Nasdaq suspends currency-trading plans while rivals race ahead

Nasdaq Inc has put its foreign-exchange ambitions on hold because of a lack of demand from customers, even as its rivals spent about US$1.2 billion last year on platforms to trade the world's biggest asset class.

PHOTO: REUTERS

JAN 11, 201611:15 PM

[NEW YORK] Nasdaq Inc has put its foreign-exchange ambitions on hold because of a lack of demand from customers, even as its rivals spent about US$1.2 billion last year on platforms to trade the world's biggest asset class.

"We're not currently looking at any FX platforms and we're putting the FX initiative on hold," said Magnus Billing, senior vice-president and head of Nordic fixed-income and Baltic markets. "We came to the point that we don't feel customer demand is sufficient for us to launch any market in the foreseeable future."

Nasdaq was among the final bidders for 360T or Hotspot FX, currency trading venues bought by Deutsche Boerse AG and Bats Global Markets Inc. last year, according to people familiar with those deals. The company's efforts to enter currency markets have focused on derivatives.

Exchange companies are eyeing the bank-dominated foreign- exchange market, following a series of fines stemming from allegations of market rigging. Currency traders are also attracting greater scrutiny because of a practice known as "last look," which gives them the right to back out of trades.

The market was roiled a year ago when the Swiss National Bank jettisoned its price cap on the franc. Some banks sought to reduce their losses by trying to renege on transactions.

"Some participants in the FX market feel that it is moving toward more transparent trading, perhaps to more exchange look- alike trading," Billing said. "There are a number of exchanges or marketplaces seeing those trends, and that obviously is attracting interest." Nasdaq's decision to suspend its currency-trading initiative was earlier reported by Profit & Loss, a trade magazine.

Nasdaq's revenue from currency trading and clearing was minor. Sales from fixed income, currencies and commodities trading and clearing fell to US$23 million in the third quarter from US$30 million a year earlier, the exchange operator said in an earnings presentation.  David Holcombe, who was head of Nasdaq's foreign-exchange initiative, has left the company. Phil Harris, previously Nasdaq's head of FX initiatives and strategy, joined ICAP Plc last year.

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Temasek fund invests undisclosed sum in homegrown store-fixtures firm

By

Jamie Lee leejamie@sph.com.sg@JamieLeeBT

Temasek Holdings' Heliconia Capital Management has taken a "substantial minority equity position" in a Singapore store-fixtures company. 

PHOTO: BLOOMBERG

JAN 11, 20164:01 PM

TEMASEK Holdings' Heliconia Capital Management has taken a "substantial minority equity position" in a Singapore store-fixtures company.

Futuristic Store Fixtures Pte Ltd on Monday said it has secured an undisclosed investment sum from Heliconia.

The money will be used to expand and upgrade the company's manufacturing facilities in Selangor, Malaysia and in Kunshan, China. Futuristic will also set aside a portion of the funds for strategic partnerships or acquisitions in the related space to expand its regional reach, it added.

The company now works with about 40 global brands that include Victoria's Secret. More than 60 per cent of its revenue is from North America and it is expanding into China and Asia, said Futuristic's chief executive officer David Low in a press statement.

Derek Lau, chief executive officer of Heliconia, said that Futuristic is seen as a potential proxy to consumer retail, rather than a traditional fixtures company.

    
 

Morgan Stanley sees US$20 a barrel oil on US dollar appreciation

A rapid appreciation of the US dollar may send Brent oil as low as US$20 a barrel, according to Morgan Stanley. 

PHOTO: REUTERS

JAN 11, 20164:51 PM

[HONG KONG] A rapid appreciation of the US dollar may send Brent oil as low as US$20 a barrel, according to Morgan Stanley.

Oil is particularly leveraged to the dollar and may fall between 10 to 25 per cent if the currency gains 5 per cent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan 11. A global glut may have pushed oil prices under US$60 a barrel, but the difference between US$35 and US$55 is primarily the US dollar, according to the report.

"Given the continued US dollar appreciation, US$20-US$25 oil price scenarios are possible simply due to currency," the analysts wrote in the report. "The US dollar and non- fundamental factors continue to drive oil prices."

Crude tumbled last week on volatility in Chinese markets after the country sought to quell losses in equities and stabilize its currency. A 3.2 per cent increase in the US dollar - as implied by a possible 15 per cent yuan devaluation - - may drive oil down 6 to 15 per cent, which could put crude in the high US$20s, Morgan Stanley said. If other currencies move as well, the shift by both the dollar and oil could be even greater, according to the report.

 

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Brent crude closed at US$33.55 a barrel on the London-based ICE Futures Europe exchange on Friday, the lowest settlement since June 2004. Prices extended their declines Monday, losing 2.7 per cent to US$32.64 at 8:10 am in London.

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Consumer spending plans drop amid pessimism over wages, Fed says

JAN 12, 201612:16 AM

[NEW YORK] US consumers reduced their expectations for spending over the next year to the weakest since at least mid-2013 as they grew more pessimistic about prospects for wage growth, a Federal Reserve Bank of New York survey showed.

The median respondent in the New York Fed's December Survey of Consumer Expectations predicted household spending would rise 2.9 per cent over the next year, marking the most tepid outlook in records going back to June 2013.

