Today, Standard & Poor’s announced a new equity index based on the CIVETS countries. The moniker, coined by the Economist Intelligence Unit a few years ago, describes a group of sizeable emerging markets—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa—with appealing conditions for sustained high growth. Although not yet part of common parlance like the BRICs (Brazil, Russia, India and China), the CIVETS are generally the most-discussed markets in the next tier of emerging economies.
For its part, S&P describes the group as characterised by “dynamic, rapidly changing economies and young, growing populations.” Back-testing its new index, the CIVETS-based construction has recently outperformed indexes based on the BRICs as well as emerging markets in general. But this is not to say that shares in the CIVETS countries are uniformly buoyant: since the start of 2008, Colombian large caps have risen by more than 60% while large Egyptian stocks have shed more than 50% of their value. The group is an eclectic mix of political and economic systems, with financial markets of widely varying maturities. Thus, an index built from the CIVETS offers exposure to a targeted yet diversified basket of important emerging economies.
The recent performance of CIVETS shares will attract adventurous investors seeking outsized returns, much like intrepid coffee lovers who covet a rare, expensive type of bean harvested with the help of the civet, a cat-like mammal. In a less auspicious omen, civets were also linked to the spread of the deadly SARS virus.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
What do an Italian bank and a poultry farm in Madagascar have in common? Very little in practice, of course. Both, however, share a common minority shareholder: Libya.
As the unrest in Libya intensifies and governments step up the pressure on Colonel Muammar Qadhafi, the toughest actions taken against Libya’s ruling regime so far have been financial. Amid signs that cash is running short in Tripoli, attention has turned to the government’s foreign holdings, and the extent to which it can repatriate these funds for much-needed liquidity.
Read more at Financial Services Briefing: “Trimming Tripoli’s tentacles” (March 11th)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
Assets under management at the world’s sovereign wealth funds are now nearly US$4trn, according to new research. The latest tally, released by Preqin, is up by 11% over 2010, which itself grew 11% over the year before.
Recent growth has come thanks to rising commodity prices and despite some significant withdrawals by host governments. Russia, for example, bolstered its fiscal position by tapping its sovereign fund for around US$35bn over the past 12 months. Despite the promise of an influx of petrodollars, the outlook for a host of funds in the Middle East and North Africa is cloudy, as the stewardship of funds faces potential changes in states experiencing unrest like Libya, Bahrain and Algeria.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The EIU’s finance team has received the latest Credit Suisse Global Investment Returns Sourcebook. A hard-copy only publication, it is a weighty tome in terms of both content and physical heft. The research, conducted by a group of academics from the London Business School who wrote an influential book on investment returns, crunches the numbers on asset returns for 19 countries back to 1900. This makes it an authority on the global equity risk premium.
Over the past 111 years, the annual global equity risk premium was 4.5% relative to treasury bills, the research shows. Dividends account for the bulk of the premium, with the overall valuation of shares—as measured by the price/dividend ratio—adding only 0.5% per year. This re-rating of shares is “quite modest”, the report argues, “given the improved opportunities for stock market diversification that took place over this period”.
Was a 4.5% premium what investors expected in advance? To some extent, past equity performance relied on “past good fortune and factors that are unlikely to recur”, the research asserts. Take, for example, the fact that the world dividend yield in 2010, 2.5%, is well below the 4.1% average seen over the past 111 years. This, combined with a more modest outlook for the re-rating of shares and other factors, leads the researchers to infer that investors now expect an annualised long-term equity risk premium, relative to bills, of between 3% and 3.5%.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The practice of contrarian investing has been addressed here before. To this end, contrarians will love the latest survey of institutional investors by Bank of America-Merrill Lynch.
