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Attack on Volcker Rule Seen Exaggerating Cost of Disruption to Bond Market

2012-01-18T14:07:00.000-05:00

Attack on Volcker Rule Seen Exaggerating Cost of Disruption to Bond Market

By Yalman Onaran - Jan 18, 2012 12:14 PM ET

That exaggerates the impact of the Volcker rule by assuming it would be as disruptive as the worst recession since World War II, said Senator Jeff Merkley, an Oregon Democrat involved in drafting the original law. Photographer: Bill Clark/CQ Roll Call

Lobbyists for U.S. banks say a proposed ban on proprietary trading will cost companies and investors more than $350 billion. Some economists and fund managers say the claim is greatly exaggerated.
The impact of the so-called Volcker rule on markets and the economy is being debated at a congressional hearing today, a month before the Feb. 13 deadline for comments on a 298-page plan by regulators to implement the ban. The proposal, championed by former Federal Reserve Chairman Paul Volcker, 84, would constrain the largest banks from betting on investments that could produce big losses.
Lobbying groups, including the Securities Industry and Financial Markets Association, say the narrow definition of what’s allowed under the proposal will curtail the role of banks as market-makers, preventing them from purchasing securities clients want to sell without first finding a buyer. That would reduce liquidity and increase transaction costs for companies, according to an industry-funded study.
“Their fears are greatly exaggerated,” said Simon Johnson, an economics professor at the Massachusetts Institute of Technology scheduled to testify at the House Financial Services Committee hearing. “The industry’s claim ignores the fact that when the largest banks stop doing this kind of trading, somebody else will step in to do it. And we have to weigh those costs against the risk of banks blowing up.”

Lobbying Priority

The potential loss of revenue for banks has made pushing back against the Volcker rule a lobbying priority. Efforts by Sifma and other groups to modify the proposal come as lenders already are making less money buying and selling securities. Trading revenue at JPMorgan Chase & Co., the largest U.S. lender by assets, dropped 18 percent in the fourth quarter, the bank reported last week. Citigroup Inc. (C), the third-largest, posted a 10 percent decline yesterday.
The Volcker rule is scheduled to take effect in July, two years after passage of the Dodd-Frank Act, which incorporated the restrictions. While a final version of the regulation could be published within two to three months of the Feb. 13 deadline, there’s a chance details won’t be ironed out before the July deadline, regulators say.
Two studies of the Volcker rule’s impact on markets, commissioned by Sifma, conducted by consulting firm Oliver Wyman and published last month, don’t mention potential benefits. One report estimated that because investors won’t be able to sell bonds as easily as before, they will lose as much as $315 billion on the value of existing holdings. Borrowing costs for companies selling new debt would rise by $43 billion a year because buyers of debt would demand higher premiums for less- liquid assets, according to the study.

‘Lawyer and Psychiatrist’

The Oliver Wyman report bases its analysis on an academic study that looked at the loss of liquidity during the financial crisis. That exaggerates the impact of the Volcker rule by assuming it would be as disruptive as the worst recession since World War II, said Senator Jeff Merkley, an Oregon Democrat involved in drafting the original law.
“They relied on several faulty assumptions, including cherry-picking data points from the bottom of the financial crisis,” Merkley said in an e-mail.
Fed Governor Daniel Tarullo repeated the same sentiment during his testimony today, calling the Oliver Wyman study “analytic advocacy.”

‘Some Liquidity Impact’

“There might be some liquidity impact on the margins,” Tarullo said. The impact on markets remaining limited “depends on how well regulators do their job implementing the rule and the degree to how much non-regulated firms pick up where others leave it aside.”
Representative Barney Frank, the Massachusetts Democrat who led the Dodd-Frank legislation through the House in 2010 when he was chairman of the committee, questioned the regulators on whether they thought they were able to provide the correct guidelines for distinguishing between prop trading and market making. Tarullo and the others testifying at the hearing all answered affirmatively.
JPMorgan Chief Executive Officer Jamie Dimon, 55, said last week that while he supports the aim of the Volcker rule to prevent excessive risk-taking, regulators have written their proposal too narrowly.
“If you want to be trading, you have to have a lawyer and a psychiatrist sitting next to you determining what was your intent every time you did something,” Dimon said in an interview with CNBC on Jan. 9.

Defining Prop Trading

In their Oct. 11 proposal, the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Securities and Exchange Commission laid out guidelines for how to distinguish between permitted market- making and proprietary trading. The regulation allows banks to use capital to buy and hold securities temporarily in anticipation of finding a match for the trade later, while banning them from betting on asset prices without consideration of client demand.
Sifma and other lobbying groups say the burden of proving they’re not prop trading falls on the firm, which will raise compliance costs and discourage buying and selling for market- making purposes. Some clients agree. Zane Brown, a fixed-income strategist at Lord Abbett & Co. in Jersey City, New Jersey, said his firm, which manages about $100 billion of assets, already has felt the impact of banks being reluctant to make markets in anticipation of the Volcker rule.

Less Liquidity

“Dealers are less willing to carry inventory,” Brown said in a phone interview. “So liquidity has gotten much worse in the last six to nine months. When they don’t want to carry inventory, we can’t sell big blocks of bonds to them. They want to look for a buyer to match the seller first. That lowers the price because the buyer knows the seller is trying to get out of the position.”
Other fund managers say the reluctance is the result of deteriorating market conditions, not fear of pending rules.
“Since the 2008 crisis, the fear of getting stuck with losses has made the banks less willing to buy less liquid bonds,” said Sean Simko, who manages $7 billion in bonds at SEI Investments Co. in Oaks, Pennsylvania. “With the European crisis getting worse in the second half of last year, the reluctance has increased.”

Bid-Ask Spread

Before the financial crisis, the difference between the market-maker’s bid for buying an investment-grade bond such as one issued by International Business Machines Corp. and the offer for selling it would be 2 or 3 basis points, Simko said. Post-crisis, that bid-ask spread has climbed to 20 to 30 basis points, he said. A basis point is 0.01 percentage point.
Some increased trading cost might be payback for the underpricing of risk before the crisis, said Charles Whitehead, a professor of finance law at Cornell University.
“A little friction in the market can be a good thing to prevent a crisis,” he said in an interview.
Hedge funds could take over the role of market-making from banks, Whitehead said. Still, while the cost of implementing the Volcker rule might not be as high as the Oliver Wyman study predicted, it could exceed the benefits, he said. That’s because by only banning short-term prop trading, the rule doesn’t prevent banks from taking oversize risks with their own money on longer-term investments.
“What caused the crisis was banks holding toxic mortgage securities -- long-term assets -- and financing them with short- term money,” Whitehead said.

Volcker Complaint

The alleged failure of the Volcker rule to address the real causes of the crisis was one of the criticisms cited in a staff memo sent last week to members of the House Financial Services Committee in advance of today’s hearing and obtained by Bloomberg News. The committee’s staff also pointed to displeasure by Volcker with the proposed guidelines.
Republican Representatives Spencer Bachus of Alabama and Randy Neugebauer of Texas, the chairmen of the full committee and the investigations subcommittee, respectively, have opposed the proposal from its inception and have pressured regulators to pull back the scope of the rule.
“If the proposed regulations are implemented in their current form, those regulations will dramatically reduce liquidity across multiple markets, which will in turn make it more expensive for businesses to borrow, invest in research and development and create jobs,” Bachus, along with Republican Representatives Shelley Moore Capito of West Virginia, Scott Garrett of New Jersey and Jeb Hensarling of Texas, wrote in a Dec. 7 letter to regulators.

Volcker Blames Lobbyists

Volcker said in a November speech in Singapore that the rule was too complicated and cumbersome, blaming bank lobbyists. He declined to comment for this story.
Former FDIC Chairman Sheila Bair also criticized the complexity of the proposal drafted by regulators, urging them to throw away everything and start again.
“The regulators should think hard about starting over again with a simple rule based on the underlying economics of the transaction, not on its label or accounting treatment,” Bair said in congressional testimony last month. “If it makes money from the customer paying fees, interest and commissions, it passes. If its profitability or loss is based on market movements, it fails.”
The four regulators who drafted the rule testified in the morning session of today’s hearing. In the afternoon, Douglas J. Peebles, chief investment officer at AllianceBernstein LP, the fund-management unit of French insurer Axa SA, will appear on behalf of Sifma. Mark Standish, president and co-CEO of RBC Capital Markets, will represent the Institute of International Bankers, a lobbying group of foreign banks operating in the U.S. Scott Evans, executive vice president at pension-fund manager TIAA-CREF, also will testify.

Fund Managers

Some fund managers are supporting the banking industry attack on the Volcker rule because they have close business relations, MIT’s Johnson said. Non-financial companies did the same when derivatives regulation was being negotiated in 2010, rallying to the side of banks when their own interests weren’t necessarily aligned with the financial firms, according to people familiar with the discussions then.
Some foreign governments also have criticized the Volcker rule. Canada and Japan sent letters to the U.S. regulators, expressing concern that the trading of their sovereign bonds would suffer if U.S. banks are reluctant to make markets. Congress exempted U.S. Treasuries from the prop-trading ban. Sifma will ask regulators to expand the exemption to other top- rated government bonds such as those issued by Canada, said Rob Toomey, a managing director at the lobbying organization.

Rules ‘Too Onerous’

“Congress’s intent was not to harm market-making, but the rules as proposed by regulators are too onerous,” Toomey said.
Even if the Volcker rule does reduce trading in some markets, that might not be so bad, MIT’s Johnson said.
“There’s probably excessive trading anyway,” he said. “Do we need all this trading for the objective of efficient allocation of capital? Not really. They publish these studies saying the Volcker rule could hurt social interest, but since when did the banks start caring about social interest?”
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net or @yalman_bn on Twitter
To contact the editor responsible for this story: David Scheer in New York at dscheer@bloomberg.net

兔尾行情收官在即证监会龙年伸出"五爪"迎春

2012-01-14T22:52:00.000-05:00

兔尾行情收官在即证监会龙年伸出"五爪"迎春

农历新年到来前的兔尾行情还有一周时间收官，本周前两个交易日的表现让人充满期待，但随后市场犹豫的走势又平添了一份郁闷。

还好，这些都不是关键。本周，证监会主席郭树清对未来一个时期资本市场改革和监管工作做了五个方面的具体部署，基本囊括了目前证券市场所有的热点和难点，我们且称此为证监会的龙年"五爪"，这才是对龙年行情有深远影响的关键所在。目前摆在我们面前的是：最难完满的"新股发行改革"，屡教不分的"上市公司分红"，只闻其声不见其影的"退市制度"，以及发展了多年仍步履蹒跚的"场外市场"……
也许，在即将到来的龙年，证监会锋利的龙爪会将其一一破解。即便只解决掉一个问题，也将大大有利于股市的健康发展。正如某知名企业家所说：如果强制分红这把火能真烧，占股市市值大半的蓝筹股，市盈率就可能回归到12~16倍，股市的春天就将来临。

日前，全国证券期货监管工作会议在北京召开。证监会主席郭树清在会议上总结2011年称：股票市场继续得到发展完善；债券市场的统一规范迈出步伐；期货市场改革创新焕发出勃勃生机；继续大力推动上市公司质量提升；努力促进各类投资中介机构规范健康发展；进一步加强市场法治和诚信建设；对外开放和国际合作取得新的突破；深入开展党风廉政建设和干部队伍建设。

来自证监会的数据显示，2011全年股票融资5073亿元，上市公司债券融资1707.4亿元。证监会核准上市公司资产重组69项，交易金额2369亿元。全年调查内幕交易、市场操纵、"老鼠仓"等违法违规案件209起，作出行政处罚与市场禁入决定68项。

其实，在上述工作进展的基础上，投资者最期待的还是证监会主席履新之后的一系列改革新政。在过去的两个多月里，证监会频频出招，从加强市场监管到内部整顿，从严格要求上市公司治理到IPO过会率降低，出台的各种措施不仅让人耳目一新，且速度之快，效率之高。

就在外界还在对证监会2012年的各种新政猜测不已之时，郭树清在全国证券期货监管工作会议上又抛出了 "资本市场改革和监管工作的五方面部署"，内容详细全面，给了投资者一个清晰的证券市场改革路径。这五方面分别是：积极稳妥地推进证券期货领域的改革开放；努力推动资本市场的结构调整和服务能力提升；以公开透明为核心加强市场制度建设；以防范系统性区域性风险为重点加强市场监管；加强组织领导和干部队伍建设。

《每日经济新闻》记者发现，在这五方面工作中，新股发行制度，债券市场，上市公司分红，退市制度，场外市场，长线资金等是2012年证券市场改革与监管的六大关键词。

中投顾问宏观分析师杨文柳向《每日经济新闻》记者解读上述政策时称："推动上市公司质量提升，与深化发行体制改革的政策关联性较强，此举有望为中国资本市场的长期繁荣奠定基础。另外，以公开透明为核心加强市场制度建设，有望改善我国投资者利益普遍受损的怪象。"

在与A股市场密切相关的政策细节尚未出台前，仅郭树清的"五步走"讲话，已经助力了本周的兔尾行情。

上周末结束的全国金融工作会议上，国务院总理温家宝强调要深化新股发行制度市场化改革，抓紧完善发行、退市和分红制度，加强股市监管，促进一级市场和二级市场协调健康发展，提振股市信心。紧随其后，证监会主席郭树清就提出了"五步走"的改革和监管的具体工作部署，与温总理提出的要求一脉相承。

本周第一个交易日，沪指大涨2.89%，周二继续上涨2.69%，这样的单日涨幅已经有3个月未见了，更何况是连续上涨。不过，接下来的市场走势显得很犹豫，周三周四连续小幅下跌后，周五又跌了1.34%。

