By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
(Corrects to say EI Sturdza is UK investment firm, not Swiss)
Commerzbank analyst Simon Quijano-Evans recently analysed credit ratings for emerging market countries and concluded that there is a strong tendency to "under-rate" emerging economies - that is they are generally rated lower than developed market "equals" that have similar profiles of debt, investment or reform. The reason, according to Quijano-Evans, is that ratings assessments tend to be "blurred by political risk which is difficult to quantify and is usually higher in the developing world compared with richer peers.
Many investors have greeted with enthusiasm India's plans to get its debt included in international indices such as those run by JPMorgan and Barclays. JPM's local debt indices, known as the GBI-EM, were tracked by almost $200 billion at the end of 2012. So even very small weightings in such indices will give India a welcome slice of investment from funds tracking them.
Being labelled an emerging-markets bank can be a mixed blessing. Standard Chartered’s shares have drifted in recent months as investors fret about growth, particularly in Asia. Yet while the bank is feeling the pinch in Korea and Southeast Asia, other markets are picking up the slack. Shareholders probably need to get used to Standard Chartered delivering a more varied performance.
This is a reference when the People's Bank of China makes big decisions.Difficulty in collating accurate data is perhaps not so surprising, given the rapid urbanisation of the world's second largest economy. Off-beat labour statistics (employing dissimilar methodology to the ILO) are partly skewed due to a large number of temporary registrants that slip the official statistics net. The solution? Jinny Lin at Standard Chartered, who thinks China's real GDP level is more likely around 5.5 percent, suggested this could be taken from the history books. Emperor Yongzheng, China's ruler in the late Qing dynasty, set up an independent body to look at data at the local level, and successfully stemmed tax evasion.
If local data is reliable enough, we should use local data.
What a difference a few months have made for Indian markets.
The rupee is 8 percent up from last summer's record lows. Foreigners have ploughed $17 billion into Indian stocks and bonds since Sept 2012 and foreign ownership of Indian shares is at a record high 22.7 percent, Morgan Stanley reckons. And all it has taken to change the mood has been the announcement of a few reforms (allowing foreign direct investment into retail, some fuel and rail price hikes and raising FDI limits in some sectors). A controversial double taxation law has been pushed back. The government has sold some stakes in state-run companies (it offloaded 10 percent of Oil India last week, netting $585 million). If the measures continue, the central bank may cut interest rates further.
By Aruna Viswanatha and Brett Wolf
WASHINGTON/ST. LOUIS, Sept. 5 (Thomson Reuters Accelus) - Benjamin Lawsky's surprise move against Standard Chartered in an Iran sanctions case may have stunned the banking world, but it is unlikely to expand the scope of a series of similar U.S. cases against European banks that are still in the pipeline.
Lawsky, the New York state bank regulator, stunned the British bank, its shareholders and other U.S. authorities when he moved ahead last month with his own case against Standard Chartered, accused of hiding transactions involving Iran, which is under U.S. trade and economic sanctions.
By Martin Coyle
LONDON/HONG KONG, Aug. 31 (Thomson Reuters Accelus) - Standard Chartered Bank's major shareholders are declining to openly criticise the firm's compliance practices but some cited overall governance issues as their primary interest following its settlement over allegations it breached Iran-sanctions laws. One institutional investor said that it had discussed compliance issues with the bank before this month's $340 million settlement was reached with New York's Department of Financial Services (DFS) for breaches of sanctions with Iran. The UK fund manager, which declined to be named, said that it discussed the allegations in general as well as compliance issues. "Compliance was discussed," the fund manager said without elaboration.
By Justin O'Brien, Thomson Reuters Accelus contributing author
LONDON/NEW YORK, Aug. 31 (Thomson Reuters Accelus) - Despite the lack of commentary from either the White House or federal executive agencies, the Standard Chartered investigation — and the manner in which it was handled — is certain to reignite the festering feud over how to regulate finance. Absent the physical bloodshed, the power struggle for control of banking regulation and how to change its culture finds remarkable parallels in Macbeth, the classic Shakespearean tale of political infighting. As with Banquo's Ghost, the spectre of Eliot Spitzer and his battles with federal counterparts over the purpose of regulation looms large.