Money managers under the microscope
from Global Investing:
Russian debt finally became Euroclearable today.
What that means is foreign investors buying Russian domestic rouble bonds will be able to process them through Belgian clearing house Euroclear, which transfers securities from the seller's securities account to the securities account of the buyer, while transferring cash from the account of the buyer to the account of the seller. Euroclear's links with correspondent banks in more than 40 countries means buying Russian bonds suddenly becomes easier.And safer too in theory because the title to the security receives asset protection under Belgian law. That should bring a massive torrent of cash into the OFZs, as Russian rouble government bonds are known.
In a wide-ranging note entitled "License to Clear" sent yesterday, Barclays reckons previous predictions of some $20 billion in inflows from overseas to OFZ could be understated -- it now estimates that $25 to $40 billion could flow into Russian OFZs during 2013-2o14. Around $9 billion already came last year ahead of the actual move, Barclays analysts say, but more conservative asset managers will have waited for the Euroclear signal before actually committing cash.
Foreigners' increased interest will have several consequences. Their share of Russian local bond markets, currently only 14 percent, should go up. The inflows are also likely to significantly drive down yields, cutting borrowing costs for the sovereign, and ultimately corporates. Already, falling OFZ yields have been driving local bank investment out of that market and into corporate bonds (Barclays estimates their share of the OFZ market has dropped more than 15 percentage points since early-2011). And the increased foreign inflows should act as a catalyst for rouble appreciation.
Each of these points in a bit more detail:
a) Foreigners' share of the Russian bond market is among the lowest of major emerging markets. Compare that to Hungary, where non-residents own over 40 percent, or South Africa and Mexico, where foreigners' share of local paper is over 30 percent.
The Dow Jones Industrial Average has recouped more than 50 percent of the losses from the October 2007 peak and the March 2009 bottom.
It’s been a remarkable rally, and the cheerleaders of the world’s major economies say it indicates a return of confidence to markets.
from Summit Notebook:
By Neil Chatterjee
The U.S. has promised it will hunt down tax evaders.
And it seems tax evaders are on the run.
DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
Is this the end of offshore private private banking?
Hedge fund stories from the past 24 hours from Reuters and elsewhere:
Economies face hedge fund attacks - Telegraph
Another sign this year’s huge equity market rally may soon run out of steam.
After Crispin Odey’s warning last month of a pullback — yet to emerge but certainly a possibility according to many hedge fund managers — Majedie Asset Management’s Matthew Smith has sold out of cyclical stocks in case economic growth disappoints.