农历兔年即将在下周结束，根据历史经验，每年的最后一个交易周，过节气氛俨然超过了投资气氛，市场成交较为清淡，股指走势也较平稳，一般不会有太大惊喜。兔尾行情收官之后，节后的龙头行情如何演绎才是投资者关注的重点，证监会伸出的龙年"五爪"会有怎样的影响呢？

解读"五爪"

"五步走"产生六大关键词

从郭树清的工作部署中，《每日经济新闻》记者提炼出六大关键词：新股发行制度，债券市场，上市公司分红，退市制度，场外市场和长线资金。
场外市场债券市场长线资金

对三板市场颇有研究的中国社科院王彬生认为，"对场外市场建设给一个明确的时间表，几乎不可能。我觉得任何一项政策的发布和实施都需要一个契机，就像创业板，当初念叨了十多年才最终推出。"

他进一步介绍，目前中关村代办系统极其不活跃，是交易制度造成的，对这些制度的改变，其本质是一场变革，意味着一个新的交易所的诞生。如果在2012年有一个良好的契机，也许新三板的制度改革能够破冰，否则，这将是一个长期的政策制定。

有人担心新三板扩容对现有的股市造成冲击，王彬生对此向《每日经济新闻》记者称，这是不必要的，当初实行股权分置改革的时候，还曾迎来了一波A股市场上最大的牛市行情。而新三板扩容，有利于上市公司之间的竞争，如果一些高新类中小企业可以选择新三板，那么主板市场的壳资源也就不再那么稀有，与创业板、中小板的建立一样，只是给投资者提供了更为丰富的投资平台。

相比新三板扩容的蹒跚步履，债券市场的大力发展和长线资金入市，证监会早在2011年底就已开启了马达。郭树清担任证监会主席后，不仅在多个场合宣扬大力发展债券市场，还提出了一些具体的想法，如应该推出创新债券或高收益债券。同时，证监会已经成立了债券办公室，这也是第一个专为债券市场发展设立的办公室。2011年公司债发行75只，发行总额高达1100亿元，是2010年的两倍还多，仅11月、12月两个月就有17家上市公司发债，发行金额达到182亿元，而2010年全年也只有23家公司发债。郭树清对债券市场的加力提速可见一斑。

长线资金入市中，最受关注的养老金入市还在隔空画饼，但RQFII(人民币合格境外投资者)已经在进行的路上了。1月11日，首批两只RQFII产品发行，产品投资总监对外表示，初期约有90%资金投资债券，股票投资方面主要关注消费股及商业相关股票，因为这些行业较为稳定。

上市公司分红

最有可能在2012年采取实际动作，且对A股市场影响最直接的就是强制上市公司分红。强制分红政策已经在IPO公司中实施，下一步将推广到上市公司中。

郭树清在工作部署中提出，要督促上市公司明确对股东的回报，切实加强对其红利分配决策过程和执行情况的监管，强化对未按承诺比例分红、长期不履行分红义务公司的监管约束。

目前已进入2011年的年报披露期，将有多少家上市公司进行分红？分红比例又将扩大多少？这都是对强制分红政策能落实到多大程度的印证。

有数据显示，美国上市公司的现金分红占公司净收入的比例从上个世纪70年代的30%提升至目前的50%~70%，且绝大多数都是按季分红。美国上市公司之所以愿意分红，是因为已形成了分红的环境和氛围，一家公司的分红政策往往被作为判断该公司是否具有投资价值的重要参照。

A股上市公司2010年分红金额占净利润的30%左右。"在A股市场上，这种氛围尚未形成，所以才出现监管层强制分红将分红与再融资挂钩的措施。企业一方面要分红，一方面又要融资扩大再生产，这是可以理解的。我个人认为，可以把上市公司的分红与银行信用挂钩，有持续分红的上市公司，在需要资金的时候更能从银行获得贷款。"清华大学金融系教授杨炘接受《每日经济新闻》记者采访时表示。

新股发行退市

新股发行制度经过多次修改，仍难以完满。

日前，证监会主席助理朱从玖对新股发行改革提出了五大措施，其中包括"增加在新股发行和上市环节的存量股份流通性，考虑用存量股份配售、推动实际控制人之外的股份上市首日可流通"，"增加机构投资者的认购比例"等。

且不提朱从玖的五大措施能否在2012年全盘推出，杨炘认为，新股发行制度的改革非常迫切，不仅针对价格高企，还有对新股发行的审核也需要更加市场化。正如郭树清所说，要改革股票承销办法，使新股定价与发行人基本面密切关联。

退市制度方面，证监会已出台创业板退市制度征求意见稿，主板市场在2012年能否激活该制度，也牵扯到多个政策的实施。有意思的是，在郭树清部署的五方面工作中，并没有提到对融资融券业务的发展。之前，知名财经评论员叶檀就指出，如果没有一个完善可行的退市制度，整个市场的做空机制就没有立足之地，也就不会有大的发展。

因此，郭树清首先提出的是"以优化市场优胜劣汰机制为导向，积极推进退市制度改革，逐步形成市场化和多元化的退市标准体系。"(每日经济新闻李文艺)

温家宝要求提振股市坚决抑制社会资本脱实向虚、以钱炒钱

2012-01-09T09:07:00.002-05:00

温家宝要求提振股市坚决抑制社会资本脱实向虚、以钱炒钱

　　温家宝要求提振股市信心

　　据新华社电全国金融工作会议1月6日至7日在北京举行。国务院总理温家宝出席会议并讲话，他在讲话中对今后一个时期的金融工作作出部署，要求多方面采取措施，确保资金投向实体经济。

　　防止虚拟经济过度膨胀

　　温家宝指出，我国金融领域还存在一些突出问题和潜在风险。金融机构经营方式总体粗放，公司治理和风险管理仍存在不少问题，农村金融和中小金融机构发展相对滞后，金融监管能力有待提升，信贷政策与产业政策结合得还不够紧密，对实体经济的支持还不够及时有力。

　　温家宝强调，要坚持金融服务实体经济的本质要求，牢牢把握发展实体经济这一坚实基础，从多方面采取措施，确保资金投向实体经济，有效解决实体经济融资难、融资贵问题，坚决抑制社会资本脱实向虚、以钱炒钱，防止虚拟经济过度自我循环和膨胀，防止出现产业空心化现象。

　　温家宝要求，坚持市场配置金融资源的改革导向，进一步明确政府作用的领域和边界，做到该放的坚决放开、该管的切实管好，激发各类金融市场主体的活力。坚持创新与监管相协调的发展理念，支持金融组织创新、产品和服务模式创新，同时要防止以规避监管为目的和脱离经济发展需要的“创新”。

　　实施稳健的货币政策

　　温家宝强调，坚持把防范化解风险作为金融工作生命线，加强金融监管和调控能力建设，严厉打击金融犯罪，加强金融机构网络信息安全。坚持自主渐进安全共赢的开放方针，在确保国家经济金融安全的基础上提高金融对外开放水平。

　　温家宝要求金融部门和金融机构认真贯彻中央经济工作会议精神，做好今年金融工作。一要实施好稳健的货币政策，进一步提高针对性、灵活性和前瞻性，保持社会融资规模合理增长。二要优化信贷结构，加强对国家重点在建续建项目和保障性住房建设，对符合产业政策的企业特别是小型微型企业，对企业技术改造的信贷支持。三要深化新股发行制度市场化改革，抓紧完善发行、退市和分红制度，加强股市监管，促进一级市场和二级市场协调健康发展，提振股市信心。四要敏锐观察和跟踪分析国内外经济形势，做好应对预案，切实防范经济金融风险。

　　■ 链接

　　此前，全国金融工作会议分别在1997年、2002年和2007年举行过三次，每次均涉及金融体系的重大改革和部署，对我国金融业发展影响重大。

　　1997年11月第一次全国金融工作会议提出力争用3年左右时间大体建立与社会主义市场经济发展相适应的金融机构体系、金融市场体系和金融调控监管体系，基本实现全国金融秩序明显好转，化解金融隐患；加快国有商业银行的商业化步伐等。

　　2002年2月第二次全国金融工作会议重点提出了“必须把银行办成现代金融企业”，“具备条件的国有独资商业银行可改组为国家控股的股份制商业银行，条件成熟的可以上市”，并将农信社改革提到了重要位置。

　　2007年1月第三次全国金融工作会议提出继续深化国有商业银行改革，加快建设现代银行制度，稳步有序推进中国农业银行股份制改革，推进政策性银行改革；完善农村金融体系；大力发展资本市场和保险市场等。

　　■ 八项部署

　　温家宝对今后一个时期金融改革发展作出部署。要求打破垄断，鼓励民间资本进入金融服务领域。

　　1 解决微型企业融资难问题

　　为经济社会发展提供更多优质金融服务。金融行业要大力提升服务功能，扩大服务覆盖面，加大对薄弱领域的金融支持。

　　重点支持经济结构调整、节能减排、环境保护和自主创新，特别要加快解决农村金融服务不足、小型微型企业融资难问题。

　　2 引导民间资本入金融领域

　　深化金融机构改革。着力加强公司治理，形成有效的决策、制衡机制。

　　推进股权多元化，打破垄断，放宽准入，鼓励、引导和规范民间资本进入金融服务领域，参与银行、证券、保险等金融机构改制和增资扩股。

　　政策性金融机构要坚持以政策性业务为主体，明确划分政策性业务和自营性业务，实行分账管理、分类核算。

　　国家开发银行要坚持和深化商业化改革。

　　3 证券业强化行为监管

　　加强和改进金融监管，切实防范系统性金融风险。银行业要建立全面审慎的风险监管体系。

　　证券业要完善市场制度，强化行为监管，保护投资者合法权益。保险业要加强偿付能力监管，完善分类监管制度。

　　4 规范地方政府举债

　　防范化解地方政府性债务风险。当前我国政府债务总体安全、可控。

　　要综合施策、标本兼治，妥善处理存量债务，规范地方政府举债融资机制，将地方政府债务收支分类纳入预算管理，构建地方政府债务规模控制和风险预警机制。

　　5 清理整顿各类交易场所

　　加强资本市场和保险市场建设，推动金融市场协调发展。促进股票期货市场稳定健康发展，坚决清理整顿各类交易场所，建设规范统一的债券市场，积极培育保险市场。

　　6 完善人民币汇率形成机制

　　完善金融宏观调控体系，加强货币政策与财政政策、监管政策、产业政策的协调配合，有效促进经济发展和金融稳定。进一步完善人民币汇率形成机制。

　　7 提高外汇储备经营水平

　　扩大金融对外开放，提高资源配置能力和金融安全保障水平。

　　稳妥有序推进人民币资本项目可兑换，提高外汇储备经营管理水平。

　　深化内地与港澳台金融合作，支持香港巩固和提升国际金融中心地位。

　　加快上海国际金融中心建设。积极参与全球经济金融治理。

　　8 建立统一征信平台

　　加强金融基础建设，改善金融发展环境。加快制定完善金融法律法规，建立统一征信平台，完善登记、托管、支付、清算等金融基础设施，加强消费者权益保护。

　　■ 解读

　　“提振股市信心”成今年工作亮点

　　“提振股市信心”，成为了这次会议部署今年金融工作中的一个亮点。

　　“‘提振股市信心’‘抓紧完善发行、退市和分红制度’……会议给出了清晰答案，部署令人鼓舞。”兴业银行经济学家鲁政委表示。

　　近一段时间以来，我国股市表现疲弱，投资者信心不足，股市与宏观经济走势明显不相符合，加快资本市场改革、有效提振股市信心将成为今后金融工作的一个看点。

　　“强调促进一级市场和二级市场协调健康发展，就是强调投资者与筹资者利益的协调。”国务院发展研究中心金融研究所副所长巴曙松指出。

　　金融学家认为，“重融资、轻回报”已成为当前中国股市的一大顽疾，此次会议强调深化改革，强调完善分红制度，是对投资者权益的保护，将有利于提振股市信心，有利于中国资本市场的健康发展。据新华社电

第四次全国金融工作会议今召开三大焦点受关注

2012-01-06T15:42:00.002-05:00

第四次全国金融工作会议今召开三大焦点受关注

第四次全国金融工作会议今日将在北京召开。继去年的中央经济工作会议之后，各方期待这次会议能为中国经济确立更多制度化、规范化的政策。作为每隔5年一次的中国金融界最高规格会议，"金融国资委"能否正式组建、存款保险制度以及金融体制改革能否顺利推进，成为舆论关注的焦点。

组建金融国资委再次提上议程

据了解，金融国资管理仍然是本次全国金融工作会议的焦点议题。"金融国资委"能否正式组建，成为本次会议的一大看点。

据报道，在财政部主持的组建方案中，金融国资委将以目前财政部金融司为基础，纳入汇金公司，将银监会、央行等监管部门对金融机构的行政管理权限也可能集纳于其中；同时，金融国资委为直属国务院的正部级机构。

广东金融学院代院长陆磊之前接受《21世纪经济报道》采访时就曾表示，是否成立金融国资委，争议的关键在于我国对金融资产是采取行政管制的方式还是市场化的方式进行管理。

金融国资委如能顺利成立，"一行三会"的职能定位也将进一步清晰，其目前所有的人事权等都将划拨金融国资委，央行将成为彻底的宏观调控部门，"三会"则清晰定位于监管职能。

存款保险制度有望推进

久未破局的存款保险制度，有望通过此次会议加快出台进程。

中国的存款保险制度已探讨有十年之久，由于各部委对其出台的时机和具体费率设定等核心内容的一直存在争议，存款保险制度一直处于徘徊状态。

这一制度涉及银行业金融机构的市场化退出机制，即市场化风险补偿机制，机构的倒闭由市场埋单而不再是国家财政担保，这一制度亦是《金融机构破产条例》出台的先行条件，但始终都没有明确的推出时间表。

