Global Investing

Smell the money in Asia

Asia is still the place to be to make big bucks.

That’s the upbeat message from Baring Asset Management, which is betting on Asia to deliver some of the best returns during a recovery.  The only question is when’s the recovery coming?

“The market may still have further to fall but the evidence suggests that when a recovery does happen, Asia’s equity market rally is likely to outstrip many other markets around the world, particulary the developed markets,” Baring’s head of Asian multi-asset Khiem Do says.

Barings based its research on its analysis of MSCI data. The research shows that the 18 rallies (a rise of 20 percent from the bottom to the next turn in the market) seen in Asian markets since Dec. 1987, when MSCI launched Asian indices, produced on average, returns of 43 percent in U.S. dollar terms in six months.

Please invest, please

Hardly suprising that investment funds want their clients to cough up some money. It is, after all, how they get paid. So an appeal to pension funds from UBS Global Asset Management to stop sitting on the fence is not entirely pro bono. Nonetheless, a new note from the firm that trustees are actually risking things by hanging on to large cash reserves is worth a run through.

First, it says, there is the danger that they will lose out on any market recovery. UBS reckons stocks are well priced with high expected returns. It did not say so, but people sitting on cash in late November to early January missed a more than 25 percent rally in world stocks.

Second, UBS reckons hanging on to cash is not a good move given the amount of higher-yielding low-risk investments currently available. Some investment grade corporate bonds are trading at 10 percent-plus yields.

Global government-backed bonds surging

Government-backed lending programs around the world have sparked a revival in financial and corporate borrowing — for now. Worldwide sales of corporate bonds rose to $251 billion in January, the highest level since May 2008, marking the first signs of a thaw after a long global capital markets winter. The following are the global sales totals and a list of the biggest borrowers, according to Thomson Reuters data.

Read the full story here.

Top Temporary Liquidity Guarantee Program
(TLGP) Issuers
Ranking Issuer Name Proceeds (USD) Market Share 1 BANK OF AMERICA CORP 32,628,557,500 23% 2 GENERAL ELECTRIC CAPITAL CORP 21,045,031,500 15% 3 CITI 17,726,150,000 12% 4 JPMORGAN CHASE & CO 16,176,202,500 11% 5 MORGAN STANLEY 14,324,084,000 10% 6 GOLDMAN SACHS 13,558,528,800 9% 7 WELLS FARGO & CO 5,996,490,000 4% 8 AMERICAN EXPRESS BANK FSB 5,247,235,000 4% 9 REGIONS BANK 3,497,682,500 2% 10 PNC FUNDING CORP 2,896,760,000 2% 11 SUNTRUST BANK 2,743,940,000 2% 12 HSBC USA INC 2,673,895,750 2% 13 JOHN DEERE CAPITAL CORP 1,995,380,000 1% 14 SOVEREIGN BANCORP INC 1,597,932,500 1% 15 KEYCORP 1,499,050,000 1% 16 NEW YORK COMMUNITY BANCORP INC 601,626,380 0% 17 ZIONS BANCORPORATION 254,892,000 0%

Corporate and Government Guaranteed Debt – Global Month Global Corporate Debt US Guaranteed Debt (TLGP) International Guarenteed Debt Total January 2007 317,575.6 317,575.6 February 2007 254,769.1 254,769.1 March 2007 315,515.9 315,515.9 April 2007 197,842.8 197,842.8 May 2007 336,817.1 336,817.1 June 2007 320,097.3 320,097.3 July 2007 123,559.2 123,559.2 August 2007 135,911.7 135,911.7 September 2007 221,778.5 221,778.5 October 2007 260,642.5 260,642.5 November 2007 156,442.8 156,442.8 December 2007 117,873.8 117,873.8 January 2008 203,028.2 203,028.2 February 2008 155,728.7 155,728.7 March 2008 147,390.8 147,390.8 April 2008 303,897.8 303,897.8 May 2008 357,243.5 357,243.5 June 2008 219,317.5 219,317.5 July 2008 133,174.8 133,174.8 August 2008 125,650.0 125,650.0 September 2008 106,030.8 106,030.8 October 2008 68,402.9 4,869.0 73,271.9 November 2008 116,849.8 20,079.9 9,955.9 146,885.6 December 2008 102,066.7 87,768.5 4,050.5 193,885.7 January 2009 251,013.0 46,493.8 19,665.9 317,172.7

Who gets the last laugh?

