Global ETF News Older than One Year
IOSCO Consults on Certain Internal Controls and Procedures of the Credit Rating Agencies
MAy 25, 2012--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a consultation report, Credit Rating Agencies: Internal Controls Designed to Ensure the Integrity of the Credit Rating Process and Procedures to Manage Conflicts of Interest.
This Consultation Report describes certain internal controls and procedures that credit rating agencies (CRAs) use to promote the integrity of the credit rating process and address conflicts of interest, with a view to promoting a better understanding of these practices. The views of stakeholders and CRAs on these questions will assist the IOSCO with further analysis of the internal controls and procedures used by CRAs.
This Consultation Report is based on an IOSCO review of CRAs that focused on the internal controls established by CRAs to enhance the integrity of the credit rating process and on the procedures to manage conflicts of interest. The review was motivated by the role of CRAs in the 2008 financial crisis, which raised concerns about the quality of credit ratings and credit rating methodologies, the timeliness of adjustments to credit ratings, and, more generally, the integrity of the credit rating process. The 2008 financial crisis also raised concerns about how conflicts of interest are being managed by CRAs.
Source: IOSCO
Invasion of covered bonds stalls at US gate
May 25, 2012--Frederick the Great, the 18th century king of Prussia and famed general, never set foot on US soil. But now, more than 200 years after his rule, one of the former European sovereign's most pervasive inventions could be on the brink of a new invasion into the US.
The humble covered bond, a centuries-old mainstay of European debt markets, made major inroads into the US market this week after the Securities and Exchange Commission gave the green light for a $12bn covered bond programme to be sold by Royal Bank of Canada as “registered securities”.
Source: FT.com
Design policies to ensure growth is socially inclusive, says OECD-World Bank report
May 24, 2012--Economic policy should be better designed to bring about more inclusive growth, ensuring that the benefits of increased prosperity are shared more evenly across society, according to a new report from the OECD and the World Bank.
Promoting Inclusive Growth: Challenges and Policies assesses the options countries have as they seek to make growth not only stronger, but also more inclusive. Standard measures of economic expansion do not fully take into account how the benefits of growth are shared across society and affect affect poverty and income distribution.
"Strong growth is not necessarily inclusive, in that all members of society usually don’t benefit to the same degree," said OECD Chief Economist Pier Carlo Padoan. “The challenge facing governments in the age of Occupy Wall Street is to do more to ensure that economic growth leads to positive change in living standards and well-being across all social groups,” Mr Padoan said.
view the Promoting inclusive growth: Challenges and policies
Source: OECD
IMF Working paper-Optimal Liquidity and Economic Stability
May 24, 2012--Summary: Monetary aggregates are now much less used as policy instruments as identifying the right measure has become difficult and interest rate transmission has worked well in an increasingly complex financial system. In this process, little attention was paid to the potential spillover of excess liquidity.
This paper suggests a notional level of "optimal" liquidity beyond which asset prices will start to rise faster than the GDP deflator, thereby creating a gap between the face value and the real purchasing value of financial assets and widen the wedge in income between those with capital stock and those living on salaries. Such divergence will eventually lead to an abrupt and disorderly adjustment of the asset value, with repercussions on the real sector.
view the IMF Working paper-IMF Working paper-Optimal Liquidity and Economic Stability
Source: IMF
Four steps to finding the right ETF-Deborah Fuhr
May 24, 2012--Increasingly investors are asking how to select an ETF, given the breadth and depth of products available in the market. The European exchange traded funds (ETF) industry had 1,295 ETFs, with 4,579 listings, assets of $291 billion, from 37 providers on 21 exchanges, based on the recent ETFGI monthly industry report.
The criteria investors use to select ETFs was analysed in the recent EDHEC-Risk Institute study, covering 174 institutional investment managers and private wealth managers based in Europe who already use ETFs.
It is important to remember that the majority of respondents said they primarily use ETFs to gain broad market exposures, while over half use ETFs for buy-and-hold investments and to implement dynamic asset allocation.
The findings indicate that users of ETFs go through a four-step decision-making process when selecting an ETF.