2010年初，国务院决意加快建立存款保险制度，命央行牵头制定详细方案。按照分布走的设想，先在央行内设一个存款保险基金，而非作为实体的存款保险公司；先临时性推出"全额保险"，将来再过渡到"限额保险"。待到未来条件成熟时，再设立完全独立的存款保险公司。存款保险机构的保险基金由各投保银行按照存款的一定比例交纳。

随着中国式存款保险制度方案的推进，争议由存款保险是否具有监管权、放在哪个部门之下的制度设计，转变为对具体问题的担忧。监管当局深感棘手的是，像农信社这样数量众多、问题重重、尚未完成改革进程和财务重组的存款类机构，加入存款保险制度后，会不会出现后遗症。

法兴银行中国经济分析师姚炜在接受《第一财经日报》采访时表示，在取消存贷款利率管制之前，必须首先建立存款保险制度，通过促使金融机构为储户投保，以防御风险。

金融体制改革仍是焦点

国家行政学院决策咨询部副主任陈炳才接受《中国经济报》采访时表示"从每次开会的时间上看，正好都是遭遇外部重大冲击与内部重大调整关键时期。"他说，银行改革和金融监管是历届会议的讨论重点。

去年，温州等地的资金链断裂事件引发了社会对于民间信贷和小额信贷监管的关注。这在金融领域专家看来，正是目前我国金融体系建设不完善的必然后果之一。多数机构预期，2012年中国经济外部环境将因为欧美经济陷入危机而充满不确定性。因此，应认真查找潜在风险，进一步深化金融改革，为金融业长期稳定发展奠定坚实基础。

央行货币政策委员会委员夏斌此前接受采访时表示，金融改革现在的最大挑战，是如何在国内各种复杂的矛盾中，始终如一地坚持市场导向的原则，这是金融改革的首要原则、核心准则。

夏斌认为，当今全国金融市场的制度框架已基本形成，全国的金融市场已深度统一，市场上任何一项新的金融改革措施出台，往往会波及全国。要把握好金融改革开放中合理的节奏、次序和政策部署的衔接配合，以改革助推金融业的发展。 (中国网)

China central-bank chief on yuan, 2012 forecasts

2012-01-05T11:47:00.000-05:00

China central-bank chief on yuan, 2012 forecasts

By Hu Shuli and Zhang Jiwei

BEIJING ( Caixin Online ) — Amid global economic uncertainty, People’s Bank of China Gov. Zhou Xiaochuan is one of the world’s most talked-about central bankers.

Zhou attracts as much attention as U.S. Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi because the world’s financial markets are vitally interested in China’s interest-rate trends, bank deposit reserve ratio adjustments, and yuan-dollar exchange rates.

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Zhou is a big-thinking strategist with firm ideas about financial reform. He’s also a tactician who can find opportunities for promoting reform in any situation. He harmoniously pursues realism and idealism, seeking gradual progress while pushing for financial reform.
The year 2011 was difficult and complex for China’ economy. The year 2012 will be no different. What does Zhou see ahead, and what lessons can be learned from the past year?
In an interview in December, shortly after the Chinese government set its 2012 policy goals at the annual Central Economic Work Conference in Beijing, Zhou sat down with Caixin to discuss his personal views and the central bank’s views toward inflation and monetary-policy adjustments, interest-rate control, exchange-rate reform, capital-account liberalization and the internationalization of the yuan. His comments follow:

Caixin: China’s macro-economic policies were adapted to fit changing economic situations in 2011. How do you see the economic situation in 2012 and corresponding policy options?

Caixin Online

People's Bank of China Gov. Zhou Xiaochuan

Zhou Xiaochuan: The Central Economic Work Conference clearly articulated macro-economic policy, taking into account two considerations: Efforts to prevent an economic downturn, and efforts to restrain inflation.
First, we are encountering concurrent issues in the international arena, including an evolving European debt crisis, U.S. economic uncertainty, and slowing growth in emerging economies. More importantly, the international economy is changing rapidly, and its outlook remains uncertain. Thus, we must be prepared to respond to new situations.
On the other hand, looking at China’s domestic economy, local governments will have leadership reshuffles in 2012, and the capacity for growth in the Chinese economy is still great. At the same time, the consumer-price situation has changed for the better, and the need to control inflation is not as pressing as it was in early 2011. Of course, there are still uncertain factors, such as the impact that the real-estate market will have on the national economy.
Overall, we need to plan for the worst external environment without relaxing efforts to keep prices from rising too quickly. We need to rationally manage inflationary expectations. Meanwhile, economic structural adjustment is still a difficult task. Macro-economic policy makers need to weigh all these issues.

China’s consumer price index (CPI) grew 4.2% in November, 1.3 percentage points below October’s and below market expectations. How do you view this change?

The target of 4% inflation set for full-year 2011 may have been hard to achieve. Ultimately, it was likely to be around 5%. Technically speaking, year-on-year monthly comparisons sometimes give wrong impressions. Since the global economic crisis of 2008, economic data have fluctuated significantly, making for a large base-number effect for year-on-year comparisons. The effect of the base number must be considered in all monthly year-over-year numbers.
I have always advocated the use of seasonally adjusted sequential data, which reflects CPI trends quickly. In short, inflation control has achieved some results and is moving in the right direction, but we cannot be too optimistic.
From the perspective of the domestic driving force contributing to the growth of the Chinese economy, the quality of life for Chinese people needs further improvement. There is still plenty of potential in urbanization, and there is still room for expanding the nation’s infrastructure on a large scale. These projects are all somewhat government-led.
Looking at national conditions and China’s stage of development, the domestic economy is prone to overheating. Looking internationally, CPI growth in emerging markets is generally higher than in developed countries. This is not to say that there is currently a risk of overheating, but that inflation cannot be taken lightly.

How do you assess the effects of China’s integrated use of quantitative tools and target-price-based instruments to achieve regulatory goals in 2011?

There are several aspects that require attention. First, the frequency and intensity of using quantitative tools and price controls are different. If you only look at the frequency of adjustments, it seems quantitative tools are used more often. But you need to look at the different strengths of the adjusted results that different tools accomplish.
Second, excess liquidity needs to be restrained. Only by estimating the existing liquidity situation can you judge whether a policy adjustment’s strength is appropriate. Third is the judgment of neutrality. Because of the international imbalance, there should be quantitative hedging. Only when hedging reaches a certain point is it neutral. That is, you must distinguish tightening, neutrality and loosening based on quantity.
Of course, you have to consider the mutual impact of quantitative and price-based policies. In reality, they are connected. This can be seen clearly through a study of short-term borrowing rates on the interbank market. Quantitative adjustments bring price reactions. Conversely, interest-rate adjustments bring quantitative changes in liquidity.

Since November, the Chinese financial institutions’ yuan funds outstanding for foreign exchange have continued to decrease. Has this provided a certain amount of room for choice in monetary policy?

We’ve always had a relatively wide space for setting monetary policy. The policy trade-off is mainly related to macro-control goals. For example, deciding whether to pursue higher employment or lower inflation requires repeated consideration of a balanced goal. Other future uncertainties will affect changes in policy objectives.
Of course, there will also have some constraints, and every policy choice brings some negative effects. Differing economic conditions in China’s eastern, central and western regions, and a lack of domestic and international synchronization will generate arbitrage in opportunities. As long as the arbitrage is not on a massive scale, it is a question of balancing the positive and negative effects of policy, which requires making judgment calls.

You mentioned that now is a special time (for China’s economic development). But is it also a time of reform?

Sometimes, reform’s timing is complicated. Often, difficult reforms that require strong commitments are launched when pressures are relatively great. This is what we saw with the design of exchange-rate reform in 1993 (which was implemented Jan. 1, 1994). At the time, people said exchange-rate reform required three conditions: very strong exports; adequate foreign-exchange reserves; and experience in macro-economic regulation. The situation at the time was just the opposite, but reform was still pushed forward.

Calls for market-oriented interest-rate reform have been heard frequently over the past year. How do you see the timing for further reform, and the risks?

Market-oriented reforms on interest rates are always being encouraged. Specific implementations should be introduced in an orderly fashion, and on the basis of overseas economic situations. From a sequencing perspective, the first step is, through reform, to put hard restraints on financial institutions. In this way, the competitive behavior of market players becomes more orderly, and price-liberalization issues are not too great.
From past experience, soft restraints on financial institutions’ competition behavior will always be ineffective, and there will be problems. It should be said that with joint-stock reforms and successful listings of 2010, the soft restraints and fair-competition issues of financial institutions are gradually being resolved, and conditions are there for interest-rate market reforms to advance.
When comparing international and domestic situations, domestic and foreign pressures have differed mainly since the financial crisis. China maintained a relatively high rate of growth, while some developed countries kept interest rates at zero. Advancing market reforms for interest rates at a time when there are wide gaps between interest rates will create some special problems.

The upcoming U.S. presidential election has created some pressure for yuan appreciation. On the other hand, from a market perspective, the yuan has showed a tendency to devalue. What is your opinion of this trend and any corresponding advancement for exchange-rate reform?

A lot of results have been achieved in yuan exchange-rate reform in recent years. In judging whether the exchange rate is at equilibrium, the current international comparison is mainly based on the current-account balance. From the perspective of the current-account balance, the yuan exchange rate has moved closer to the equilibrium point over the past few years.
There is a problem with lagging relations between the exchange rate and current-account balance. Exchange-rate adjustments will quickly affect decisions made by some manufacturers, such as whether to sell products internationally or domestically, or whether to procure domestically or abroad. But the deeper response involves adjusting capacity. A combination of adjustments to investing and factors of production are needed for them to adapt, and there will be a lag period, which is more obvious in China.
Changes in exchange rates cause readjustments in production capacity. For example, reallocating resources from the manufacturing industry to the service industry requires a process in order for changes to occur gradually.
China’s current-account surplus (mainly trade surplus) reached a peak in 2007 and 2008, and subsequently began to fall. The current-account surplus at the end of 2011 may have ended up, being only around 3% percent of GDP. A current-account balance inclining toward equilibrium is the result of structural and exchange-rate adjustments.
Worrying too much about exchange-rate adjustment and trade balance issues is inappropriate and useless because there is a process for resource allocation and adjustment. In reality, China has significantly developed toward equilibrium, although there will be fluctuations.
As for exchange-rate reform, the closer the yuan is to the equilibrium level, the fewer difficulties will result from reform. At the same time, as the trading band expands and controls are further reduced, reform’s difficulties will be smaller, and the conditions for yuan convertibility on the capital account will be increasingly present. In fact, exchange-rate reform has, on the whole, developed for the better, with a number of international political implications.

Is the current two-way volatility of the yuan a temporary phenomenon, or does it fundamentally indicate that the yuan exchange rate has already been overshot?

In the past, people said expectations for the yuan were one-way appreciation. Until close to the equilibrium level, it would experience two-way expectations and two-way volatility. This sort of natural, bi-directional floating state is the goal that reform has pursued. But to truly reach this state may take more time. The movement in the current foreign-exchange market is still mainly related to the external environment.
Speaking of foreign direct investment, many European and American investments in China did not bring the money back or even pay dividends in the past. Undistributed profits remained in a company’s accounts. Now, if funds are tight in a parent company’s host country, more profits (from Chinese operations) will be sent back (to the parent). Considering domestic factors recently, enthusiasm for overseas investment has rapidly increased.
In the past, many traders settled foreign trade payment in advance and made long-term purchases of foreign currency, resulting in a relatively high demand for yuan. Now, financing conditions for foreign trade are changing, and settlements are being postponed. This situation makes for periodic changes in foreign-exchange supply and demand. Of course, there are individual cases of control-evasion and using fake trading backgrounds for exchange arbitrage. For these and other reasons, the Hong Kong Non-Deliverable Forward contract has changed direction.
On the whole, these changes still have to be monitored. The most important thing is to look at economic fundamentals. Looking at the foreign-exchange market, we still need to look at whether the current account is in surplus or deficit, (and) whether the net direct investment is flowing in or out; that is, whether direct investment from foreign businesses minus China’s outgoing direct investment is positive or negative.
China’s commodity trade surplus in 2011 may have been as high as $150 billion, and total FDI is still quite large. ... Overall, the capital account and current account are still in surplus. The balance has improved significantly, but there have been no reversals for the fundamentals. Exchange-rate movements need to be monitored further.

With the exchange rate approaching to the equilibrium point, can capital-account convertibility be put on the agenda as well?

Some things still need clarification regarding capital-account convertibility. In the past, there was an argument that full convertibility was understood as the highest standard. But in reality, international organizations have not clearly defined this. Most developed countries are not 100% freely convertible; maybe they only reach an 80% or 90% level.
Second, retaining necessary oversight is not an obstacle to the realization of convertibility. An internal International Monetary Fund opinion in 2010 said that to maintain macro-economic stability, it is rational for countries to implement a certain degree of management or employ temporary management measures for a capital account, especially for unusual, short-term capital flows.
In China’s case, there are three principles to consider in the development of policy goals in the area of capital-account convertibility. First, prudent macro-economic management of private and public debt must be implemented to prevent broad mismatches of currencies.
Second, necessary oversight of cross-border financial transactions must be carried out. Currently, there are three oversight aspects that are internationally recognized and for which there is consensus: Money laundering, terrorist financing, and excessive use of tax havens must be prevented.
Third, short-term, cross-border, speculative cash flows must be properly managed.
Discounting the above factors, comparing the 40 sub-items relating to capital-account convertibility required by the IMF, one finds that, in fact, we are not far from the goal of capital-account convertibility.
There are two main difficulties. First, our concerns and worries about overseas investment by companies and residents are relatively high. This should be adjusted. The government’s main responsibility is to educate investors, letting them accumulate their own knowledge and gradually undertake their own risks.
Another control is aimed at the problem of foreign companies coming to China to raise funds. Currently, foreign institutions are permitted to issue yuan debt in China, but equity financing is still prohibited. However, the China Securities Regulatory Commission is paying efforts to study the issues, and the overall trend is to gradually liberalize. From this point of view, we are not far from capital-account convertibility.
There is another prerequisite for capital-account convertibility, which is for the yuan exchange rate to be close to the equilibrium exchange-rate level. If the difference is too great, the hole for arbitrage will be relatively deep.

