balance-of-payments (BOP). However, fears of a potential BOP crisis may be overblown.
One of the key measures that determines the vulnerability of an economy to such a crisis is the external debt-to-GDP ratio. For India, that metric is nowhere close to the level of the early 1990s when the country needed to be rescued by the International Monetary Fund after finding itself on the verge of defaulting on its sovereign debt. Another reassuring factor is the country has foreign exchange reserves of nearly US$300 billion—although only enough to support up to seven months of imports.
Nonetheless, the falling rupee is a challenge to the economy, and policymakers can use this as a clarion call to bring in much-needed reforms. The Indian economy’s challenge has long been to attract sufficient foreign capital to fund domestic growth. On a sustainable basis, the flow of capital can occur either through a robust export industry or through foreign direct investment (FDI) in long-term projects. Reforms are critical to achieving either of these improvements.
However, we are concerned that policymakers are drawing the wrong conclusions about the current state of the rupee. Recent measures announced by the Indian government and the Reserve Bank of India (RBI) suggest that policymakers are viewing the rupee movements as a short-term issue while paying less attention to some of the structural problems confronting the economy. Hence the measures seem to focus on reducing the country’s need for U.S. dollars by restricting or raising the cost of “non-essential” imports such as LCD televisions or gold. Furthermore, in recent days, the RBI has placed some restrictions on the ability of its residents to move capital overseas. The efficacy of such measures is questionable.
The government may be aiming to plug the gap in funding India’s current account deficit by increasing reliance on shorter-term sources of funding, including external debt. While these measures may work in the interim, there must be a concerted effort to attract more sustainable sources of capital that can be achieved by easing the cost of doing business, and by improving domestic business competitiveness. Unfortunately, the country’s attempts to improve competiveness in recent years have been half-hearted. Last year’s much-heralded decision to open FDI in retail, for example, amounted to very little due to certain constraints placed on foreign companies seeking to invest in India.
The silver lining to all this is if recent events can become the impetus for Indian policymakers to pay attention to longer-term objectives of improving competition and productivity within the country. In the past, economic stresses have enabled progressive elements within the country to move forward with reforms. We continue to believe that the underlying attraction to investing in India remains intact, and may get a boost with a more thoughtful framework for economic reform.
Sharat Shroff, CFA Portfolio Manager Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Foto: Mar del Este. ING vende su filial de seguros surcoreana por 1.650 millones de dólares a MBK Partners
ING announced this Monday that it has reached an agreement to sell ING Life Korea, its wholly owned life insurance business in South Korea, to MBK Partners for a total purchase price of approximately KRW 1.84 trillion (1.6 billion USD at current exchange rates). Under the terms of the agreement, ING will hold an indirect stake of approximately 10% in ING Life Korea for an amount of KRW 120 billion (106 million USD at current exchange rates).
ING has also reached a licensing agreement that will allow ING Life Korea to continue to operate under the ING brand for a maximum period of five years. In addition, over the course of one year, ING will continue to provide technical support and advice to ING Life Korea.
ING has made great strides in delivering on its programme to divest its insurance businesses as announced in 2009. Since then, ING has sold its insurance and investment management operations in Canada, Australia & New Zealand and Latin America, and a large portion of its insurance and investment management activities in Asia. In May 2013, ING’s U.S.-based retirement, investment and insurance business was successfully listed on the New York Stock Exchange, reducing ING’s stake to approximately 71%.
ING has accelerated preparations for the IPO of its European insurance and investment management businesses to be ready to go to market in 2014. The process to divest the remaining insurance and investment management businesses is on-going and any further announcements will be made if and when appropriate.
Transactions Details
MBK Partners is executing the transaction announced today through Life Investment, a private equity fund and will manage the investment in ING Life Korea for MBK Partners as well as for other investors in the fund. As part of the transaction, ING will hold an indirect stake of approximately 10% in ING Life Korea for an amount of KRW 120 billion (EUR 80 million at current exchange rates) which will be held by ING Insurance (ING Verzekeringen N.V.). As previously announced, the proceeds of the transaction will be used to further reduce the debt of ING Insurance.
The transaction announced today is subject to regulatory approvals and is expected to close in the fourth quarter of 2013. It does not impact ING’s Commercial Banking activities in South Korea.
