Japan pension debate goes beyond bonds and stocks

March 7, 2014

A government advisor and the chief of the country’s $1.2 trillion public retirement fund are sparring over asset allocation between debt and equity. While stock market investors have a stake in the turf war, the bigger concern for bond buyers is the surge in pension liabilities.

Italy’s Renzi off to a bad start

March 6, 2014

Matteo Renzi has been forced to amend his electoral reform. The result could mean that Italy will remain ungovernable. The new prime minister’s hand is weaker, even though the risk of early elections has subsided. And serious economic reforms will be harder.

Bondholders will have to pay for Ukraine’s reset

March 5, 2014

The country’s bonds keep sinking in spite of an upcoming IMF package. Creditors are facing either a soft debt rescheduling or more radical haircuts. The risks of austerity, devaluation and continued political uncertainty all point to the latter. Market prices still look rosy.

West can hurt Russia – if there’s a will

March 3, 2014

The U.S. and Europe say Russia will pay a cost for its actions in Crimea. Markets contributed by sending Moscow exchanges down 10 pct. But Putin won’t be impressed until Europe reviews the two pillars of its relationship with Russia – finance and gas. That won’t happen overnight.

Deadly assault brings new kind of risk to China

March 3, 2014

The shocking knife attack that killed at least 33 in the Southwest suggests rising ethnic tension. Until now, belief in China’s relative stability has helped keep its cost of capital down. Even a small reassessment may hit assets, from real estate to the yuan, at a fragile time.

Japan bond investors’ overseas trip may flop again

February 26, 2014

The Federal Reserve’s taper talk discouraged Japanese investors from venturing abroad last year. Now wobbly emerging markets are threatening this year’s outing. That’s bad news for bondholders searching for better returns - and for the Bank of Japan’s anti-deflation campaign.

At least Venezuela’s unrest is simply economics

February 25, 2014

Ukraine’s split is ethnic, Thailand’s regional and Syria’s religious. Venezuela is ethnically and religiously united and even has oil wealth. But income inequality and chaos bedevil the Latin nation. In theory, these problems can be alleviated even without political upheaval.

Italy’s Renzi has big dreams and small mandate

February 25, 2014

The new prime minister announced ambitious reforms on a tight deadline. But his position in parliament is weaker than his sleepy predecessor’s. The promise of shock therapy may give Italy kudos in Europe. But markets need more details - and delivery - before giving him credit.

Ukraine, the bailout Europe cannot shirk

February 24, 2014

After triggering the end of the Yanukovich regime, the EU has a responsibility to help with Ukraine’s dire economy. It won’t provide all the needed $20 bln, but it can give the IMF political cover, while calming Russian anger. The ultimate goal has to be for Kiev to join the EU.

G20’s growth pledge is missing a demand booster

February 24, 2014

The world’s largest nations have vowed to raise collective GDP by an extra 2 percent in five years. Tinkering with regulation and labour markets may raise productivity. But with wages stagnant and governments reining in spending, there may not be anybody to buy the higher output.