How do you view relations between yuan internationalization, market-oriented reform of the capital account, and maintaining the value of foreign reserves?

It should be said that this problem is a relatively weak link in research inside every circle. In theory, an optimal sequence should be designed in advance. Not every reform can be advanced following conventional procedures.
Some currently ask: How did the yuan become internationalized before convertibility? At the same time, they say other conditions are not yet in place. Will beginning to use yuan in place of foreign currency for import payments not cause China’s foreign-exchange reserves to grow faster?
Therein lie questions about understanding foreign-exchange reserves. Some voices say higher reserves are purely bad. This idea is not comprehensive. It should be understood that the side effects of excessive reserves emerge when reserves increase too quickly, leading to a surge in funds outstanding for foreign exchange. If sterilization is inadequate, inflationary pressure will increase. Using yuan to pay for imports on the surface looks like replacing a portion of foreign-reserve payment, but some foreign-exchange reserves do not need to be sterilized.
Theoretically, reforms should first remove all unnecessary control policies and achieve capital-account convertibility, and then push for overseas settlement of the yuan. But deregulation will not necessarily lead to an international currency.
Promoting cross-border use of the yuan stems from an opportunity seen at the beginning of the financial crisis. South Korea’s capital outflows were quite conspicuous, and the country hoped to carry out a currency swap with China to increase liquidity and market confidence. But under those circumstances, if China had used U.S. dollars for the swap, it would have been unacceptable, because no one knew how the crisis would evolve. Thus, using local currency was proposed. Subsequently, more than 10 countries launched currency swaps with China, and wanted to go a step further by using yuan for trade and investment settlement.
At that time, the market confidence in the dollar had declined due to the impact of the crisis. This was a little providential. This sequence of events certainly did not conform to general rules. But if neighboring countries welcome the yuan without it being convertible, why stop it?
Of course, the basic logic is that we will have to streamline the procedure sooner or later. The sequence of what we do now may be contrary to common sense of the past, but this is not necessarily a bad thing, because it was created by opportunity. It can also force us to do things we had not done.
The internationalization of the yuan depends primarily on the degree of its acceptance by the market. First, this is affected by the progress of China’s reform and opening. With slow reform, its popularity will fall.
Second, [it is] related to the sustainability and stability of macro-economic growth. China’s macro-economy now is relatively good, but in fact we have many difficulties and challenges

BRIC Decade Ends as Growth Peaked: Goldman

2011-12-28T09:36:00.001-05:00

BRIC Decade Ends as Growth Peaked: Goldman

By Michael Patterson and Shiyin Chen - Dec 28, 2011 3:35 AM ET

In the past decade, mutual funds poured almost $70 billion into Brazil, Russia, India and China, stocks more than quadrupled gains in the Standard & Poor’s 500 Index and the economies grew four times faster than America’s.

Now Goldman Sachs Group Inc. (GS), which coined the term BRIC, says the best is over for the largest emerging markets.
BRIC funds recorded $15 billion of outflows this year as the MSCI BRIC Index sank 24 percent, EPFR Global data show. The gauge, which beat the S&P 500 by 390 percentage points from November 2001 through September 2010, has trailed the measure for five straight quarters, the longest stretch since Goldman Sachs forecast the countries would join the U.S. and Japan as the top economies by 2050.
“In emerging markets, we’re waiting for things to get worse before they get better,” said Michael Shaoul, the chairman of Marketfield Asset Management in New York who predicted in February that developing-nation stocks would fall this year. The $845 million Marketfield Fund (VONEMBI) has topped 97 percent of peers in 2011, data compiled by Bloomberg show.
BRIC indexes may fall another 20 percent next year, buffeted by the liquidity squeeze stemming from Europe’s sovereign debt crisis, Arjuna Mahendran, the Singapore-based head of Asia investment strategy at HSBC Private Bank, which oversees about $499 billion, said in an interview. Nations such as Indonesia, Nigeria and Turkey may overshadow the BRICS in the next five years as they expand from lower levels of growth, he said.

BRICs Slowdown

“The slowdown we’re seeing in the BRICs will continue for most of the first half,” Mahendran said. “Compared to the U.S., corporate profits haven’t been that good as companies face higher wages, higher interest rates and currency volatility, and at best, we’ll only start to see the effects of monetary policy loosening in the second half of 2012.”
Gross domestic product in the four countries rose at the slowest pace in almost two years last quarter and Goldman Sachs said this month that their potential economic growth rates have probably peaked because of a smaller supply of new workers. Even as Brazilian and Russian policy makers start to lower borrowing costs, profit growth in the MSCI index will slow to 5 percent next year from 19 percent in 2011, trailing the S&P 500 by five percentage points, according to more than 12,000 analyst estimates compiled by Bloomberg.
Average economic growth in the BRIC countries will decelerate to 6.1 percent next year from a high of 9.7 percent in 2007, according to September estimates by the International Monetary Fund. That would narrow the gap over America’s expansion to 4.3 percentage points, the smallest since 2004, the IMF data show. Global GDP may increase 4 percent next year, restrained by 1.1 percent growth in the euro area, the Washington-based fund said.

‘Meaningfully Slower’

Slowing exports to Europe and government restrictions on real-estate investment are curbing the expansion in China, the biggest emerging economy. India’s growth has been hampered by the fastest interest-rate increases since 1935 and the rupee’s decline to a record low, which fueled inflation and deterred foreign investment. Brazil and Russia, whose growth during the past decade was spurred by surging commodity demand, have been hurt by falling metals prices and the slowdown in China.
“In emerging markets across the board, all the numbers are pointing toward meaningfully slower growth” next year, Rajiv Jain, who oversees about $15 billion as a money manager at Vontobel Asset Management Inc. in New York, said in a Dec. 5 phone interview.
Jain’s emerging-market equity fund beat 98 percent of peers this year, buoyed by holdings of beverage and tobacco companies whose profits are resilient to economic slowdowns.

2011 Losses

The BSE India Sensitive Index led declines among BRIC equity gauges this year, falling 23 percent. China’s Shanghai Composite Index also dropped 23 percent, while Russia’s Micex retreated 18 percent and Brazil’s Bovespa sank 16 percent. The 21-country MSCI Emerging Markets Index (MXEF) lost 20 percent, while the S&P 500 gained 0.6 percent.
The MSCI BRIC Index slid 0.8 percent as of 8:30 a.m. inLondon and the MSCI Emerging Markets Index dipped 0.6 percent, set for the lowest close in a week. The Shanghai Composite gained 0.2 percent, the Sensex dropped 1.1 percent, while the Micex was little changed.
Egypt’s EGX30 Index (EGX30) tumbled 49 percent this year, the biggest decline in emerging markets, as political turmoil stifled tourism and deterred foreign investment following the popular uprising that ousted President Hosni Mubarak. The Philippine Stock Exchange Index posted this year’s largest gain, advancing 3.2 percent after higher consumer spending countered the global economic slowdown.

Peak Expansions

Longer-term economic growth rates in the BRIC nations are poised to drop as their working-age populations increase more slowly and then eventually shrink, according to a Goldman Sachs report on Dec. 7 titled “The BRICs 10 Years On: Halfway Through The Great Transformation.”
“We have likely seen the peak in potential growth for the BRICs as a group,” Dominic Wilson, an economist at Goldman Sachs, wrote in the report. Wilson made the New York-based firm’s first detailed long-term forecasts for the BRIC nations in 2003, two years after Jim O’Neill, then head of economic research, coined the term.
O’Neill, now chairman of Goldman Sachs’s asset-management unit, declined an interview request for this story. His latest book, “The Growth Map,” talks of “rosy prospects” for the BRICs as well as the potential of the “Next Eleven” most populous emerging economies.

Fund Flows

Goldman Sachs’s bullish outlook for the BRIC nations proved prescient as the economies expanded at an average pace of 6.6 percent during the past decade, more than four times faster than America, according to IMF data. Investors poured about $67 billion into Brazil, Russia, India, China and BRIC mutual funds from 2001 to 2010, data compiled by Cambridge, Massachusetts-based EPFR Global show.
This year’s fund outflows were the biggest on an annual basis since at least 1996, according to EPFR Global. India equity funds recorded about $4 billion of net withdrawals, while China funds lost $3.6 billion. Investors pulled $2.2 billion from Brazil, $326 million from Russia and $5.3 billion from funds that invest in all four of the BRIC countries. All emerging-market funds tracked by EPFR Global had about $47 billion of outflows, leaving assets under management at $605 billion.

Rate Cuts

Large fund outflows are a contrarian indicator because they may signal pessimistic investors have already sold, setting the stage for a trough in share prices, according to Jonathan Garner, the chief Asia and emerging-market strategist at Morgan Stanley in Hong Kong. Emerging-market funds recorded about $48 billion of outflows in the five months ended October 2008, when developing-nation stocks began a rally that sent the MSCI emerging-market index up 108 percent in 12 months.
Emerging-market stocks will probably outperform U.S. equities next year as central banks in developing countries cut interest rates to stimulate economic growth, said James Paulsen, the chief investment strategist at Wells Capital Management in Minneapolis. The MSCI emerging-markets gauge (MXBRIC) rose an average 35 percent after the BRIC nations began cutting interest rates in 2003, 2005 and 2008.
Brazil has reduced its benchmark Selic interest rate by 1.5 percentage points since August to 11 percent. China lowered banks’ reserve requirements in November for the first time since 2008, while forwards contracts in Russia and India show that traders are betting on interest-rate cuts in the next 12 months.
In the U.S., the Federal Reserve has pledged to hold interest rates near zero until at least mid-2013.

Easing Policies

“I like the emerging markets better than anything right now,” Paulsen said in a Dec. 7 interview on Bloomberg Television. “Most of these emerging-market policy officials are turning to easing policies.”
While the MSCI BRIC index has dropped to 8.4 times estimated profit from 13 times at the start of the year, valuations are still higher than they were a decade ago. The MSCI India Index trades for 15 times profit, up from 13 times in 2001, according to data compiled by MSCI Inc.
India’s price-earnings ratios have climbed to an 8 percent premium over U.S. stocks from a 63 percent discount 10 years ago, data compiled by MSCI show. The discount on Chinese shares narrowed to 35 percent from 59 percent, while it shrank to 29 percent from 76 percent in Brazil and dropped to 60 percent from 87 percent in Russia, based on MSCI indexes.

Relative Valuations

Compared to the U.S., valuations for BRIC markets don’t look cheap enough, said Ok Hye Eun, a Seoul-based fund manager at Woori Asset Management Co., which oversees the equivalent of $15 billion.
“BRIC markets won’t be an attractive destination for a while because there are still ongoing risks,” said Ok, citing the prospects of a potential collapse in China’s real estate market and the outlook for economic reforms in India. “I see more opportunities in the U.S.”
ICICI Bank Ltd. (ICICIBC), India’s biggest private lender, trades for 14 times profits, a 42 percent premium over San Francisco-based Wells Fargo & Co., even as analysts predict slower earnings growth at the Mumbai-based bank, according to data compiled by Bloomberg. ICICI Bank profits will increase 10 percent in the current fiscal year, compared with 28 percent at Wells Fargo, the biggest U.S. bank by market value, the estimates show.

Want Want, Redecard

Want Want China Holdings Ltd. (151), a Shanghai-based maker of food and beverages, is valued at 36 times profits and analysts project earnings will increase 7.7 percent this year. The Hong Kong-listed shares are twice as expensive as Northfield, Illinois-based Kraft Foods Inc., which trades for 17 times earnings and may boost profits 13 percent, analyst estimates compiled by Bloomberg show.
Redecard SA (RDCD3), Brazil’s second-biggest card-payment processor, trades for 15 times profits, versus 12 times for New York-based American Express Co. Sao Paulo-based Redecard’s earnings will probably slip 3.8 percent this year while American Express posts a 19 percent gain, analyst projections compiled by Bloomberg show.
Outflows from emerging-market funds may continue next year as economic growth and company results disappoint investors, according to John-Paul Smith, the London-based emerging-market strategist at Deutsche Bank AG. Money managers surveyed by Bank of America Corp. from Dec. 2 to Dec. 8 said their emerging-market holdings are still 23 percent higher than benchmark weightings even after they cut positions from last month.

‘Structural Weaknesses’

“There will be a lot of volatility, but as people realize the underlying structural weaknesses of the BRIC economies, you’ll see money coming out,” Deutsche Bank’s Smith said in a telephone interview on Dec. 19.
China’s economic data have trailed estimates for the past two months, based on Citigroup Inc.’s Economic Surprise Index, a gauge of how much reports are missing economist projections in Bloomberg News surveys. Chinese manufacturing contracted by the most since 2009 in November, while new home prices declined in 49 of 70 cities tracked by the government the same month.
By contrast, U.S. data is beating analyst expectations by the most in nine months, according to the country’s Citigroup surprise index. Manufacturing in America expanded at the fastest pace in five months in November, the Institute for Supply Management said. Initial jobless claims fell to the lowest level since 2008 in the week ended Dec. 10, while U.S. housing starts in November climbed the most in 19 months, government data show.
Per-share earnings in the MSCI BRIC index trailed analysts’estimates by 13 percent last quarter, according to data compiled by Bloomberg. S&P 500 profits beat projections by 4.4 percent, the data show.