Jeff Talpas. (Foto cedida por BBVA Compass). BBVA Compass pone a Jeff Talpas al frente de la nueva división de Wealth & Retail
BBVA Compass announced that William C. Helmshas been appointed vice chairman of the BBVA Compass board of directors.
Until now, Helms has led the bank’s Wealth Management business, overseeing private banking, asset management, international wealth management, broker-dealer activities and registered investment advisors.
“Bill brings a deep understanding of our strategic direction and will greatly enrich our board,” said Manolo Sanchez, BBVA U.S. country manager and president and CEO of BBVA Compass. “His leadership has helped us successfully implement our innovative, customer-focused business model across our growing U.S. footprint. We are fortunate to have his counsel.”
In addition to serving on the bank’s board of directors, Helms joins the board of BBVA Compass Bancshares, the bank’s holding company. He will be active in business development and in supporting the bank’s growth as directed by executive management. He also will oversee BBVA Compass’ national and local advisory boards and be involved in the bank’s government relations efforts.
Jeff Talpas, a member of the bank’s Management Committee who has overseen the bank’s Retail line of business, will lead the new combined Wealth & Retail Banking group. The move brings together all of the bank’s consumer segments in a single area led by Talpas, who has more than 25 years of experience in the financial services industry.
Helms joined Compass Bank in 2003 after serving in various leadership roles in the financial industry, including as co-president of Bank of America’s private bank. He serves on the Chancellor’s Council for the University of Texas System and as an advisory director for the McCombs School of Business at the University of Texas. He also serves on the board for the McGovern Museum of Health and Medical Science, and recently served on the boards of the Greater Houston Partnership, the Houston Grand Opera and the Museum of Fine Arts, Houston.
Wikimedia CommonsFoto: Dan SmithRdsmith4. Los grandes bancos centrales no tienen prisa por retirar los estímulos
The timeline set by the US Federal Reserve to reduce its monetary stimulus seems to be gradual enough and calls for the economy to grow strongly before exceptionally loose conditions are over. Nevertheless, the prospect of an end to such a liquidity boost as QE may increase volatility in financial markets until the first interest rate rise actually happens, probably next year, according to Pioneer Investments’ last Global Markets Strategy Report, published last Friday.
“We do not believe that the Fed will be forced to hurry up the process amid evidence of inflation in an uphill battle against the bond market vigilantes”, highlights the report. Pioneer Investment explains that in their strategy, they listened to central banks’ invitation to buy risky assets but have always given priority to risk control and their first assessment in this new scenario was to evaluate which markets stand to lose ground in the run-up to a normalized policy, which eventually includes higher interest rates
Most credit markets were strongly supported by QE-like policies which prompted a global search for additional yields. Although credit spreads did not fall as low as before the last recession, Pioneer has argued that many yield- seeking investors scooped up newly-issued bonds with scant concerns about the issuers’ credit standings. Downside risks in a post-QE world may also affect Emerging-Market bonds, not because of a lesser commitment to good fiscal policies but rather for the negative impact of dwindling investor flows(a concern shared by EM equities).
Equity prices are likely to be more resilient in the more challenging scenario, as valuations look overall cheap and dividend yields remain attractive, especially in Europe. Pioneer Investments’ upbeat view is conditional to a moderate rise in bond yields, which have risen quickly but from near-record lows. Emerging-market equities are another asset class whose performance may be undermined by the changed scenario, according to the report. Unlike high-yield corporate bonds, most emerging equity markets were not overly expensive in their view, but Pioneer Investment believes that most flows into them were spurred to a large extent by QE-like policies and may retreat somewhat. “Moreover, China has often been key for these markets’ overall performance and the uncertainty over the government’s policy action, namely, to curb excess bank lending, may keep concerns over an economic hard landing alive”.
Developed-market equities appear to be less affected by policy uncertainties and provide fair alternatives to Emerging Markets. “Japan has cheapened somewhat after the latest sell-off, whereas US equities may be prone to sharp corrections when bond yields rise significantly but tend to resume the uptrend when the bond market settles down”.