Public critisicm may be heating up against banking executives being rewarded with huge bonuses despite taking too much risk (especially ex Merill Lynch head John Thain who requested a bonus and spent $1,405 on a garbage pail during a $1.22 million renovation of his office).

However, there are smaller fish who are being rewarded after doing something similar — taking too much risk and choosing the wrong bank in which to put their deposit. We’re talking about those who deposited in the collapsed Icelandic bank Landsbanki.

Around 300,000 British savers had accounts worth some 4 billion pounds in Landsbanki’s online savings provider Icesave, which offered competitive interest rates of up to 7-plus percent.

Dead cat bounce?

New year can get in the way of understanding what is happening on financial markets. Just because humans measure the year in 12 month tranches, it does not necessarily follow that markets do. Consider world stocks, for example. MSCI’s all-country world stock index is often cited as having fallen 43.5 percent in 2008. In fact, long-term investors’ losses were a lot worse. From an all-time high on November 1, 2007, to a low on November 28, 2008, the index fell 56.2 percent.

Something similar is happening at the moment. Investors might be focusing on year-to-date losses of around 5.7 percent for the index, but they are doing better than that. The index has gained 14.5 percent from that November 28 low last year.

What is your interpretation? 1) The credit crunch crash lasted for 12 months, hit bottom on November 28 and stocks are now recovering or 2) We have just had a dead cat bounce.

What a web we’ve woven

Thanks are due to the World Economic Forum for clearly  explaining the interlinked web of misery currently facing the world.  Make what you will of the details in the graphic below – and if you can, please do let us know! — but the overall impact really does spell it all out.

This Vonnegutesque cat’s cradle, incidently, comes from the forum’s new report, Global Risks 2009, released ahead of its annual meeting in Davos between January 28 and February 1. It shows an interlinked world facing a monumental series of interlinked risk, some of which  investors are having to confront for the first time.  Sheana Tambourgi, head of WEF’s global risk network, explains the report in this video:


from Africa News blog:

Forgiveness in paradise?

If you lived on an archipelago that defined paradise with palm-fringed white sand beaches and emerald green waters, you would expect a relaxed, lazy pace of life.

Lazy would be a generous description of the Seychellois soldier’s wave at the entrance to State House as I arrived with my local colleague George Thande - who is admittedly a regular visitor here.

The Seychelles were ruled by the French before the British and State House in the capital Victoria is every bit the luxurious colonial mansion: a lush garden exploding with tropical colours; an oil painting of Britain's Queen Victoria hangs in the wood-panelled reception room close to a portrait of Castor, a runaway slave from the 19th century with a fearsome reputation; a Daimler and Rolls Royce are parked on the forecourt.

A lot of witches but no more crises?

As financial markets wrap up the final full trading week of 2008, investors are contending with “quadruple witchings”, that is the day on which stock index futures, stock index options, stock options and single stock futures all expire.

French investment bank Calyon says that in addition the U.S. Treasury debt future also expires on Friday. “More witches than a Hallowe’en party,” the bank said in a note to clients.

“It is Friday, six days before Christmas in the middle of a credit crunch and this will only amplify the movements.”

No black tulip bulbs, no black swans

The world has experienced many crises in the past.

In 1636, during the Dutch Tulip Bulb Bubble, the quest for a perfect black bulb had inflated the price of a black bulb by many hundreds. In a different crisis in 1866, a London wholesale bank Overend, Gurney & Co collapsed with a massive debt, after expanding its investment portfolio beyond its means.

What is common in these events and the present crisis is that investors borrowed and levered themselves, and the eventual bubble burst prompted massive deleveraging and contagion, according to Julian Chillingworth, chief investment officer at London-based asset management firm Rathbones (established in 1742 – 22 years after the South Sea Bubble).

“It’s greed, it’s fear and it’s leverage,” Chillingworth told a group of journalists at a breakfast briefing. He says all the risky and highly leveraged assets were dressed up with “pseudo finance” and the likelihood of contagion and volatility was characterised as a “black swan” event – originally a metaphor for something that could not exist.

from Davos Notebook:

Bankers – Ever thought about working for Big Pharma?

    Are you an out-of-work banker looking for a new job with
some stability? Considered the drugs industry?

    Daniel Vasella, chief executive of Swiss pharmaceuticals
company Novartis, reckons his sector is a pretty good place
to work when compared to "mercenary" banking.

    "We are not in a banking industry, where they fire a
thousand investment bankers
and then a year after they hire
a thousand investment bankers," Vasella told Reuters.