Labor Supply

While Goldman Sachs still expects the BRICs to join the U.S. and Japan as the world’s biggest economies by 2050, the bank predicted this month that the four nations’ contribution to the global expansion will diminish during the next few decades. Economic growth in the BRICs may fall to about 4 percent by 2050 as working-age populations dwindle, Goldman Sachs said.
The number of people aged 15 to 64 in Russia has already started to drop, while Chinese workers may peak at around 1 billion and begin falling by 2020, according to estimates by the United Nations. Brazil’s peak may come by 2040, with India’s topping out by 2060, the New York-based United Nations said. The U.S. will keep adding workers through 2100, the forecasts show.
“In the last decade, simply recognizing that the BRICs were the story was largely enough to propel outsized investment returns,” Goldman’s Wilson wrote in this month’s outlook report. “It is much harder to accept that simply believing in their long-term growth dynamics can be a sufficient investment thesis now, if it ever was.”
To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net.
To contact the editor responsible for this story: Laura Zelenko at lzelenko@bloomberg.net

Europe Crisis Reflects Deeper Ideological Divide: Eric Fine

2011-11-25T10:13:00.000-05:00

Europe Crisis Reflects Deeper Ideological Divide: Eric Fine

By Eric Fine Nov 24, 2011 7:00 PM ET3 Comments

The crisis gripping Europe reflects a much larger problem: The world’s policy makers have fundamentally opposing views of how to manage their currencies and economies. Unfortunately, there’s no happy solution.

Let’s examine the ideologies. In the U.S., the dominant crisis narrative is that authorities faced a once-in-a-hundred-years storm in the financial panic of 2008. The only proper response, then, was for the Federal Reserve to provide unlimited funds until confidence returned and longer-term solutions were possible. Many Americans apply this lens to Europe, and conclude that the European Central Bank must similarly print money to solve its crisis now.

Germans, together with many emerging-market policy makers, see a very different narrative. To them, the crisis is the result of governments repeatedly building up debts in response to economic slowdowns -- the same explanation U.S. authorities offered for emerging-market crises in the late 1990s. They might further note that the U.S. hasn’t used the time bought with the Fed’s largess to address underlying problems, such as the sorry state of public finances.

These poles reflect deeply held beliefs, not intellectual or moral failures, as those on opposite sides of the divide appear to think. There’s no objective truth. Nobody really knows how much debt the U.S. and the euro area, which issue the world’s two leading reserve currencies, can bear. It’s also unclear how much inflation the citizens of advanced nations will tolerate before they lose faith in their currencies. As the U.S. and Europe test new limits, we may soon find out.
Monetary Policy

Consider monetary policy. Many in the U.S. believe the Fed can expand its balance sheet indefinitely, if necessary. They rightly point out that investors pile into the haven of dollars and U.S. Treasury bonds in times of crisis, and that this revealed preference suggests the dollar’s reserve-currency status is unassailable. Given the experience of the Great Depression of the 1930s and the stagflation of the 1970s, they reasonably conclude that bank runs should be treated with limitless liquidity, and that inflation can ultimately be resolved.

Germans draw their beliefs from a darker history. Between the two world wars, central-bank financing of government deficits fueled the hyperinflation that helped bring down theWeimar Republic and set the stage for the rise of Nazism. Many emerging markets have also learned painful lessons about what can happen when central banks become perceived as primarily lenders to government and enablers of fiscal incontinence. Their response to the American line is that if the fiscal and monetary authorities don’t establish credibility, suffering a bout of austerity may be far less bad than social breakdown. Not surprisingly, the charter of Germany’s Bundesbank forbids lending to government.

Can these differences be reconciled? One seeming compromise-- which will probably be proposed if the world faces another period of systemic risk -- is to invoke a new global reserve currency, namely the International Monetary Fund’s so-called Special Drawing Rights. If the IMF had the ability to issue unlimited SDRs, it could boost the reserves of central banks at will.

Such a move, though, would probably face opposition from the German side of the ideological divide, which would view it as yet another attempt to finance profligacy with funny money.

This suggests a second option will arise: to create some global standard to which the value of individual currencies can be tethered. Central banks would guarantee their currencies’value in gold, or against a basket of commodities. People with backgrounds in emerging markets would recognize such a commodity standard as essentially identical to a currency board, in which a central bank guarantees the exchange rate of its currency against that of a reserve currency. Currency boards tend to come about when people lose confidence in the fiscal and monetary authorities, almost always as a result of permanent monetization of government debt. Sound familiar?

Cautionary Tale

For policy makers who see the SDR as an answer, the recent European experience offers a cautionary tale. The European Financial Stability Facility represents an attempt to create a new balance sheet to bail out governments. Doing so in a crisis hasn’t worked out well, as the troubles of financially weak states have infected the stronger ones. This is why China, likeGermany, is reluctant to become a backstop for Europe. Once that happens, every new “crisis” will drag them in deeper, increasing the likelihood of contagion.

In the short term, the probable outcome is a continued policy muddle. Some central banks will follow the Fed’s example and keep expanding their balance sheets, while others will try to hold the line, like the ECB. To prevent the effects of such opposing policies from leaking across borders, countries might start to employ capital controls.

If the sides ever do agree on a single new architecture, it will probably happen in one of two bad ways. Financially strong countries, such as China and Germany, may become so infected by the weaker countries that the attractiveness of printing money overwhelms ideological constraints. Alternatively, the financially weak nations might give in to demands for austerity and tough choices.

In the final analysis, either option will be painful.

(Eric Fine is a managing director at Van Eck Global. He manages accounts that have positions in the sovereign and corporate debt of various countries, including a net short position in European sovereign debt. The opinions expressed are his own.)
To contact the writer of this story: Eric Fine at EFine@vaneck.com
To contact the editor responsible for this story: Mark Whitehouse at mwhitehouse1@bloomberg.net

三大积极因素助力A股企稳回升

2011-11-24T09:11:00.002-05:00

三大积极因素助力A股企稳回升

受欧美大跌影响早盘直接低开，蓄势震荡一个小时后，股指突然发力上攻，并强势翻红。截止收盘，沪指报2397点，上涨2.49点，涨幅0.10%。

是什么原因促使股指企稳回升的？我们认为主要有三大因素：

1、央行表态浙江6家农信银行恢复存准率16%，这意味着定向宽松政策正在逐步推进。

2、换届后IPO首发通过率明显下降，表明证监会开始整治A股弱势的根源，利好股市。

3、神秘资金逆势拉抬四大行，疑似国家队再出手。

盘中的这波异动拉升是在银行为首的权重股带领下起来的，其实近期四大行的表现明显强于股指，主要是因为随着近期的频频下跌，股指再次来到汇金大举增持的点位，这意味着汇金也将面临被套的局面，同时作为国家队也有护盘维稳的要求，所以很有可能就是它们再次出手大举买入。据监测，目前主力资金明显流入、正加速入场，使很多个股快速翻红上涨。

总的来看，目前政策面已经悄然转向，继汇金大举增持四大行、国务院力挺小微企业、财政部宣布减税后，部分地区的存准率也开始有下调松动趋势，这意味着定向宽松的政策利好正在不断酝酿，有助于A股的企稳筑底。

投资者应该注意的是，据我们详细研究，目前操作要想获利，只能买入一类股：那就是国家政策大力扶持的品种，同时像前期暴涨的文化传媒概念也是同样的原因。(广州万隆)

President Barack Obama channeled the national frustration with the economy that threatens his political standing and challenged the U.S. Congress to pass a $447 billion jobs plan tilted heavily toward the Republican prescription of tax cuts.

2011-09-09T09:12:00.000-04:00

President Barack Obama channeled the national frustration with the economy that threatens his political standing and challenged the U.S. Congress to pass a $447 billion jobs plan tilted heavily toward the Republican prescription of tax cuts.

The president, speaking before a joint session of Congress, demanded six times that lawmakers act “right away” on a plan that would boost spending on infrastructure, stem teacher layoffs and cut in half the payroll taxes paid by workers and small business owners.

“The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy,” Obama told the lawmakers yesterday.

Job growth stalled last month and the unemployment rate has hovered at or above 9 percent for more than two years. The president’s job-approval ratings are falling to new lows as public doubts about his stewardship of the economy rise. Public opinion of Congress has dropped even lower.

Tax cuts account for more than half the dollar value of the president’s latest plan to turn the economy around, and administration officials said they believe that will have the greatest appeal to Republicans in Congress. The president dared his adversaries to oppose a provision that would extend and deepen payroll tax cuts due to expire Dec. 31.

“I know some of you have sworn oaths to never raise any taxes on anyone for as long as you live,” he said. “Now is not the time to carve out an exception and raise middle-class taxes, which is why you should pass this bill right away.”

Common Ground
House Majority Leader Eric Cantor, a Virginia Republican who has been a frequent critic of Obama, said there may be areas of common ground, such as tax reductions for small businesses.

“That’s something we Republicans have been advocating for quite some time now,” Cantor said in a Bloomberg Television interview. He also indicated Republicans may support extending the payroll tax for workers.

Still, some other Republicans were hesitant.

“I am not sure that a payroll tax holiday is really going to spur the economy,” said Representative Bill Huizenga, a Michigan Republican. He added that “a better tax break would be something that would spur along innovation and wealth generation” and creates “ancillary jobs.”

The 2012 presidential election and the political consequences of public blame for inaction on joblessness formed an undercurrent in the speech. Even as Obama warned against delay, he noted “the next election is 14 months away.” He said he would take his case for passage of the bill “to every corner of the country.”

On the Road
He speaks today in Richmond, Virginia, in Cantor’s congressional district. On Sept. 13 he’s scheduled to travel to Columbus, Ohio.

Hours before Obama addressed Congress and a national television audience, Federal Reserve Chairman Ben S. Bernanke said policy makers will discuss at their next meeting this month the tools they could use “to promote a stronger economic recovery in the context of price stability.” In a speech to economists in Minneapolis, Bernanke stopped short of signaling what he believes is the central bank’s best option to aid the economy.

Treasuries and the Standard & Poor’s 500 Index futures declined after Obama detailed his plan. Ten-year yields climbed two basis points to 1.99 percent as of 10:35 a.m. in London. S&P 500 futures fell 0.3 percent.

Covering the Cost
Obama stressed that he would pay for the entire jobs package with offsetting spending cuts and increases in tax revenue over the next decade. He said he would announce the offsets by Sept. 19.

Obama didn’t mention the total cost in his televised address. Nor did he utter the word “stimulus,” though Republican lawmakers were quick to draw comparisons with the $825 billion spending and tax-cut program of 2009 that has become unpopular with voters.

Representative Kevin McCarthy of California, the third- ranking Republican in the House, dubbed the new plan “Stimulus 2.0.”

The package includes spending favored by Democratic constituencies. It would include a $105 billion infrastructure proposal for school modernization, transportation projects and rehabilitation of vacant properties. Most of the economic impact from the infrastructure spending would be next year though some of it would come in 2013, according to an administration official, who briefed reporters on condition of anonymity.

‘Make a Difference’
“Ultimately, our recovery will be driven not by Washington, but by our businesses and workers,” the president said. “But we can help. We can make a difference.”

The administration estimated that $35 billion it’s seeking in direct aid to state and local governments to stem layoffs of educators and emergency personnel would save the jobs of 280,000 teachers, according to a White House fact sheet.

The centerpiece of the plan is the cuts in payroll taxes, which cover the first $106,800 in earnings and are evenly split between employers and employees. Obama would reduce the portion paid by workers next year to 3.1 percent from 6.2 percent. The rate had been cut 2 percentage points under the terms of a tax deal reached last year, and that reduction is set to expire Dec. 31.

The White House also would use temporary payroll tax reductions next year to offer incentives for new hiring and assist small businesses.

Helping Smaller Firms
Businesses would get the same 3.1-point reduction on taxes they pay on the first $5 million of their payroll, a limit that skews the benefit toward smaller firms. The full 6.2 percent employer contribution would be waived on the first $50 million net increase in a company’s payroll.

The proposal includes additional tax credits for hiring veterans and workers who have been unemployed more than six months. The administration also wants to make it illegal for employers to discriminate against applicants who are unemployed.

The fiscal boost from the jobs package next year would be larger than in the first year of the 2009 economic stimulus, said Mark Zandi, chief economist at Moody’s Analytics Inc.

Zandi, who was briefed on the plan before the president’s speech, forecast that passage of the entire jobs package would add 2 percentage points to economic growth next year and bring down the unemployment rate by 1 percentage point compared with current policy, under which a temporary payroll tax cut and extended unemployment benefits both expire Dec. 31.

Long-Term Unemployed
In a step aimed at the long-term jobless, Obama proposed granting states authority to pay unemployment benefits to people who have been out of work for more than six months while they train for jobs at businesses at no cost to the employer for up to eight weeks.

States also would be able to use unemployment-insurance funds to make up for wages lost by workers whose hours were cut back in lieu of a layoff and for those 50 and older who took a lower-paying job after a layoff.

The White House wants to incorporate the changes in the unemployment-insurance program along with a one-year continuation of extended unemployment benefits. The extended benefits cover jobless workers for up to 99 weeks.

The administration considered and rejected a temporary repatriation holiday that would allow companies to return overseas profits without paying corporate income taxes on the proceeds. The White House concluded that it wouldn’t have as great an impact on job growth as the new hiring incentives, the administration official said.

The official said the small businesses targeted by the tax incentives confront credit constraints and often have sustained declines in the value of the collateral they can use.

To contact the reporter on this story: Mike Dorning in Washington D.C. at mdorning@bloomberg.net

Norway buffs armor as currency wars open new front

2011-09-08T14:24:00.000-04:00

Norway buffs armor as currency wars open new front

September 8, 2011, 1:26 PM.Central bank alarms are ringing in Scandinavia now that currency traders must roam further north to find a safe-haven alternative to the Swiss franc USDCHF.