Source: CityWire
World Bank Database Shows Export Markets Are Dominated by Big Firms
Difficult for Newcomers to Survive
May 24, 2012-A few large companies dominate export markets in developing and developed countries, with the top one percent often accounting for more than half-sometimes nearly 80 percent - of total exports, according to a new World Bank database with a wealth of details on exporting firms.
The new Exporter Dynamics Database offers the most comprehensive picture yet of exporter characteristics and dynamics – a firm’s entry, exit and survival in the export market – in 45 developed and developing countries. The database mainly covers 2003-2009, though data from the 1990s are also available for some countries.
A key finding is that the export market is difficult to tackle for newcomers, with 57 percent of companies on average – and two-thirds in Africa – quitting within a year of entering the export market.
view the Exporter Dynamics Database -Overview
Source: World Bank
The World Bank and Gender
May 24, 2012--Overview
In September 2011, the World Bank launched the World Development Report 2012: Gender Equality and Development (WDR 2012), the first of the series to focus on gender. WDR 2012 highlighted impressive progress in educational enrollment, life expectancy, and economic opportunities, but also pointed out that these gains have not been universal.
In many parts of the world, too many women are still dying in child-birth, or, at alarming rates, not being born at all. Women continue to lack voice in the household and the ability to participate in decisions that affect them, their families, and their societies; and too often, their economic opportunities remain very constrained.
Source: World Bank
El Ezz Aldekhela Steel-Alexandria to Join Dow Jones EGX Egypt Titans 20 Index
Banque Centrale Populaire S.A. Added to Dow Jones Africa Titans 50 Index
Korea Exchange Bank Added to Dow Jones Emerging Markets Select Dividend Index
Shin Corporation PCL of Thailand Added to Dow Jones Emerging Markets Technology Titans 30 Index
May 24, 2012--Dow Jones Indexes, a leading global index provider, today announced Egypt's Egyptian Company for Mobile Services will be removed from three of Dow Jones Indexes' market gauges due to its acquisition by MT Telecom SCRL of France.
India's Patni Computer Systems Limited will be removed from the Dow Jones Emerging Markets Technology Titans 30 Index due to its acquisition by iGate Corporation of the United States.
Dow Jones EGX Egypt Titans 20 Index: El Ezz Aldekhela Steel-Alexandria replaces Egyptian Company for Mobile Services;
Dow Jones Africa Titans 50 Index: Banque Centrale Populaire S.A. replaces Egyptian Company for Mobile Services; and
Source: Dow Jones Indexes
Greece Raises Concerns over Global Economy
May 23, 2012--Highlights
PBoC's RRR cut fails to boost sentiment.
Hong Kong and China stock markets extended losses when the intensifying European debt woes and falling foreign investment in China overshadowed the reserve requirement rate (RRR) cut announcement.
The People’s Bank of China cut the RRR by 50 bps, effective May 18. However, the market’s response towards the third cut in six months was muted as talks on a coalition government and the eventual failure in Greece overwhelmed the market.
India
Markets hit by European debt woes.
The Indian equity market trended lower last week as the worsening concerns over the Europe debt crisis negatively affected the Asia markets.
Investors’ risk appetite decreased and moved investments from emerging markets to the US dollar, which is perceived to be a safe harbor.
Brazil
Further policy easing likely.
The equity market sell-off intensified in the week ending May 17th to erase YTD gains. Brazilian output data reinforced the dual speed dynamic within the local economy. Retail sales rose in March, whilst the GDP proxy (IBC-Br) missed expectations, paving the way for further monetary easing in the near term.
Russia
EM equities' compelling valuation.
Concerns regarding the potential exit of Greece from the Eurozone have triggered a spike in risk aversion, causing significant outflows from risk assets into perceived safe havens.
Spanish 10-year yields have risen to 6.22%. News that the ECB has suspended lending to selected Greek banks has raised fears over capital flight from the country’s financial system.
Source: Mirae Asset
IMF Working paper-The Volatility Trap: Precautionary Saving, Investment, and Aggregate Risk
May 23, 2012--Summary: We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth.
High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.
Source: IMF
