Today - Monday, March 30, 2015
7:54 AM| Comment!
- After pulling away from a 12-year trough the last two weeks, the euro fell to as low as $1.0830 (-0.6%) this morning, hurt by the uncertainty of whether Greece would be able to strike a deal with its creditors before it runs out of cash.
- After sending a list of reforms to bailout monitors late last week, both sides held lengthy talks over the weekend, with Greece pledging to finalize the list by Monday.
- The proposals include measures to increase tax revenue and investment, and would raise some €3B, according to Greek officials.
- Athens' ATG stock index -1.1%.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Chinese stocks took off today after policy makers signaled the country had capacity to ease monetary policy and boost sluggish growth at the Boao Forum for Asia on Sunday.
- PBOC governor Zhou Xiaochuan outlined that China's policy makers had to be "vigilant" against the risk of disinflation and suggested that the nation had "room to act."
- China's central bank has already taken a series of easing steps since November, cutting interest rates twice and slashing banks' reserve requirements.
- The Shanghai Composite +2.8% to 3,795; Hang Seng Index +1.8% to 24,923.
- ETFs: FXI, EWH, KWEB, PGJ, YINN, GXC, FXP, ASHR, HAO, TAO, YANG, CHIQ, CQQQ, CHIX, MCHI, QQQC, PEK, XPP, YAO, YXI, CHXF, ECNS, FCA, CN, CHII, CHIE, CHIM, EWHS, FCHI, ASHS, KFYP, CNXT, CHNA, KBA, FHK, AFTY
Sunday, March 29, 2015
- Russia, Australia, Denmark and the Netherlands have now become the latest countries to join the China-led Asian Infrastructure Investment Bank despite misgivings in Washington.
- China has set a March 31 deadline to become a founding member of the bank, which is seen as a significant setback to U.S. efforts to extend its influence in the region and balance China's growing financial clout and assertiveness.
- At least 35 countries will join the AIIB by the deadline, the bank's interim chief, Jin Liqun, said last Sunday.
- Previously: AIIB steadily gains more members (Mar. 27 2015)
- Previously: Australia poised to join AIIB (Mar. 25 2015)
- Previously: AIIB gains more steam (Mar. 22 2015)
Friday, March 27, 2015
- Companies made key bets on India's wireless phone industry this week -- and Idea Cellular made the biggest of all -- in a spectrum auction that drew $17.6B overall.
- Idea -- India's No. 3 wireless carrier -- spent the most among carriers, with 300B rupees ($4.8B) in bids across three different bands (900 MHz, 1800 MHz and 2.1 GHz).
- Bharti Airtel (291B rupees, or $4.65B) and Vodafone (VOD; 259.6B rupees, or $4.15B) spent nearly as much. The three dominated the auction bidding due to license renewals they had to accomplish before a December expiration. Overall, bidders focused on 4G bandwidth in order to grow more high-speed services.
- The size of the auction raised eyebrows, and Idea said it would take advantage of a government-offered deferred payment.
- In a reflection of the recent U.S. wireless auction, Bharti Airtel complained about the auction format: "We hope that in future auctions, the government will make available adequate spectrum by securing it from agencies and operators who are underutilizing this vital resource," said the company's regional CEO Gopal Vittal.
- Profitability is on the rise among Indian carriers, with 120M smartphone users in country and sliding handset prices expected to fuel further subscriber growth.
- Fitch has downgraded Greece's long-term foreign and local currency issuer ratings, as well as its senior unsecured foreign and local currency bond ratings, to CCC (substantial credit risk, with a real possibility of default) from B (highly speculative).
- Fitch: "Lack of market access, uncertain prospects of timely disbursement from official institutions, and tight liquidity conditions in the domestic banking sector have put extreme pressure on Greek government funding. We expect that the government will survive the current liquidity squeeze without running arrears on debt obligations, but the heightened risks have led us to downgrade the ratings ... The damage to investor, consumer, and depositor confidence has almost certainly derailed Greece's incipient economic recovery. The damage will take time to repair even if prospects for a successful programme completion improve over the coming days or weeks."
- ETF: GREK
- Previously: Greek bank deposits plunge further
- Previously: Deutsche: Greece could default as early as April 9
- European equity funds took in another $6B of inflows in the week ended March 25, according to EPFR Global, while Japanese funds brought in $2B.
- U.S. equity funds, meanwhile, saw outflows of $8B, with Q1 earnings season about on tap, and as investors handicap the timing of the first Fed rate hike (vs. easing in Europe and Japan).
- ETFs: VGK, FEZ, IEV, HEDJ, EPV, EZU, FEU, FEP, UPV, EURL, ADRU, FEEU, DBEU, IEUR, FIEU, ESTX, HEZU, SBEU, DBEZ, FEUZ
- Previously: Money pours into European stocks (March 24)
- Shares of Manchester United (MANU +2.9%) trade higher as the soccer club puts itself in a strong position to be playing in European competition next year.