Norway’s krone rose 2% against the euro Tuesday, its biggest jump since Jan. 2009, after the Swiss National Bank said it would prevent its currency from rallying over a certain level against the euro — sending some investors seeking a safe-haven in the krone and Swedish krona. The Norwegian krone USDNOK has gained about 1% against the U.S. dollar since the SNB move. Read more on Swiss move.

But the Norwegian central bank appears ready to step in to make the krone less attractive.

On Thursday, Norges Bank Governor Oystein Olsen directly addressed the krone’s jump after the SNB move, and warned:

A krone that is too strong can over time result in inflation that is too low and growth that is too weak. In that case, monetary policy measures will be taken. In Norway, the key policy rate is the relevant instrument.

After the speech, Citi currency analyst Greg Anderson said that “the pertinent issue for FX markets is the amount of appreciation that Norwegian authorities will tolerate before beginning to interfere as the Swiss ultimately chose to do.” Citigroup economists think there’s now a strong possibility of a Norwegian rate cut at the central bank’s Sept. 21 policy meeting if the krone keeps rising.

But the Norwegian central bank, which in 2009 became the first major European institution to hike interest rates since the credit crunch, has a little more wiggle room than its Swiss counterparts did. In Norway, benchmark interest rates are at 2.25%. In Switzerland, where central bank authorities failed to stave off the Swiss franc’s rise with more conventional currency interventions before Tuesday’s vow to buy unlimited quantities of euros, rates are near 0%. But Norway may not be able to hold out for long.

“Like the SNB, the Norges Bank may eventually arrive at a point where intervention is necessary,” wrote Anderson in emailed comments. “In fact, given the Swiss experience and the way markets learn, the evolution to that point may be relatively rapid.”

Oil sustains Norway as EU wallows in debt

2011-08-19T08:32:00.000-04:00

Oil sustains Norway as EU wallows in debt

High oil prices, strong trade bring prosperity to Nordic nationStories You Might Like

OSLO (MarketWatch) — Blessed with large petroleum reserves, Norway is riding a wave of prosperity brought by high oil prices and robust public finances while the rest of Europe is mired in a debt crisis.

This Scandinavian nation of 4.9 million is the biggest oil producer and exporter in western Europe, with most of the oil production taking place offshore in the North Sea. Norway was also the world’s second largest exporter of natural gas after Russia last year, when crude oil, natural gas and pipeline transport services made up nearly 50% of its exports value.

A crane vessel is being resupplied outside of the oil town of Stavanger, Norway. “We’re a commodity-based economy,” said Snorre Evjen, senior economist at Fokus Bank, in a recent interview in his office overlooking the Parliament building in Oslo. “It all stems from the oil price and the strong terms of trade. Export prices have increased substantially, while import prices have remained fairly stable.”

To make sure future generations also benefit from the oil resources first discovered in 1969 and which will eventually run out, Norway saves petroleum revenues in a pension fund valued at roughly $550 billion. The so-called 4% fiscal rule limits the swings in the Norwegian economy; under the rule, the government aims to spend only 4% of the pension fund annually, though the exact percentage can vary.

“The country’s finances are solid,” Evjen said. “We don’t have net debt. That’s why Norwegians don’t worry too much.”

The budget surplus was more than 10% of gross domestic product last year, and unemployment is currently 3.3%. The mainland economy, which excludes oil and shipping, is expected to grow 3.3% this year and 4% next year after growth of 2.2% in 2010, the OECD estimates.

Norway’s population is also increasing rapidly, driven by labor immigration from Sweden, Poland and the Baltic nations, as newcomers are attracted by high wages and the low unemployment rate. Norway is part of the European Economic Area and participates in the European Union’s single market, but it’s not an EU member after two failed attempts by referendum to enter the union. As a result, the nation benefits from the free movement of goods and labor, but has its own monetary policy and currency.

Krone strength
The sovereign debt crisis, which has roiled the 17-nation zone that uses the euro, has had no impact on Norway’s real economy. In the financial markets, however, Norwegian stocks have fallen along with equities elsewhere in Europe; Oslo’s OBX stock index /quotes/zigman/1475606 NO:XOBX -0.10% is down nearly 19% year-to-date. At the same time, investors have bid up the value of the krone, while strong demand has pushed down the yields on Norwegian government bonds.

Reine, a fishing village in Lofoten, Norway. Steinar Juel, chief economist at Nordea in Oslo, said in an interview that the krone — a small, illiquid currency which tends to be sold when investors want to exit risky assets — has been acting differently. The currency has rallied around 8% against the dollar so far this year.

“The krone isn’t a safe haven in the same way as the Swiss franc, but we see a tendency that the krone is becoming more like that,” Juel said.

In recent weeks, investors looking for safety have piled into the Swiss franc, prompting the Swiss central bank to take a series of measures in an effort to stem the strength of its currency. Like the Swiss franc, the Norwegian krone and the Swedish krona are increasingly appealing.

Strategists at FxPro noted in a recent report that “one of the considerable attractions of the krone for foreign investors is the fabulous state of the public finances.”

Of concern for Norway is that the high exchange rate and rising wage demands are beginning to weigh on the competitiveness of the trade sector,” they cautioned.

That concern was evident when Norway’s central bank, Norges Bank, kept interest rates on hold at 2.25% in early August, reluctant to increase rates further given markets turbulence and clear signs of slowing global growth.

Norway is also dealing with the impact of the July 22 twin attacks, when an extremist killed 77 people and injured dozens others.

“The terror attacks will have a dampening effect on consumption,” Juel said. “It could take some time before people start acting normally.”

“We may lower the growth numbers somewhat because of weaker growth internationally,” he added. While the estimate revisions haven’t been finalized, he thinks growth in the mainland economy this year and next will be around 2.75%, lower by about 0.5% and 0.25% for 2010 and 2011, respectively, than Nordea’s previous forecasts.

“Slower hikes from Norges Bank will in 2012 to a large extent counteract the negative impulses from slower growth abroad,” Juel said.
/quotes/zigman/1475606 Add XOBX to portfolio NO:XOBX Oslo Stock Exchange Equity Index 324.72 -0.31 -0.10% Volume: 1.85MAug. 19, 2011 2:14p
Polya Lesova is chief of MarketWatch’s London bureau.

屈宏斌：三大方案拆除平台债炸弹

2011-08-08T10:35:00.000-04:00

屈宏斌：三大方案拆除平台债炸弹

本文来源于《财经网》　2011年08月03日 20:58 我要评论（0）

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发行市政债券并以其收益偿还银行贷款；出售公有资产将为偿还债务筹集资金，对地方政府资产证券化是中期方案；在中央和地方政府之间重新调整收入分配，是地方政府的财政地位得到强化的最终解决方案

　　我们认为最近关于地方政府债权规模的讨论并未抓住要点。无论是 10.7万亿（官方数据）抑或14万亿（非官方估测）人民币，都低于GDP的36%。若将中央政府的债务计算在内，中国政府债务总额达到2010年GDP 的54%左右。这一债务水平虽不低，但与发达国家以及大多数新兴国家相比，仍属可控状态。需要注意的是，地方债务逾 70% 的收益都流向了基础设施建设以及土地投资，从而提高了政府的资产额。因此，总体上而言，我们认为中央和地方政府的资产负债表仍相当强劲。
　　但由于银行借款的期限结构与长期基建项目的投资回收周期不匹配，因此存在着流动性风险。鉴于过半的债务都会在2013 年年底到期，我们认为未来政府需要着手重组地方债务并防止发生对银行的重大违约。我们认为当局有三种选择：
　　推动发行长期地方债券，以确保地方政府如期偿还银行贷款。考虑到私营部门巨大的银行存款（64万亿人民币），需求应该不成问题。
　　中期的选择是盘活资产以偿还贷款。地方政府仍拥有收费公路、港口、隧道以及2万多家国有企业，其中70%以上都在盈利。在任何情况下，我们都认为将地方政府从商业活动中脱身出来，并使其专注于公共服务是一个必要的步骤，这也是中国政府进行改革的主要目标。
　　从更长期看，最终措施是给予地方政府更大的财政收入份额，从而使地方政府能够持续为基础建设投资提供资金。
　　解读地方债务
　　地方债务规模可控；尚无偿付风险
　　但存在流动性风险 - 需进行债务重组以避免对银行的违约
　　发行地方债券为最佳选择
　　无论是10.7万亿还是14万亿人民币，地方债务规模仍属可控。前者是国家审计局（NAO）的预测，是41,300名工作人员花了近三个月的时间调查了6,567家地方政府融资平台公司后得到的结果。利用不同的统计数据，某些私营部门预计总数为约14万亿人民币。
　　不论数字是多少，这都是一笔巨大的数额。但若以占中国GDP的比重来看，就没有那么惊人了。首先，即使假定为14万亿人民币，再加上6.8万亿人民币的中央政府公债，政府债务总额为20.8万亿人民币，或为GDP的54%（2010年）。与发达国家和大多数新兴国家相比，中国的公债仍在可控范围内（参见图1）。

　　其次，公债总额（中央加地方）与政府总收入相比仍较低，并且财政收入还在强劲增长。中国政府（总体来看）财大气粗，去年总收入高达 8.3万亿人民币。20.8万亿人民币的总债务相当于2010年政府总收入的2.5倍，这比美国的近 6.5 倍要好得多，就在撰写本文的同时，美国仍在争取于截止日期前提高债务上限。上半年财政收入同比增长30% ，今年有望达到10万亿人民币，这意味着总债务/收入比可能在年底降到2倍。
　　在过去十年中，利息占政府总收入的比重下降，目前该比率仍属可控（参见图2）。

　　无偿付能力问题
　　与许多其他由于过高的运营支出导致公债不断增加的国家相比（见表1），中国地方债务逾70% 的收益都用于基础建设融资以及土地收储，这增加了政府的资产额。因此，尽管债务水平较高，但地方政府的资产负债表仍非常强劲。

　　在所用的资金中，约62%用于城市基础设施建设（36.7%）和交通运输项目（24.9%）。另有10.6%用于购买土地。总之，这些投资共7.9万亿人民币，具有巨大的商业价值。
　　但存在流动性问题
　　但由于债务的期限结构与项目的投资回收周期不匹配而存在流动性问题。如图4所示，逾50%的地方债务将在2013年年底到期，另有17%的债务将于2014年和2015年间到期。

　　但由于逾 70% 的债务都用于投资回报期较长的长期基建项目融资，这意味着未来三至五年内这些项目难以产生足够的现金流来偿付当地贷款。
　　尽管地方政府有其他收入来源，但考虑到 2013年年底到期的短期债务是地方政府年收入的1.4倍，该债务的偿还仍具挑战性。我们认为，为避免对银行的违约，当局需果断采取措施对地方债务进行重组。
　　拆弹平台债
　　我们认为中国政府有三种方案来进行债务重组，其中债券-贷款互换最为可行。
　　1. 市政债券-贷款互换
　　第一个选择是开始发行市政债券并以其收益偿还银行贷款。从本质上看，这为地方政府发行新债（长期债券）以偿还旧债（短期债券）的展期打开了大门，从而缓解了对银行的违约风险。
　　同时，为地方政府开辟了融资渠道，以透明和市场化的方式来满足未来基础设施投资之需。由于中国正处于城市化的进程之中，在未来几十年内对基础设施建设的需求仍然很大，因此如何以更好的方式为此类投资进行融资，将对维持中国的长期发展起到关键作用。

　　相关媒体报道显示，试点地方债可能最快将于年内发行。沿海地区的地方政府具有相对较强的资产负债管理能力，因此可能成为第一批候选人。如果成功，该计划可能在全国范围内推广。这可能比多数预期的更快。
　　2. 盘活政府资产
　　地方债的积累伴随着资产的增加，其中大多为基础设施项目和土地（图3）。地方政府目前仍拥有20,000多家国有企业，其中 70%以上均有盈利。所有这些都显示，地方政府有强大的金融实力来避免偿付能力的风险。

　　出售公有资产将为偿还债务筹集资金。不管怎样，我们认为地方政府有必要出售这些资产以实现其由经济主体向公共服务机构的转变，这是未来五年政府职能转变的关键目标。为此，地方国有企业上市将是最佳方案，但真正的挑战在于如何对通过其它渠道出售这些资产进行管理以防止腐败和国有资产的流失。
　　对地方政府的资产进行证券化是另一个可行方案。城镇基础设施建设和交通运输项目为主要投资对象，这些项目一般具有稳定的现金流，适于进行资产抵押证券化。一些高质量的项目（例如收费公路）可能已经为贷款或债券发行作了抵押（通过城镇基建公司），但公共事业公司、医院和土地也可成为证券化的目标。
　　由于资本市场的欠发达特征，证券化是中期方案。未来数年需要克服一些制度障碍。例如，中国需建立促进证券化发展的法律框架。

　　对地方债券的需求不是问题，尤其是中国家庭积聚的大量储蓄。虽然这些家庭具有雄厚的财力，但他们的投资选择有限。
　　根据中国央行的数据显示，尽管国内金融市场在过去数年内得到长足发展，但其中 70%以上中国家庭的金融资产依然为现金和存款。存款的收益率非常低，一年期存款的实际利率仅为 0.3%。这意味着对回报率较高的投资工具的需求非常强烈。
　　中国的储蓄规模足以为发行地方债提供资金，进而深化债券市场和拓宽投资渠道。

　　为落实该计划，我们认为中国需要提高地方政府的融资透明度，并引入更多成熟的机构投资者和评级机构，以便市场为其信用风险准确定价。
　　3. 财政收入分配的重新调整
　　在中央和地方政府之间重新调整收入分配，是地方政府的财政地位得到强化的最终解决方案。这将促使地方政府更好地履行对地方社会和经济发展的责任。
　　在1990年代初期，中国政府出台了一项旨在集中税收收入的重大财政改革计划。中央政府集中国税，并收取大量其他税款（例如增值税和企业所得税），只将余额归入地方政府。结果，在牺牲地方政府的情况下，中央政府的财政收入占总数的比例从 1990 年代初期的 30%不到上升到50%以上。
　　问题是，地方政府仍然承担了大量的基础设施融资压力。在收入不足的情况下，多数地方政府别无选择地通过地方政府融资工具（LGFV）向银行贷款。自 1990年代初期以来，多数地方政府的融资工具（尤其那些国家层面的融资工具）累积大量债务的现象已不足为奇。
　　从中期和长期来看，地方政府需要扩大其收入来源，而不能仅仅依赖于土地出让收入、中央政府转移支付或地方政府融资工具。在一些试点方案中已引入新的地方税种，包括物业税和资源税。
　　今年物业税已在上海和重庆进行试点，其所有收入均归地方政府。新疆于 2010年 6 月实施了一项资源税，去年筹得 20亿元人民币，相当于新疆 2009年财政收入的 7%。其他省份（例如内蒙古和山西）正致力于推出资源税试点。
　　屈宏斌为汇丰银行大中华区首席经济学家，孙珺玮为汇丰宏观经济分析师

'Dow Theory' Confirms Sell Signal

2011-08-04T09:44:00.000-04:00

'Dow Theory' Confirms Sell Signal

By STEVEN RUSSOLILLO

If there were any doubts that stocks have entered corrective mode, the "Dow Theory" is now telling us the market is heading down.