Foto: Martin St-Amant. El mercado laboral sigue mejorando en Wall Street, según una encuesta
A survey of MBA students and graduates from Training The Street(TTS), a leading corporate training provider for Wall Street firms and top-tier business schools, suggests that MBA candidates are receiving multiple offers as the banking industry continues to search for top talent. Offers are coming from the large bulge bracket banks as well as non-investment banking financial firms, such as consulting and private equity shops.
The fourth annual MBA employment survey from TTS also found that candidates are going on multiple interviews and receiving competitive job offers. Forty percent of those surveyed conducted between four and seven first-round interviews, 23% participated in one to three first-round interviews, 12% in eight to ten, and a surprising 19% participated in more than ten interviews. When asked about their satisfaction with their employment offers, 45% of respondents said they were “very satisfied,” with 32% answering “satisfied,” 15% “neutral,” and only 8% “dissatisfied.”
“The Wall Street hiring environment continues to improve, and investment banks in particular are willing to invest in top talent,” said Scott Rostan, Founder and CEO of TTS. “What’s also clear is that other financial and professional firms now feel the need to hire as well, and strong candidates have their choice of where they’d like to work. All of this suggests a significant shift from just a few years ago.”
The most aggressive recruiting came from large bulge bracket banks and consulting firms, with 48% and 35% of survey respondents stating those firms have been actively recruiting them, respectively. Boutique advisory firms/middle market banks were also heavily recruiting, with 27% of survey respondents stating such institutions have actively recruited them. Twenty-two percent said they had been approached by startups.
In terms of candidate sentiment, 22% of respondents said that large banks would be their top employment choice, while 19% would choose a consulting firm. Only 9% of those surveyed chose boutique advisory firms/middle market banks as their top choice, and just 5% selected startups as their top employment choice.
“Our results suggest what we’ve known anecdotally for a while, that not only has the Wall Street job market improved, but it continues to improve regularly,” added Mr. Rostan. “We know from our conversations with recruiting departments that many investment banks are now actively looking to hire more junior professionals as they see the need to expand their talent pools.”
Other findings from the survey include:
Optimism among candidates is high, with 48% reported feeling “very optimistic” about their job prospects after school and 41% as “somewhat optimistic.” Only 5% and 1% responded that they were “somewhat pessimistic” or “very pessimistic,” respectively.
On-campus recruiting was the most successful way for finding a job. Forty-eight percent found their job through on-campus interviews, while 22% found their job independently. 18% utilized personal references.
Forty-seven percent of respondents said they will be receiving a starting annualized base salary between $100,000-$125,000, 21% between $76,000-$99,000, and 22% between $50,000-$75,000.
Seventy-five percent of the survey respondents were male, and 78% were between the ages of 26 and 34.
Wikimedia CommonsPhoto: NASA. Modification: Eric Gaba. AXA Outlines Asian Ambitions and Changes Within Equity Teams
AXA Framlington, the fundamental equity business within AXA Investment Managers, announced its intention to grow its business in Asia and that senior portfolio manager Mark Tinker will relocate to Hong Kong as Head of AXA Framlington Asia.
Mark Tinker will move to Hong Kong in September to support the expansion of the AXA Framlington franchise in Asia. He will be working closely with the distribution teams in Asia to develop business in the region and will support the development of Asian equity capability.
As a result of the move, Mark Tinker will no longer manage the AXA Framlington Global Opportunities and its clone fund AXA WF Framlington Global Opportunities. The funds will be managed by the global sector team, led by Mark Hargraves and will be managed in line with the existing AXA WF Framlington Global. The fund drives returns through fundamental stock selection by sector from recommendations by the global sector team of 7 specialist fund managers with average experience of 18 years. The deputy manager on all three funds will be Susan Sternglass Noble.
The AXA WF Framlington Global High Income is now managed by William Howard. William has over 26 years’ experience in asset management and joined AXA Framlington in September 2012. Prior to this, William was Managing Director and Portfolio Manager at Goldman Sachs and an Executive Vice President at Templeton Investment. The deputy manager is Anne Tolmunen.
Wikimedia Commons. CONSAR Approves the First Mandate Awarded by an Afore
Following an approval period of two years, the CONSAR has authorized AFORE Banamex, to proceed with the first operation in the SAR’s history to be carried out through investment mandates. The mandate, with Schroders, the London based global financial asset management company, is initially for $200 million.
