Global ETF News Older than One Year
Historic silver price benchmark bites the dust as banks pull out
Deutsche Bank says postpones resignation from silver fix
Alternatives being sought, customers surprised by its collapse
May 14, 2014--The 117-year old London silver price benchmark-or fix - will cease on Aug. 14, its operator said, as regulatory scrutiny of price-setting intensifies across markets.
The fix is set once a day by banks getting together via telephone to work out a price, based on deals between their clients. It is used by producers, consumers and investors who use it to base contracts on.
Source: Reuters
IMF paper-Bank Size and Systemic Risk
May 14, 2014--Summary: The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or "too big to fail" subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk.
The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on "too big to fail" subsidies, and its policy message is in line with this earlier work.
view the IMF paper-Bank Size and Systemic Risk
Source: IMF
ETFs firms go back to the well for product launches
May 13, 2014--Exchange traded fund providers are treading well-worn paths to success in their 2014 product launches.
Many of the 57 exchange traded products launched in the first four months of this year are variations on several themes that emerged last year: currency-hedged global equity, short-term or less interest rate-sensitive segments of fixed-income, and alternative-beta strategies.
Source: FT.com
OPEC Monthly Oil Report May 2014
May 13, 2014--Oil market highlights
Crude Oil Price Movements
The OPEC Reference Basket in April increased 12¢ to $104.27/b, amid marginal improvements in most component values. Crude prices were supported by firmer refining margins, ongoing supply outages, and the return of some refineries from maintenance. On
average, Nymex WTI gained $1.53 to $102.03/b and ICE Brent increased 34¢ to $108.09/b.
The Brent-WTI spread ended the month with an average of around $6.05/b, the narrowest since September 2013.
World Economy
World economic growth in 2014 remains at 3.4%, following growth of 2.9% in 2013. The
OECD growth forecast remains at 2.0%, with the US revised down and the Euro-zone slightly higher. China’s growth forecast remains at 7.5% and India’s at 5.6%. The main lift
for 2014 growth is seen coming from OECD economies, while emerging markets are slowing. With the most recent weakness in some major OECD economies- mainly the US
and Japan-the risk to the global growth forecast is seen currently skewed slightly to the
downside.
Source: OPEC
ETF Securities-Precious Metals Weekly-Gold Recovers but Remains Within an Increasingly Narrow Range
May 12, 2014--Gold continues to see safe haven buying as Ukraine risks escalate. The gold price and
ETP flows rose last week as the situation in the Ukraine continued to escalate after brief hopes Russia might become more conciliatory. Gold's price gains were limited by a stronger US Dollar, which rallied on the back of strong US economic data and rising
expectations the ECB may be forced to quantitative ease to offset deflation.
While gold appears constrained in a relatively narrow range for the near term, any escalation in geopolitical risk is likely to keep investors positioned defensively and support the gold price.
Silver, the hybrid metal, is looking increasingly attractive. China is playing an increasingly important role in the silver market. Not only is China now the biggest silver user, it is also the dominant player in the futures market. In 2013, silver futures volume on the Shanghai Futures Exchange surpassed that of the COMEX/CME. The silver price has remained in a narrowing range, with 30-day volatility dropping to the lowest level in over a decade. Historically a sharp drop in volatility has presaged a strong price move. With gold the gold price stabilising, industrial demand for silver on the rise, futures net longs low by historical standards and the gold-silver ratios the highest it has been in four years, we believe that the next significant move is likely to be up.
Source: ETF Securities
Asset Managers Adjust to HFT
May 12, 2014--Hedge funds and other asset managers are showing continuing interest in the way that orders get executed, which can make the difference between a profitable trade and an unprofitable one.
"One of the most dramatic evolutions we've seen is involvement by the buy side," said Ronan Ryan, chief strategy officer at IEX Group. "Many were involved before, but post-'Flash Crash' a large majority got involved. They're asking more questions, and they’re taking more control of their order flow based on the answers they are receiving and researching.