The century-old Dow Theory, a way to analyze market trends and turning points, says both the Dow Jones Industrial Average and Dow Jones Transportation Average need to move in tandem to confirm the trend. On Tuesday, the Dow Theory officially gave a sell signal, as Dow industrials and Dow transports broke decisively through June lows, with the Dow transportation index hitting a 2011 low.

The selling comes as worries about the global economy have rippled through financial markets in recent weeks amid signs of further weakening.

The symbiotic relationship between the two indexes is a clear sign to Dow theorists that the economic message and the market outlook are moving in tandem. The idea is that making goods is one leg of the industrial economy and moving those goods around is the second leg, so their trends should be in sync.

Phil Roth, chief technical market analyst at Miller Tabak & Co., said in a Wednesday note that Dow theorists pointed to several divergent actions early last month. For example, the Dow transports hit an all-time high in early July, but the industrials weren't able to follow suit.

The actions were early indicators that the market's uptrend was due for a reversal, which consequently has taken place over the past few weeks. "A sell signal has been confirmed," Mr. Roth said.

The Dow Jones Industrial Average broke an eight-day skid Wednesday, rising 29.82 points, or 0.3%, to 11896.44.

The Dow Jones Transportation Average—a 20-member index of airlines, railroads and trucking companies—turned positive in midafternoon trading, erasing a 1.9% loss, and finished up 0.5%, to 4967.18

Despite the intraday bounce, the index, which includes bellwethers FedEx Corp. and United Parcel Service Inc., remains firmly in correction territory, down 12% from its all-time closing high on July 7.

For now, market technicians are adjusting their models to reflect the stock-market's swoon.

"New short-term oversold extremes mean probabilities are increasing for a short-term rebound, but a rebound is probably a reflex affair in a medium-term trend that just turned down," Mr. Roth said.

Write to Steven Russolillo at steven.russolillo@dowjones.com

Japanese, Swiss Move to Push Currencies Lower

2011-08-04T09:39:00.000-04:00

Japanese, Swiss Move to Push Currencies Lower

By TAKASHI NAKAMICHI And TOM LAURICELLA

The collateral damage from the U.S. and European debt crises has shifted the front lines of the currency wars to Japan and Switzerland.

Japan has intervened in currency markets in an effort to stem the rising yen. Will this unilateral move effectively contain the currency's climb and improve conditions for the country's exporters

.The Japanese government intervened Thursday morning in currency markets to stem the rise of the yen against the dollar, hoping to preserve modest growth in an economy rebounding surprisingly well from the March earthquake and tsunami—but that now appears threatened by a soaring currency undermining exporters.

The Bank of Japan also announced that it would end later in the day a policy meeting originally scheduled to spill over to Friday and would make an announcement Thursday afternoon. That suggested the central bank was coordinating with the Ministry of Finance in moving to keep the yen from hitting the postwar record high it has flirted with in recent days. The BOJ has been widely expected this week to take steps to pump more cash into the economy by purchasing bonds and other assets.

The action in Tokyo came a day after the Swiss National Bank caught markets by surprise, cutting interest rates to nearly zero and pledging to pump billions of newly minted francs into its markets in order to fend off a flood of money entering the country from investors seeking a safe haven.

In announcing Japan's intervention, Finance Minister Yoshiko Noda said the government was moving to counter what he called "one-sided," "excessive" and speculator-driven rises in the yen.

In similar language, the Swiss central bank called its currency "massively overvalued," adding that it "will take further measures against the strength of the Swiss franc if necessary."

The intervention by the Finance Ministry underscores a renewed currency activism by Japan as the yen has danced near record highs over the past year. Above, Japan's Finance Minister Yoshihiko Noda in a parliamentary committee meeting in Tokyo Wednesday.

The moves by the two economies—which analysts doubted would have lasting success as long as uncertainty dominates global markets—reflects another in a growing list of knock-on effects from the 2008 financial crisis and its aftermath.

The dollar this week flirted with a record low against the yen near ¥76.25. After heavy verbal threats from officials earlier in the week that intervention was imminent, the dollar rose back above ¥77, and was at ¥77.13 just before the intervention at 10 a.m. Tokyo time. It then popped up to as high as ¥78.47.

Traders said Japan spent about ¥400 billion to ¥500 billion on the move, and acted alone, without support from other countries. Some analysts expect Japan to keep intervening, as it tries to push the dollar to ¥80, a level seen as critical for exporters.

Prior to Wednesday's move in Switzerland, the franc had risen 11% against the dollar in just the past month and 13% against the euro. On Wednesday the Swiss franc fell 0.6% against the dollar and 1.6% against the euro.

The pressures on Japan and Switzerland emanating from the currency markets echoes the complaints about a "currency war" last September from Brazil's finance minister. Brazil has slapped penalties on certain kinds of investments by foreigners in order to try to limit money flowing into the country.

Some investors speculate that the currency moves may prompt a globally coordinated intervention, although the complex logistics, expense and limited chance of success make that unlikely.

Before last year, Japan had gone more than six years without buying or selling currencies to alter the value.

.While emerging-market countries such as Brazil and others in Asia have seen their currencies rise for reasons different to Switzerland and Japan—investors in search of high yields and economic growth—the end result is similar: Domestic economies can be heavily influenced by outside events.

"When the financial seas are choppy as a result of what the whales are doing, it makes life very uncomfortable for the shrimp as well," says Barry Eichengreen, a professor at University of California, Berkeley.

Because investors are moving money out of two of the most widely used currencies—the dollar and euro—the dislocations at the other end of the trade are that much greater for small economies such as Switzerland, says author Liaquat Ahamed, who won the Pulitzer Prize for his book "The Lords of Finance."

"Tiny shifts in capital…just swamp their capital markets and cause disruptions in their domestic economic management," he said.

Japanese officials were driven to act as Japanese companies have reacted with increasing alarm to the yen's steady rise against the dollar and other currencies. While lowering the cost of some critical imports, including oil and food items, the elevated Japanese currency has eroded profits at Japan's many exporters. A strong yen hurts Japan Inc.'s competitiveness by lowering the yen-value of revenue earned in dollars and making products more expensive overseas.

A litany of executives at brand-name companies such as Nissan Motor Co., Panasonic Corp., and Toshiba Corp. warned last week during first-quarter earnings press conferences that it has become increasingly difficult to maintain their current production levels in Japan amid the high yen. "The current strong yen is out of reach of an individual company to deal with," Nissan corporate vice president Joji Tagawa said last week.

The Swiss stock market is also feeling pressure. The country's main stock index is off almost 15% this year.

For Japan, Thursday's intervention by the Finance Ministry underscores a renewed currency activism as the yen has danced near record highs over the past year. Before last year, Japan had gone more than six years without buying or selling currencies to alter the value.

.On Sept. 15, 2010, with the dollar worth about ¥83, the Japanese government executed its largest-ever, single-day, yen-selling intervention. In conjunction with BOJ easing, that helped stabilize the currency for a time. A sharp spike in the value of the yen after the March 11 natural disasters prompted joint intervention by the Group of Seven on March 18. The dollar strengthened in the following weeks, before new U.S. weakness pushed the greenback down again in recent days.

Switzerland has been more active in recent years in trying to cap its currency's rise.

In the wake of the 2008 financial crisis through June 2010, the Swiss National Bank conducted massive purchases of euros to fight the rise of the franc. Thanks to the euro's decline in the first half of 2011, the central bank reported losses of roughly $15 billion.

The Swiss central bank is owned by shareholders, including Swiss member states known as cantons. To the extent that currency market losses hurt the bank's profits, the Swiss franc's rise "becomes a fiscal issue," said Edwin Truman, senior fellow at the Peterson Institute for International Economics.

The challenge for Swiss authorities is that investors aren't being driven by interest-rate differentials, so the bank may have limited ability to curtail their appetite for Swiss assets.

"It's not a yield issue, it's a safety issue," Mr. Truman said.

University of California's Mr. Eichengreen says there are lessons for the U.S. from Switzerland's woes, despite the huge differences between the two economies.

"We're going to have to learn that what the Chinese think about the debt-ceiling imbroglio can turn out to be really important to the U.S. in the same way that what the foreign investor thinks about Geneva is really important for Switzerland," he says.

Late Wednesday, the dollar was at 0.7703 franc from 0.7625 late Tuesday. The euro traded at $1.4323 from $1.4202.

—Takashi Mochizuki, Neil Shah and Chester Dawson contributed to this article.
Write to Takashi Nakamichi at takashi.nakamichi@dowjones.com and Tom Lauricella at tom.lauricella@wsj.com

A Bet on a Falling Stock Market

2011-08-03T09:17:00.002-04:00

A Bet on a Falling Stock Market

By STEVEN M. SEARS | MORE ARTICLES BY AUTHOR

The options market is telegraphing warning signals for the stock market.

Goldman Sachs is telling clients that trading patterns in so-called binary options -- which increase in value should the Standard & Poor's 500 index fall by 10% over the next month -- are telegraphing bearish signals.

(These specialized options contracts are not listed on exchanges but are traded privately among major investors.)

These binary options -- which have only two outcomes – show that the perceived risk of a sharp stock-market decline increased in the past week, according to Goldman's Krag "Buzz" Gregory in a note to clients.

The heightened fear clearly reflects the debt-crisis debate in Washington, which now appears to be averted, and a stream of troubling economic news in recent days.

Many major investors and money managers often hedge their stock portfolios to protect positions. Put options increase in value when stock prices drop.

While most investors buy puts options that trade on exchanges, including the S&P 500 index, or the SPDR S&P 500 ETF Trust (ticker: SPY), institutional investors also can choose from private trading markets operated by major banks.

In these over-the-counter markets that are closed to ordinary investors, banks create financial products that have some, but not all, of the characteristics of exchange-traded options.

Binary options, which Goldman Sachs analyzed to determine the likelihood of a sharp stock-market decline, pay off only if the stock market declines by a certain percentage. Because of this either-or feature, binary options can be less expensive, but just as potent, as options on the S&P 500 index that are traded at the Chicago Board Options Exchange.

The value of over-the-counter trading is high-level information that is cleaner, and more valuable, than other forms of market news that are widely known. Knowing what is happening in the upper echelons of the market lets investors refine their trading strategies.

"The number one investor question we've gotten over the past week has been on estimating the 'optimal hedge' under various market down, volatility up market scenarios in early August if the debt ceiling debate reaches a stalemate and the macro data deteriorates," Gregory says.

Gregory likes hedging with the S&P 500 index options. He likes buying the September 1285 put, and selling the September 1250 put, to create a "put spread" that would increase in value if the index, recently at about 1280, declines. The spread cost $12 when Gregory first modeled the trade.

Though it is clear that the U.S. will not default on its debt payments, thanks to a last-minute debt-ceiling deal from Congress, the September options offer protects against the aftershocks of the debate.

The September put options protect portfolios if bond-rating agencies decide to downgrade the nation's credit rating because the political compromise did not do enough to eliminate the national debt. In addition, the hedge protects portfolios against a potential wave of bearish sentiment that could be unleashed if the market returns to focusing on slowing economic growth.

Swiss central bank battles to halt franc’s rise

2011-08-03T08:51:00.000-04:00

Swiss central bank battles to halt franc’s rise

‘Massively overvalued’ franc hurts economy, SNB says; euro surges

The euro /quotes/zigman/4868091/sampled EURCHF +2.28% , which had earlier notched a fresh all-time low versus the Swiss unit below 1.08 francs, rebounded sharply and traded at CHF1.1132 in recent action, a gain of 2.5% from Tuesday.
The U.S. dollar /quotes/zigman/4868123/sampled USDCHF +1.36% rose 1.5% to trade at 77.65 centimes. The U.S. unit had earlier sank to an all-time low versus the safe-haven franc as relief over an agreement to raise the U.S. government’s debt ceiling gave way to worries over weak growth.
There are 100 centimes in a franc.
In a statement, the Swiss National Bank said the currency is “massively overvalued at present” and that its strength “is threatening the development of the economy and increasing the downside risks to price stability in Switzerland.”

“The SNB will not tolerate a continual tightening of monetary conditions and is therefore taking measures against the strong Swiss franc,” it said.

