Even after rout, less than 10% of investors consider EM cheap: survey

Even after the steep decline that has rocked global markets this year, fewer than 10 per cent of investors consider emerging market-related assets cheap, according to a Barclays survey of more than 700 global investors

REUTERS

SEP 15, 20155:48 PM

[LONDON] Even after the steep decline that has rocked global markets this year, fewer than 10 per cent of investors consider emerging market-related assets cheap, according to a Barclays survey of more than 700 global investors.

Chinese stocks have plunged 40 per cent in the last three months, oil has sunk to its lowest in six years and many emerging market currencies have fallen to their weakest since the 1997-98 Asian crisis, some to their lowest on record.

But according to Barclays, more than half of the 716 global investors surveyed said these assets are still expensive, and fewer than 10 per cent said they are cheap.

"Most investors expect further downside in China-linked assets," Barclays said in a survey published late on Monday.

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Forty-five per cent of those polled said the August selloff was part of an ongoing correction in China-related assets, just over a quarter think the correction will be "short-lived and healthy", while 30 per cent say it marks the start of a wider malaise in risky assets.

More than 40 per cent of investors said weak growth in China and emerging markets is the biggest risk for global financial markets over the next 12 months, and almost 40 per cent think the economic and financial risks in China are to the downside.

The "vast majority" of respondents reckon Chinese growth statistics are probably overstated. Of those, more than 60 per cent say by 2 percentage points or more.

Close to half of those surveyed attach at least a 25 per cent probability to China experiencing some sort of financial accident over the next two years, up from a third of respondents earlier this year.

Globally, deflation is now more of a risk than inflation, according to 75 per cent of those surveyed. And after several quarters of an upbeat growth outlook, the upside and downside risks are now equal, the survey said.

Despite the gloomier outlook, most investors remained generally bullish on equities, with 45 per cent saying they remained the best-performing asset class over the next three months.

REUTERS

      

Greece not a model for future bank rescues: SRB's Koenig

An upcoming rescue of Greek banks, set to be largely financed with public money, should not be seen as a template for the future because Greek lenders were taken "hostage" by a debt-laden government, the head of the euro zone's bank resolution body said on Tuesday. 

PHOTO: REUTERS

SEP 15, 20156:25 PM

[VIENNA] An upcoming rescue of Greek banks, set to be largely financed with public money, should not be seen as a template for the future because Greek lenders were taken "hostage" by a debt-laden government, the head of the euro zone's bank resolution body said on Tuesday.

Elke Koenig, chair of the Single Resolution Board, said future bank resolutions will follow new European rules, due to come into full force in January, which dictate that stakeholders in a bank, from shareholders to creditors and uninsured depositors, contribute to a rescue before public funds can be called on.

As part of a bailout package agreed last month, Greece is set to obtain 25 billion euros for plugging capital gaps at its banks - many of which are majority-owned by the state after a previous rescue.

The banks' senior bondholders will likely be "bailed in,"seeing the value of their investments written down, but depositors will be protected to avoid harming the wider economy, marking a deviation from the EU's Bank Recovery and Resolution Directive. "Greece has a sovereign financial crisis and, to some extent, the sovereign took the banks hostage," Mr Koenig told reporters in Vienna. "Therefore you now have fundamental restructuring and recapitalisation needs for the banking sector. The BRRD (Bank Recovery and Resolution Directive) is designed to solve the problem in a bank. So that's why I would caution against taking what we might see in the next months in Greece as the model for the future." The European Union estimates that Greece's four big banks will need between 10 billion euros (S$15.86 billion) and 25 billion euros to shore up their capital reserves, but the exact amount needed will depend on the results of ECB stress tests and asset-quality reviews.

The Single Resolution Board (SRB) was set up earlier this year to handle failing euro zone lenders. From January, Mr Koenig will decide how big a buffer of "bail-inable" bonds, known as MREL, banks on her watch must hold on top of their core capital buffers to tap in a crisis.

Diverging national rules on how MREL are defined have been a source of concern for investors.

Germany, for instance, has put forward a proposed law which effectively subordinates certain senior unsecured bonds to other senior debt, such as interbank and corporate deposits and money market instruments.

Koenig, the former head of Germany's financial watchdog, called for a unified European approach but praised the German proposal. "Of course I would prefer a single approach but so far I'm not seeing one emerging," Mr Koenig said. "We are hearing a lot of support for the German proposal, which is a smart way of dealing with the problem without requiring huge structural changes."

REUTERS

    
 

India's exports shrink for ninth straight month, fall 20.7% y/y in Aug

India's merchandise exports contracted for the ninth straight month in August, government data showed on Tuesday, marking a 20.66 per cent drop year-on-year because of continuing weak global demand. 

PHOTO: ST FILE

SEP 15, 20158:43 PM

[NEW DELHI] India's merchandise exports contracted for the ninth straight month in August, government data showed on Tuesday, marking a 20.66 per cent drop year-on-year because of continuing weak global demand.

The trade deficit marginally narrowed to $12.5 billion last month from US$12.8 billion in July, the data released by the Ministry of Commerce and Industry showed.

Imports fell 9.95 per cent from a year earlier to US$33.74 billion in August, while exports stood at $21.27 billion, the data showed.

REUTERS

Malaysia to help arrange for Swiss to interview witnesses in 1MDB probe

SEP 15, 201511:49 PM

[ZURICH] Switzerland's federal prosecutor said on Tuesday that Malaysia had agreed to arrange for Swiss investigators to interview witnesses in their investigation of alleged corruption and money laundering related to the Malaysian state-owned fund 1Malaysia Development Berhad (1MDB).

In a statement, Switzerland's Office of Attorney General said that its chief, Michael Lauber, met on Tuesday with his Malaysian counterpart, Tan Sri Dato Sri Mohamed Apandi Ali, to discuss "mutual cooperation" in the 1MDB case.

The statement said that the Swiss regarded Malaysian cooperation as crucial to their ongoing inquiry.

Mr Lauber is currently hosting a meeting in Zurich of the International Prosecutors' Association.

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The Swiss did not identify witnesses whose testimony they formally requested Malaysian authorities to arrange.

Mr Lauber's office said that it had already frozen assets "amounting to several tens of millions of US-dollars" in Swiss bank accounts in connection with its probe.

It also said that on Aug 14, it had opened criminal proceedings against two 1MDB officials and other unknown persons for corruption and suspected money laundering.

Investigations are based on two notifications of suspicious transactions flagged by Switzerland's anti-money laundering agency.

REUTERS