- The Red Devils are in 4th place in the English Premier League which would qualify it for the Champions League, and even a 5th place finish puts into the Europa League.
- Broadcast revenue and matchday revenue have been off this year at the parent company due to the club's Europe league exclusion.
- Emerging markets equity funds saw $2.4B in outflows for the week ended March 25, led by $2.37B exiting China A-share ETFs.
- Investors could be cashing in their chips after nice runs year-to-date, but there's also the widening spread between valuations in Shanghai and Hong Kong - the Hang Seng China AH Premium Index is at 136.47, i.e. Shanghai shares are 36% more expensive.
- YTD, the Deutsche China A-Shares Fund (NYSEARCA:ASHR) is up 8.6%, the MarketVectors China ETF (NYSEARCA:PEK) is up 11.2%, the KraneShares MSCI China A Share ETF (NYSEARCA:KBA) is up 10.9%. In comparison, the iShares China Large-Cap ETF (NYSEARCA:FXI) is ahead just 2%, and the iShares MSCI China ETF (NYSEARCA:MCHI) 3.7%.
- Source: Barron's Shuli Ren
- Previously: Shanghai premium grows despite Hong Kong connect (March 25)
- ETFs: FXI, EWH, PGJ, YINN, GXC, FXP, ASHR, YANG, MCHI, PEK, XPP, YAO, YXI, CHXF, FCA, CN, FCHI, ASHS, CNXT, CHNA, KBA, FHK, AFTY
- Mercedes-Benz (OTCPK:DDAIF) plans to introduce its first pickup model by 2020.
- The automaker will target Europe, South Africa, and Latin America before deciding if it will roll out the Mercedes pickup in the U.S. where the F-150, Silverado, and Ram models are firmly entrenched.
- YTD Mercedes-Benz sales in the U.S. are +6.0% through the end of February.
- Lower oil prices and subdued consumer demand have again pushed Japan to the brink of deflation, underscoring the difficulties faced by policy makers to revive the world’s third-largest economy through its ¥80T a year stimulus program.
- Japanese core consumer price inflation, which includes energy prices but excludes food, fell to zero Y/Y in February, far below the 2% target the central bank had aimed to achieve by this spring.
- The Nikkei Composite Index dropped 1% on the news, falling to 19,286.
- ETFs: DXJ, EWJ, DFJ, NKY, DBJP, EZJ, EWV, JPNL, DXJS, SCJ, JSC, ITF, JPP, HEWJ, FJP, QJPN, JPMV, DXJT, DXJR, DXJH, DXJC, DXJF
- South Korea hopes its infrastructure companies will benefit from the country joining the China-backed Asian Infrastructure Investment Bank, its finance ministry said on Friday.
- The countries share close trading ties: China is South Korea's biggest trading partner and the two nations are set to sign a free trade agreement in the first half of this year.
- Seoul announced yesterday it would join the AIIB as a founding member, the latest U.S. ally to do so despite Washington's warnings.
Thursday, March 26, 2015
4:07 PM| Comment!
- The fallout in the energy sector thanks to oil's steep decline is no secret, but beyond reduced headcounts and spending in the oil patch, says Nomura, are hits to related industries like construction and engineering.
- While banks have low direct exposure to the oil sector, there's indirect exposure through things like mortgage-lending in Alberta.
- Then there's the impact of the oil shock on the investment portfolios of Canadian households, says Nomura, estimating 25% of household wealth is linked to domestic stocks, and 25% of that is energy-related. Canada's stocks have already been underperformers this year and should things worsen further, it could squeeze consumer spending.
- ETFs: EWC, FXC, CNDA, EWCS, FCAN, QCAN
- The unemployment rate rose to 5.9% in February vs. the 5.7% expected by economists. This as the central bank upped its inflation forecast for 2015 to 7.9% from 6.1% previously. The bank sees inflation falling to 4.9% in 2016 and 4.7% in 2017, but both are still above the 4.5% target.
- The Bovespa is lower by 2.4%.
- EWZ -1.9%
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Roughly €8B exited the banking system in February, bringing total deposits to €152.4B, the lowest level since June 2005. Over the last three month period, about €25B in deposits has been pulled out amid fears of capital controls or an exit from EMU.
- In the meantime, the government is rushing to put together a list of promised reforms necessary to secure more creditor cash to keep paying bills, and the ECB yesterday boosted the amount of money Greek banks can borrow under the ELA to €71.1B from €69.8B.
- Source: WSJ
- GREK -1.4%, NBG -3.7%
- "The underlying factors driving this trend [lower] are still there," says Marvin Barth, European head of FX strategy at the bank, noting the EU's large output gap has gone nowhere, thus depressing return on capital, especially when compared to the U.S.
- He also takes note of the ECB's commitment to hold rates near zero as facilitating the euro's (NYSEARCA:FXE) use as a funding currency, though the borrowing is not being used to invest in the European economy.
- Barclays moves up its forecast for euro/dollar parity by three months to Q3 of this year.
- The euro's lower by 0.4% today to $1.0920.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
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