In December, the median respondent saw earnings growing 2 per cent over the next year, down from 2.5 per cent in November and the lowest level since May 2014. The monthly drop in expected earnings growth was largest in the survey's history. Median expected household income growth over the next year was 2.3 per cent, the lowest since July 2014.

The data release follows a Dec. 15-16 meeting at which Fed Chair Janet Yellen and her colleagues on the policy-setting Federal Open Market Committee raised the benchmark federal funds rate from near zero, where it had been held since December 2008.

Expected inflation one year ahead fell to a new survey low of 2.5 per cent in December, while expected inflation three years ahead rebounded to 2.8 per cent, from November's low of 2.7 per cent.

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China's cabinet to have greater financial supervision role: source

JAN 12, 201612:19 AM

[BEIJING] China's cabinet is set to take on a bigger role in overseeing financial markets, as perceived missteps by existing regulators fuel concerns globally that Beijing may lose its grip on economic policy with growth at its slowest in a quarter of a century.

The State Council has set up a working group, headed by deputy secretary-general Xiao Jie, a former vice finance minister and tax chief, to prepare for upgrading the cabinet's financial department to bureau level, said a source close to the country's leadership.

After last summer's stock market crash was blamed in part on poor coordination between financial regulators, sources said China was considering merging its banking, insurance and securities watchdogs into a single 'super-commission'.

This month's renewed stock market turmoil has made it more urgent to unify China's regulatory system to restore confidence in markets and ward off financial risks.

 

"The leadership is very unhappy about the stock market crisis," said the source. "A merger of the regulators may take years to complete." Thus the move towards an interim 'agency', with the promotion of the cabinet's financial department.

Officials at the cabinet were not immediately available for comment.

Bloomberg earlier reported that the cabinet has created a new department, within its general office, to coordinate between the financial and economic regulators, with Agricultural Bank of China Vice President Li Zhenjiang in charge of daily operations.

Giving the cabinet department more oversight now would give Beijing more time to finalise any merger of existing regulatory authorities, which could be sensitive in terms of potential job losses and internal rifts between powerful state agencies.

The central bank, too, is trying to increase its say in supervising China's financial markets, adding to the uncertainties over possible regulatory reforms, sources said.

The People's Bank of China (PBOC) said last month it will introduce a new system to assess macro-prudential risks in the financial system this year as banking assets become more diversified.

Last week's renewed market turmoil highlighted some of the issues with having various financial market regulators in China.

In a surprise move on Thursday, the People's Bank of China (PBOC) weakened its morning yuan guidance, allowing for the currency's biggest fall in five months. On the stock market, investors panicked, pushing down share prices and triggering new circuit breakers. The sell-off rippled across markets worldwide. The circuit breakers were later axed.

"It's hard to predict when reforms may start, but the central bank and the three regulators need to strengthen their communications and coordination," said an influential economist who advises China's parliament.

REUTERS

    
 

Why Singapore's central bank is unlikely to make another off-cycle policy move

JAN 11, 20165:42 PM

[SINGAPORE] Singapore's central bank may ease monetary policy outside its half yearly reviews if oil prices fall more sharply or China's economy takes a turn for the worse, but economists say a repeat of last January's surprise easing is unlikely for now.

Eight of nine analysts surveyed by Reuters from Jan 6 to Jan 11 said the Monetary Authority of Singapore (MAS) was not expected to change policy before its next review in April.

The MAS surprised investors last January, when it eased its exchange-rate based policy in an unscheduled statement, saying declining global oil prices had significantly changed the city-state's inflation outlook.

This time, the deflationary impact from sliding oil prices is expected to be less severe.

 

Brent crude oil prices slid about 23 per cent in the fourth quarter of 2015 compared with a 39 per cent slide in the same period of 2014. "There hasn't been that big shock that kind of requires the MAS to act," said Daniel Martin, an economist for Capital Economics.

That could change if there are clear signs of a further deterioration in China's economic growth momentum, he said. "Our view is that the most recent hard data out of China shows signs of stabilisation, but if we do start to see the opposite...then that would make the MAS much more nervous," Mr Martin said.

The yuan's recent slide has stirred renewed concern about the health of the world's second-largest economy and triggered turmoil in financial markets, but economists do not see this prompting any immediate MAS policy change.

Indeed, the MAS had held off from any off-cycle policy change after China's surprise yuan devaluation in August. "I think they will try to hold out," said Selena Ling, head of treasury and research strategy for OCBC Bank. "We will see. With each bout of volatility, obviously we are testing a little bit on the downside for the (Singapore dollar) NEER." Against a backdrop of low inflation and tepid global growth the MAS also eased policy at a scheduled review in October.

The central bank manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER). It can adjust the slope, mid-point or width of the band.

One potential complication for the central bank is that the Singapore dollar NEER may have dropped close to the bottom of the policy band this month, according to some estimates.

The possibility of another off-cycle policy easing seems high, given that the Singapore dollar NEER seems to have slipped close to the bottom of the policy band, said Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore. "In that case, I think they might shift to a policy of zero appreciation," Suzuki said, referring to a possible reduction in the slope of the Singapore dollar NEER policy band.

REUTERS