Source: Markets Media
DECPG Weekly Economic Brief
May 9, 2014--April readings of the Purchasing Managers' Index (PMI) show factory output in the U.S. and euro area progressing at a rapid pace,
plummeting in Japan as a result of a consumption tax hike, and weakening in developing countries. Declining activity in Ukraine and Russia
is impacting growth projections for Europe and Central Asia this year. More serious consequences are possible if confidence deteriorates in
the face of worsening conditions on the ground.
Capital flows to developing countries remained strong in April, with developing countries issuing a record $42 billion in new bonds, supported by favorable global financing conditions. The expansion of global manufacturing activity continued in April, despite further signs of slowdown in developing countries and contraction in Japan. Based on April PMI data, industrial activity was firmly in expansion mode in the U.S. and the euro area, but plunged in Japan as both output and new orders were driven sharply down by the dampening impact of a consumption tax hike. In developing countries, slowing activity was broad-based, but more pronounced in South Africa - where strikes in platinum mines have compounded underlying weakness in manufacturing- and Brazil -where deteriorating domestic demand conditions and supply constraints led to declining output after four months of subdued growth. China’s PMI was broadly stable at a level consistent with sub-par industrial activity at the start of the second quarter. A number of countries bucked the trend, with strong export orders in Indonesia and Vietnam leading to increasing confidence in those two countries. PMIs in Mexico, India and Turkey were also broadly stable and continued to indicate modest growth.
Source: World Bank
MSCI May Semi-Annual Index Review Announcement Scheduled for May 14, 2014
May 7, 2014--MSCI Inc., a leading provider of investment decision support tools worldwide, including indexes, portfolio risk and performance analytics and ESG data and research, will announce the results of the May 2014 Semi-Annual Index Review for the MSCI Equity Indexes-including the MSCI Global Standard, MSCI Global Small Cap and MSCI Micro Cap Indexes, the MSCI Global Value and Growth Indexes, the MSCI Frontier Markets and MSCI Frontier Markets Small Cap Indexes
, the MSCI Global Islamic and MSCI Global Islamic Small Cap Indexes, the MSCI Pan-Euro and MSCI Euro Indexes, the MSCI US Equity Indexes, the MSCI US REIT Index, and the MSCI China A Indexes. All changes will be made as of the close of May 30, 2014.
Source: MSCI
Global economy strengthening but significant risks remain, says OECD in latest Economic Outlook
May 6, 2014--The global economy will strengthen over the coming two years, but urgent action is still required to further reduce unemployment and address other legacies from the crisis, according to the OECD's latest Economic Outlook.
"Advanced economies are gaining momentum and driving the pick-up in global growth, while once-stalled cylinders of the economic engine, like investment and trade, are starting to fire again," OECD Secretary-General Angel Gurría said while launching the Outlook during the Organisation's annual Ministerial Council Meeting and Forum in Paris.
"But with the world still facing persistently high unemployment, countries must do more to enhance resilience, boost inclusiveness and strengthen job creation.
view the OECD Economic Outlook, Volume 2014 Issue 1
Source: OECD
Research Paper-Do ETFs Increase Stock Volatility?
May 6, 2014--Abstract-April 2014
A study of whether exchange traded funds (ETFs)-an asset of increasing importance-impact the volatility of their underlying stocks. Using identification strategies based on the mechanical variation in ETF ownership, we present evidence that stocks owned by ETFs exhibit significantly higher intraday and daily volatility.
We estimate that an increase of one standard deviation in ETF ownership is associated with an increase of 16% in daily stock volatility. The driving channel appears to be arbitrage activity between ETFs and the underlying stocks. Consistent with this view, the effects are stronger for stocks with lower bid-ask spread and lending fees. Finally, the evidence that ETF ownership increases stock turnover suggests that ETF arbitrage adds a new layer of trading to the underlying securities.
view the research paper-Do ETFs Increase Volatility?
Source: www.wharton.upenn.edu
Francesco Franzoni, University of Lugano and the Swiss Finance Institute
Rabih Moussawi, Wharton Research Data Services, The Wharton School, University of Pennsylvania
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