“Through this arrangement, (where the Afore hire the services of a Global Asset Manager) savers in the SAR can access investments in international markets with the most highly specialized and experienced teams in financial risk management globally,” informed CONSAR
As the SAR experiences a rapid accumulation of resources, which is even greater than the supply of local instruments and the depth of the Mexican financial market, the regulator recognizes that it is essential to find better ways of investing in eligible instruments and countries already authorized by international markets which provide access to better yields and expertise in investment management.
In each and every case, the authorized representatives appointed must meet the criteria approved by the CONSAR’s Committee for Risk Analysis, regarding experience, operational capacity, corporate governance, transparency, integrity and competitiveness.
The CONSAR anticipates that in the near future, other AFORES will also take advantage of the flexibility of the regulations for the use of investment mandates, thus strengthening their financial diversification abroad, which is essential for providing savers with competitive returns.
Foto: Urbanrenewal. UBS Global Asset Management divide su negocio de hedge funds
UBS Global Asset Management has announced that itsAlternative and Quantitative Investments (A&Q) hedge fund platform will be reorganized into two separate business areas with immediate effect – Alternative Investment Solutions (the multi-manager and hedge fund advisory business) and O’Connor (the single manager hedge fund business.)
The Alternative Investment Solutions (AIS) business will be led by Bill Ferri. AIS is today one of the largest investors in hedge funds in the world. Under Bill’s leadership, AIS will be expanded to include additional entrepreneurial businesses in the alternatives arena. Bill continues to be a member of the UBS Global Asset Management Executive Committee.
Dawn Fitzpatrick will assume full leadership of O’Connor, in addition to her current role as CIO. Dawn will become a member of the Global Asset Management Executive Committee, reporting to John Fraser, Chairman and CEO of UBS Global Asset Management.
According to John Fraser “the move allows each business to operate as distinct entrepreneurial boutiques – something that is increasingly important for our clients.” He added, “it also provides focused leadership to drive the further growth of these successful alternatives businesses, a key strategic priority for UBS Global Asset Management.”
Foto: Averette. BBVA Compass refuerza su negocio de Private WM con la contratación de Mark Chiappara
BBVA Compass announced that Mark Chiappara has joined its U.S. private wealth management business as a senior private banker, located in Miami.
In his new role, Chiappara will focus on serving ultra-high-net-worth clients and select private institutions in the United States.
“Mark’s tremendous skill set, which includes capital markets and structured lending, have contributed to his position as one of the top private bankers in the country,” said Steve Sanak, director of Private Banking at BBVA Compass. “With a proven track record of capturing new relationships, we expect Mark to have a significant impact on our Wealth Management business.”
Prior to joining BBVA Compass, Chiappara held senior positions at Deutsche Bank, Bank of America, Lehman Brothers and Goldman Sachs. Chiappara earned a bachelor’s degree from Washington and Lee University and a master’s degree in business administration from the University of Chicago, and has achieved the CPA designation.
Foto: Henrickson. RBC Wealth Management nombra co-directores para la región caribeña
RBC Wealth Management has announced the appointment of David Foster and Mike Adams as co-heads of the Caribbean business, based in Cayman and Barbados respectively.
Mr Adams, who was most recently Head of Operational Risk Management for RBC Wealth Management globally, has assumed regional leadership of the teams based in Barbados, with accountability for the corporate and institutional business and providing directional support to the Caribbean-based Operations, Technology and Functional teams. He joined RBC via the acquisition of Barclays’ US private banking operations in 2002, and has, since then, held a series of senior compliance and risk management positions within RBC’s Wealth Management operations worldwide.
Meanwhile, Mr Foster has assumed responsibility for the operation and supervision of the Investments, Trust and Private Client teams, including fiduciary, banking and relationship management solutions delivered through offices in Cayman, Barbados and the Bahamas. He joined RBC Wealth Management in 2012 from Coutts, where most recently he was Managing Director of their Cayman business. Mr Foster has over 20 years of experience in leading teams that advise international high net worth and ultra high net worth individuals and their families.
Both Mr Adams and Mr Foster will report to Stuart Rutledge, Head, RBC Wealth Management – British Isles and Caribbean.
