Global ETF News Older than One Year
Why ESG investing makes fund managers more money
July 8, 2020--In recent years, some investors have felt so irritated by the pious tone of the environment, social and governance sector they have joked that the ESG acronym should stand for "eye-roll, sneer and groan".
Such laughter is looking hollow now.
Among the many long-held assumptions turned upside down by Covid-19 is the notion held by many investors that ESG investing implies lower returns. Instead, 2020 suggests that virtue pays.
Consider the first four months of this year, when Covid-19 caused global markets to swoon. Over this period, the S&P 500 ESG index, which tracks big US companies with high ESG ratings, beat the normal S&P index by 0.6 per cent.
Source: FT.com
Negative interest rates can be a doom loop for pension investors
July 8, 2020--Fixed income is turning into fixed expense for those who seek haven assets for capital conservation
"On the whole, negative interest rates, no ...not an area I would want to go to,” said Bank of England governor Andrew Bailey to members of the UK parliament in March. Two months later Britain sold a government bond with a negative yield for the first time, as Covid-19 created the dystopian reality of deserted airports and traffic-free highways.
Source: FT.com
Basel Committee publishes final revisions to the credit valuation adjustment risk framework
July 8, 2020--The Basel Committee on Banking Supervision today published an updated standard for the regulatory capital treatment of credit valuation adjustment (CVA) risk for derivatives and securities financing transactions.
The revisions for the regulatory capital treatment of CVA risk include:
recalibrated risk weights;
different treatment of certain client cleared derivatives; and
an overall recalibration of the standardised and basic approach.
In November 2019 the Committee consulted on a set of targeted, final revisions to the CVA risk framework published in December 2017. The changes finalised today bring the revised CVA risk framework into alignment with the market risk framework.
Source: BIS
Implications of financial market development for financial stability in emerging market economies
July 7, 2020--Note submitted to the G20 International Financial Architecture Working Group
Introduction
Over the past two decades, financial markets in emerging market economies (EMEs) have grown bigger, broader and more liquid. Their development has strengthened the financial system's overall resilience, not least by helping EMEs realise the benefits of capital flows while addressing the challenges associated with their volatility.
The expansion of local currency bond markets in particular has enabled governments to borrow in their own currency rather than foreign ones, thus reducing the currency mismatches that exacerbated earlier EME crises. That said, financial market development has altered rather than eliminated EMEs’ vulnerability to large swings in capital flows and exchange rates. The changed nature of EMEs' vulnerability was forcefully exposed in early 2020, when the Covid-19 outbreak sparked a global retreat from risk. Portfolio rebalancing by investors led to sharp currency depreciations, which amplified portfolio outflows and falls in EME asset prices.
Source: BIS
The Long Economic Hangover of Pandemics-History shows COVID-19's economic fallout may be with us for decades
July 7, 2020--The COVID-19 pandemic's toll on economic activity in recent months is only the beginning of the story. While the rapid and unprecedented collapse of production, trade, and employment may be reversed as the pandemic eases, historical data suggest that long-term economic consequences could persist for a generation or more.
Among these are a prolonged period of depressed real interest rates-akin to secular stagnation-that may linger for two decades or more. Still,one piece of good news is that these sustained periods of low borrowing costs are associated with higher real wages and create ample room for governments to finance stimulus measures to counteract economic damage caused by the pandemic.
Source: IMF
Cboe Global Markets Reports June 2020 Trading Volume
July 6, 2020--Options ADV up 50 percent, U.S. Equities ADV up 83 percent and Global FX up 5 percent over June 2019
Cboe's four options exchanges combined set a new single day volume record with more than 16 million contracts traded
Cboe EDGX Options Exchange monthly ADV of more than one million contracts a new all-time high
Cboe EDGX Equities Exchange new monthly ADV record with more than 431 million shares traded per day
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world's largest exchange holding companies, today reported June monthly trading volume.
The data sheet contains an overview of June and year-to-date trading statistics and market share by business segment, volume in select index products, and RPC, which is reported on a one-month lag, across business lines.
Source: Cboe Global Markets, Inc.
Bassanese Bites: Range trade
Equities bounced and the $US weakened, though bond yields held remarkably steady and gold also held up well. In terms of data, June readings on U.S. manufacturing, consumer confidence and employment were all better than expected, and May existing home sales also surged back after sharp falls in March and April.
Source: betashares.com.au
Credible emerging market central banks could embrace quantitative easing to fight COVID-19
This column argues that credible emerging market central banks could rely on purchases of local currency government bonds to support the needed health and welfare expenditures and fiscal stimulus. In countries with flexible exchange rate regimes and well-anchored inflation expectations, such quantitative easing would help ease financial conditions, while minimising the risks of large depreciations and spiralling inflation.
Source: bruegel.org
Basel Committee reports on Basel III implementation progress
The Basel Committee on Banking Supervision has today issued the Eighteenth progress report on adoption of the Basel regulatory framework.
The progress report sets out the adoption status of Basel III standards for each Committee member jurisdiction as of end-May 2020. It includes the Basel III post-crisis reforms published by the Committee in December 2017 and the finalised minimum capital requirements for market risk in January 2019. According to the announcement made by Governors and Heads of Supervision in March 2020, these reforms will take effect from 1 January 2023.
Source: BIS
OECD annual inflation slowed to 0.7% in May 2020, driven by energy prices; food prices inflation continued to rise
Energy prices declined by a further (minus) 13.4% in May, following the contraction of (minus) 12.2% in April. By contrast, food price inflation picked up to 4.5%, compared with 4.2% in April, the largest annual increase since December 2011. Excluding food and energy, OECD inflation was stable at 1.6% in May 2020.
Source: OECD
July 6, 2020-Equities remain range bound as the virus spoils the re-opening party.
Global markets
Global equities managed to shrug off mounting U.S. virus concerns last week and instead focus on better than expected 're-opening' economic data. Of course, the Fed chipped in with further "whatever it takes" supportive comments, and another drug company announced early promising vaccine results.
July 6, 2020--Credible emerging market central banks could embrace quantitative easing to fight COVID-19
Emerging economies are fighting COVID-19 and the economic sudden stop imposed by the containment and lockdown policies, in the same way as advanced economies. However, emerging markets also face large and rapid capital outflows as a result of the pandemic.
July 6, 2020--Report sets out the adoption status of Basel III standards in member jurisdictions as of end-May 2020
Report shows further progress in implementing these standards since previous report in October 2019
Committee will continue to closely monitor the implementation of Basel III reforms.
July 2, 2020--May 2020 OECD annual inflation slowed to 0.7% in May 2020, driven by energy prices; food prices inflation continued to rise
Annual inflation in the OECD area slowed to 0.7% in May 2020, compared with 0.9% in April and 1.7% in March, on the back of the largest fall in energy prices since September 2009.
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