LONDON, Oct 31 (Reuters) – One-month implied volatility on
the rouble – a gauge of expected swings in a currency – surged
to new record highs on Friday, as the spot exchange rate
shrugged off an outsize 150 basis-point interest rate rise to
resume its slide.
The Russian currency’s relentless depreciation in recent
weeks was abruptly halted on Thursday and it rallied more than
3 percent ahead of the central bank decision. But the
rouble resumed its slide after Friday’s rate rise.
LONDON (Reuters) – Equity holdings in global portfolios dipped to the lowest in more than a year in October as lingering caution about world growth and central bank policies prompted European, U.S. and British funds to trim allocations.
A monthly survey of 46 investment houses from the United States, Japan, continental Europe and Britain showed on Friday that the average recommended allocation to equities in global balanced portfolios had slipped to 49.5 percent, more than one percentage point lower than in September.
LONDON, Oct 30 (Reuters) – Emerging markets mostly fell on
Thursday after the U.S. Federal Reserve set the clock ticking on
its first interest rate rise in almost a decade, with a surging
dollar taking an especially heavy toll on currencies.
Russia, hurt by its own domestic woes, continued its run as
the worst performing market, with the currency falling to a
record low against the dollar.
LONDON, Oct 29 (Reuters) – Emerging stocks rose to
three-week highs on Wednesday, buoyed by gains in China and
expectations of a dovish U.S. Fed stance though the positive
mood did not touch Russia where the rouble hit another record
The Zambian kwacha was the other loser of the day, falling
more than 2 percent after the death of President Michael
Sata though it later pared losses on hopes that elections would
bring in a more investor-friendly leader.
LONDON (Reuters) – Pledges of reform in emerging markets have encouraged investors this year, but Brazil’s vote against any change at the top of its government is raising questions over whether the reforms will be delivered in hyped-up markets like India and Indonesia.
Leftist Dilma Rousseff won re-election as Brazil’s president by a slim margin over business favorite Aecio Neves. Her Workers’ Party is credited with lifting 40 million Brazilians out of poverty, but investors want to see bold pro-business measures to reverse the country’s deepening economic funk.
Many emerging economies have been banking on weaker currencies to revitalise economic growth. Oil’s 25 percent fall in dollar terms this year should also help. The problem however is the dollar’s strength which is leading to a general tightening of monetary conditions worldwide, more so in countries where central banks are intervening to prevent their currencies from falling too much.
Michael Howell, managing director of the CrossBorder Capital consultancy estimates the negative effect of the stronger dollar on global liquidity (in simple terms, the amount of capital available for investment and spending) outweighs the positives from falling oil prices by a ratio of 10 to 1. Not only does it raise funding costs for non-U.S. banks and companies, it also usually forces other central banks to keep monetary policy tight, especially in countries with high inflation or external debt levels. Howell says:
LONDON (Reuters) – Kazakhstan’s Alliance Bank ALLBy.LU, majority owned by the country’s sovereign wealth fund, is close to completing a $1.2 billion debt restructuring and a merger with two other banks, its chief executive said on Wednesday.
Timur Issatayev, who has been meeting creditors in London and New York, told Reuters he was confident of getting the go-ahead at creditor and shareholder meetings due in coming weeks.
LONDON, Oct 15 (Reuters) – South Africa is likely to cut its
2014 growth forecast next week but the government does not
expect the economy to slip into recession, Finance Minister
Nhlanhla Nene said on Wednesday.
The country, a top metals exporter, is feeling the impact of
a slowdown in key market China and a fall in mining output, due
largely to labour unrest.
LONDON, Oct 10 (Reuters) – Russian companies’ scramble to
swap roubles for dollars has pushed up the cost of such forward
swap contracts, building pressure on authorities to boost
official interest rates to stabilise the currency market.
As availability of dollars and euros on Russian markets
dries up, three-month forward rate agreements (FRAs) that allow
traders to lock in existing market interest rates for six months
jumped to 12 percent on Friday — up 2 percentage
points from the start of the week, the following graphic shows:
(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.
However there are some efforts to measure political risks, and unfortunately for emerging economies, some of those metrics seem to indicate that such risk is on the rise. Risk consultancy Maplecroft which compiles a civil unrest index (CUI), says street protests, ethnic violence and labour unrest are factors that have increased chances of business disruption in emerging markets by 20 percent over the past three months. Such unrest as in Hong Kong recently, can be sudden, causing headaches for business and denting economic growth, Maplecroft says. Hong Kong where mass pro-democracy protests in the city-state’s central business district which shuttered big banks and triggered a 7 percent stock market plunge last month.