Investors are the most bullish on equities—a net 67% of poll respondents are overweight the asset class—since the survey began in 2001. At the same time, their allocation to emerging markets has plunged, with a net 5% of fund managers overweight in February, down from 43% in January. The swing in sentiment towards America and Europe is not as pronounced, but still significant. Encouraged by such decisive shifts in investing attitudes, contrarians will now pile into bonds from emerging markets.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
Global pension fund assets grew by 12% last year, to US$26trn, an all-time high, according to a new study from consultancy Towers Watson. Despite this performance, pension fund balance sheets improved only marginally. The asset/liability indicator constructed by the consultancy improved by 2% in 2010, but remains some 25% lower than it was in 1998. This is because liabilities have grown more than twice as fast as assets over the past 12 years, opening a hole that may take many more trillions of dollars to fill.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
After months of negotiations with unions and private sector businesses, the Bolivian government has passed a law that re-nationalises the country’s pension system and significantly lowers the minimum retirement age. At a time when many countries in the region are taking up the Chilean model of private companies managing individual retirement accounts, the law sends Bolivia in the opposite direction.
President Evo Morales signed the bill into law in December, and it will take most of this year to replace the two private sector pension fund managers with a single state-owned fund manager. While the reform provides many benefits for Bolivians looking to retire, it’s not clear how sustainable it will be in the long term, as critics say its funding measures are not sufficient to cover its new obligations.
How the changeover affects Bolivia’s financial sector will depend on whether this new state entity acts purely as a disinterested manager of members’ retirement savings or adopts the priorities of Mr Morales’s administration as its own.
Read more at Financial Services Briefing: “Regime change” (February 2nd)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.
Reeling from the financial crisis and facing potential funding shortfalls, western banks turned to sovereign wealth funds (SWFs) for support during the credit crunch. In 2007 and 2008, these funds, mainly from Asia and the Middle East, pumped some US$70bn into the ailing institutions.
SEND HELP: Spain's prime minister meets China's vice premier on January 5th 2011
On state visits around Europe this month, Li Keqiang, China’s deputy prime minister, made headlines by suggesting that China stood ready to support the debt of the euro area’s troubled peripheral members. This, along with other sovereign investors’ recent history of dabbling in distressed assets, suggests that SWFs may play a role in alleviating the euro area’s current woes.
With more than US$4trn in assets, according to the SWF Institute, the funds’ collective might would be more than sufficient to cover the existing support facilities for Greece and the joint EU-IMF facility for other euro area economies in need (already tapped by Ireland). But how realistic is this?
Read more at Financial Services Briefing: “Sovereign crisis, sovereign solution” (January 12th)
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
Good news for job seekers, if the latest survey by the Association of Executive Search Consultants (AESC) is to be believed. Nearly 70% of executive recruiters have a positive outlook for the year ahead, up from 56% in a similar poll 12 months ago. What’s more, headhunters expect the financial services industry to be one of the three fastest growing sectors—particularly in the Americas—in 2011.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
December 7, 2010,
17:46 |
Tags: Asset managers, Banks, fraud, HSBC, Irving Picard, JPMorgan, Madoff, UBP, UBS
To date, Irving Picard, the court-appointed trustee in charge of liquidating Bernard Madoff’s former hedge fund empire, has recovered around US$2bn for victims of the fraud. His latest victory, announced yesterday, is a US$500m settlement with Union Bancaire Privée, a Swiss private bank.
Image links to full complaint (2.2MB PDF)
Three other suits filed in recent weeks could net Mr Madoff’s former clients much, much more. On November 24th, the trustee filed a US$2bn suit against UBS, alleging misconduct and “collaboration in the Bernard Madoff Ponzi scheme.” On December 2nd, a suit seeking more than US$6bn was lodged against JPMorgan for allegedly “aiding and abetting Madoff’s fraud”. Most recently, a US$9bn suit was launched against HSBC on December 5th. Announcements of all suits and settlements can be found here; UBS, JPMorgan and HSBC all deny the claims.
The trustee’s 173-page complaint claims that HSBC was “always willing to play the lapdog” to Madoff. In filling in the details, the plaintiff unravels the byzantine structures of “feeder funds” linked to Mr Madoff’s firm. Mr Picard has filed suits seeking some US$35bn in damages, and some are growing bullish on his prospects for recovery.
Update (December 9th): Another seven banks were sued on Wednesday.
The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.