The bank also left open the threat of outright intervention in the currency markets, saying it was keeping “a close watch on developments on the foreign-exchange market and will take further measures against the strength of the Swiss franc if necessary.”
Thorsten Polleit, an economist at Barclays Capital, said the SNB’s decision to boost its monetary base — the sight deposits banks hold with the central bank — from around CHF 30 billion ($39 billion) to CHF 80 billion — is effectively a form of quantitative easing.
The moves “are clearly driven by the negative consequences for the Swiss economy and the financial sector of an environment of sagging worldwide growth, accompanied by the Swiss franc exchange rate having climbed to record highs [versus] major currencies,” Polleit said.
But strategists expressed doubt the central bank will be able to stem the franc’s rise as the euro-zone’s debt crisis threatens Spain and Italy and concerns grow over the fragility of the U.S. economic recovery.
“The SNB will be well aware that it is swimming against the tide and that without a solution to the euro-zone sovereign debt crisis it will be difficult to convince investors to dump the franc,” said Jane Foley, senior currency strategist at Rabobank in London.
“This is the primary reason that the SNB has chosen to reduce its three-month Libor target rather than to intervene in the FX market,” she said, noting that the SNB saw its balance sheet hit hard by previous interventions in 2009 and 2010.
Peter A. Rosenstreich, chief foreign-exchange analyst at Swissquote Bank in Geneva, said the SNB’s verbal intervention will be “mildly effective” in the short term, but that the impact is likely to soon wear off.
The decision to target the three-month rate as close to zero as possible “is merely for show,” Rosenstreich said, “since traders are not in the Swiss franc for the interest-rate differential” with other currencies. With rates already near zero, the move will do little to impede safe-haven flows into the franc.
Meanwhile, Steen Jakobsen, chief economist at Saxo Bank, said the SNB move helped prompt him to move from a “risk off” to “neutral” stance on market strategy.
“The move by the SNB today to move towards QE is a clear warning signal to me that the policy risk has become too big for global policymakers,” indicating a policy response to slowing growth from the Group of 20 nations may be imminent, he said, in emailed comments.

Debt Ceiling's Overlooked Flash Crash

2011-08-03T08:36:00.002-04:00

Debt Ceiling's Overlooked Flash Crash

By JOHN JANNARONE
Markets were remarkably unmoved by Washington's political theater over the debt ceiling. The fall in stocks was limited. Any bounce from this weekend's deal was quickly overshadowed Monday by more bad news on the U.S. economy.

But, in an obscure corner of the stock market, investors did get a reminder of the risks still lurking in the system—in particular, Wall Street's popular practice of depending heavily on short-term funding to finance long-term investments.

At the height of the debt-ceiling uncertainty on Friday, a handful of mortgage real-estate investment trusts suffered a mini flash crash. Shares of Annaly Capital Management plummeted 19% in a few minutes in the morning, and American Capital Agency fell 22% before recovering the lost ground. The two REITs invest in government-backed mortgage securities using huge amounts of short-term debt.

.The quick selloff was said to be induced by stop-loss orders that many investors place on these shares, which trigger a sale if the share price moves a certain amount. The big fear for the companies has always been a spike in interest rates. That could create a double whammy, hitting the value of the REITs' long-dated mortgage securities, while also raising the cost of financing their short-term debt pile.

But the root of Friday's panic actually came from a different source. Investors suddenly worried that REITs would lose access to the debt market they rely on for funding. Typically, REITs use repos, or repurchase agreements, getting leverage by pledging their government-mortgage securities as collateral. That amplifies returns, helping Annaly pay a hefty 16% dividend yield.

WSJ's John Jannarone describes the brief panic that wafted through the REIT sector last week over fears of higher interest rates that may have resulted from a U.S. default. AP Photo.
.Yet, dependence on repos carries a big, if rarely pondered, risk. As of March 31, Annaly had $80 billion in repos. That included $11 billion due in one day and $22 billion due in two to 29 days. In contrast, 99% of Annaly's $94 billion in mortgage-backed securities had maturities of more than one year. If Annaly couldn't replace maturing repos, it could be forced to liquidate assets.

Fortunately, the repo market is unlikely to freeze up entirely. It functioned through the financial crisis, and the Federal Reserve would probably work hard to avoid any interruption, given its importance to the banking system.

And some tightening in the repo market is probably manageable. Steve DeLaney of JMP Securities says REITs can borrow against 95% to 97% of a government-backed mortgage security's value in the repo market. That percentage fell during the crisis, but only to about 93%.

But the fact remains that Annaly is beholden to the repo market, as well as being heavily exposed to any shift in interest rates. As plenty of highly leveraged borrowers learned in the crisis, hefty short-term funding can change from a profit engine to a huge liability overnight.

Write to John Jannarone at john.jannarone@wsj.com

Euro Pressured by European Crisis

2011-07-29T09:01:00.002-04:00

Euro Pressured by European Crisis

By JAVIER E. DAVID And TANIA CHEN

Renewed concerns about Europe's ability to avert financial disaster pressured the euro, momentarily eclipsing the stormy U.S. debt-ceiling debate as investors mulled whether the euro-zone crisis could take a turn for the worse.

Barely a week after a landmark European Union summit struck an accord to rescue financially distressed Greece, investors have yet to be fully mollified.

Even in the face of widening pessimism about the U.S.'s ability to overcome the political stalemate and raise its $14.3 trillion debt ceiling by early next week, the euro fell for the second-consecutive session.

Analysts have nervously eyed the yields on Italian and Spanish government debt—the euro zone's third- and fourth-largest economies, respectively—as proxies of the market's growing concern that Europe can successfully manage the possibility of Greece's debt woes leapfrogging to Spain and Italy.

Italian government bond yields rose further Thursday after the Treasury held a long-term bond auction. Ten-year yields rose to 5.82% from 5.68%, and even two-year debt yields rose to 4.20%, well above the 3.5% interest rate that EU leaders promised the Greek government.

"The Italian auction did not go as well as expected and spreads are creeping higher," noted Brian Kim, currency strategist at RBS Securities. "As time goes by, people are getting a bit more skeptical" about the Greek rescue package. "You still need to see the details behind it all."

Late Thursday, the euro was at $1.4331, from $1.4369 late Wednesday. The dollar was at ¥77.72 from ¥77.99. The pound was at $1.6373 from $1.6331. The dollar was at 0.8010 Swiss franc from 0.8017 franc.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.117 from about 74.087.

In the meantime, today's dollar trading was choppy and range-bound, with the greenback rising against the euro but falling against the yen. Market watchers were waiting for the results of a congressional vote on a possible debt agreement.

The uncertainty that hangs over the market continues to contain the dollar's gains, as U.S. lawmakers are still at a loss to reach agreement on the debt ceiling. This has undermined risk sentiment, which helped drive stocks and other risk-correlated assets lower as investors fear either a default or a downgrade of the U.S.'s coveted triple-A credit rating—or both.

In a measure of how the debt-ceiling debate has undermined confidence in the dollar, risk-related currencies—which normally fall during periods of global turmoil—have surged for a lack of investors willing to hold the greenback.

Analysts say neither of the scenarios looks favorable in the long term. "The U.S. is just going to have to muddle through its own fiscal crisis," says Mark McCormick, currency strategist at Brown Brothers Harriman. He added that the likelihood of the U.S. going into default was still unlikely, but few are holding out hope for a perfect agreement as the Aug. 2 deadline approaches.

Forex Role Players: ECN, STP, DD, etc

2011-07-27T16:38:00.000-04:00

DD — Dealing Desk — Forex brokers that operate (route orders) through the Dealing Desk and quote fixed spreads. A dealing desk broker makes money via spreads and by trading against its clients. A Dealing Desk Forex broker is called a Market Maker - they literally "make the market" for traders: when traders want to sell, they buy from them, when traders want to buy, they sell to them, e.g. they will always take the opposite side of the trade and in this way "create the market". A trader doesn't see the real market quotes, which allows Dealing Desk brokers (Market Makers) manipulate with their quotes where they need to in order to fill clients orders.

NDD — No Dealing Desk — NDD Forex brokers provide access to the interbank market without passing orders trough the dealing desk. With true No Dealing Desk brokers there are no re-quotes on orders and no additional pausing during order confirmation. This, in particular, allows trading during news times with no restrictions on trading.

An NDD broker can either charge commission for trading or choose to increase the spread and make Forex trading commission free.

No Dealing Desk brokers are either STP or ECN+STP.
STP — Straight Through Processing — STP Forex brokers send orders directly from clients to the liquidity providers - banks or other brokers. Sometimes STP brokers have just one liquidity provider, other times several. The more there are liquidity providers and therefore liquidity in the system, the better the fills for the clients.

The fact that traders have access to the real-time market quotes and can execute trades immediately without dealer intervention is what makes the platform STP.
ECN — Electronic Communications Network — ECN Forex brokers additionally allow clients' orders to interact with other clients' orders. ECN Forex broker provides a marketplace where all its participants (banks, market makers and individual traders) trade against each other by sending competing bids and offers into the system. Participants interact inside the system and get the best offers for their trades available at that time. All trading orders are matched between counter parties in real time. A small trading fee - commission - is always applied.

Sometimes STP brokers are discussed as if they were ECN brokers. To be a true ECN, a broker must display the Depth of the Market (DOM) in a data window, let clients show their own order size in the system and allow other clients to hit those orders. With ECN broker traders can see where the liquidity is and execute trades.

Broker types and revenues: fixed vs variable spreads vs commission

ECN Forex brokers always have variable spreads. Only ECN brokers charge commission for trading Forex. Commission is the only revenue/profit an ECN broker receives. ECN brokers are not making money on bid/ask (spread) difference.
An STP Forex broker is compensated through the spread (spread markups - to be explained in details below).
STP brokers have a choice of offering variable or fixed spreads. STP brokers route all trading orders to the liquidity providers - banks. These brokers, as intermediaries between their clients and banks, receive prices (spreads) posted by the banks on the Interbank market. Most banks, in fact, offer fixed spreads and are market makers.

An STP broker therefore has 2 options:

1. Let spreads be fixed.

2. Leave the spread at 0 and let the system take the best bid and ask from the number of banks (the more the better) and in this way provide variable spreads.

How an STP broker earns its money? Since STP brokers (as well as ECN) don't trade against their clients, they add own small markups to the spread quote. This is done by adding a pip (or half a pip, or any other amount) to the best bid and subtracting a pip at the best ask of its liquidity provider. All client orders are directly routed to the liquidity providers at original spread quoted by those providers while an STP broker earns its money from own markups.

Many STP brokers run a hybrid STP model: DD + NDD

Every STP broker signs a business contract with its liquidity providers (prime brokers), where the contract terms regulate the minimum transactions level which will be accepted by the liquidity provider. This means that all small orders placed by traders (usually those which are below 0.1 lot) cannot be sent to the liquidity providers, because they won't be accepted; and therefore such orders should be handled by the STP broker, who in this case becomes a counter-party for your transaction (Dealing desk model). If you trade with "Cents account" or a "Mini account", your STP broker is most likely always is a counter-party of your trades.

For all larger orders (as a rule, above 0.1 lot), the STP broker uses its real STP technology bridge & sends orders to its liquidity provides. With each transaction, the broker receives a portion of the spread.

Forex market maker - a broker with a dealing desk earns money on bid/ask difference as well as when a client loses a trade, since market makers are trading against their clients by hedging - entering in an opposite trade.

Conclusion:

ECN brokers are the purest breed among all Forex dealers. They don't profit on spread difference. Their only profit comes from commission. ECN brokers are interested in their clients to be winning, otherwise there will be no commission to earn.
STP brokers make money on spreads, thus even though they do not have a physical dealing desk to monitor and counter-trade client orders (unless its a hybrid STP model), they are still able to set their own price - the spread markup - for routing trading orders to liquidity providers and providing their clients with advanced trading services, lower account deposits, faster execution and anonymous trading environment with no dealing desk. STP brokers are also interested to see their clients trading profitable, so that a broker can continue earning on spreads.
Market makers make money on spreads and by hedging against their clients. However, if a client becomes "too" profitable, it can directly "upset" the broker. While this may be tolerated and professionally managed by a larger reputable market maker, with a smaller dealer such client will be soon asked to leave.

Benefits of trading with No Dealing Desk brokers

Among the main reason why traders look for NDD brokers is transparency, better and faster fills and anonymity.
Transparency means that a trader enters a true market instead of the market being artificially created for him.

Better fills are a result of the direct and competitive market bids and offers.
Anonymity means that there is no Dealing Desk watching who has come to the market and is asking for an order to be filled, instead client orders are executed automatically, immediately through the market network and totally anonymously.
On the opposite side is a Dealing Desk broker, who is able to profile their clients. In the worst case scenario, such broker can split clients into groups and put less successful ones on auto-execution and trade against them because on average they will lose, while clients that show signs of successful trading will be put on "slow-down" mode and can be provided with frequent re-quotes, slippage and/or slower execution especially during fast moving markets while a broker tries to offset own risks. The transparency of a Dealing Desk broker depends on the rules inside the company.

Forex Brokers aren't bad on general, whether a Dealing or Non-Dealing Desk, they aren't there to be against any particular trader. They look to make business, not just work for traders in terms of cooperation in the market environment. Many large Forex brokers who have lots of clients tend to try to help their clients become profitable as much as they can, but once a trading order is placed, its everyone for themselves.

FXCM Agency Model

2011-07-27T16:09:00.000-04:00

FXCM is one of the largest US brokers. It is very active in Asia and recently acquired the British ODL brokerage, seeking expansion in Europe. The $200 million that it’s expected to raise until the end of November will give a boost to its business.

So, with this broker trading on Wall Street, the stock price can reflect the state of the industry – the impact of new regulation proposals will be reflected in the stock – we’ll see which CFTC rules are meaningful and which aren’t. We’ll also get to see how the quarterly profitability reports that are required by the CFTC impact the stock price. Is a high profitability rate favorable for the broker, or not?

For market makers the answer is that a lower profitability rate means that the forex trader is “burned” faster and that the broker made money more quickly. For ECN / STP / NDD brokers like FXCM, the answer is expected to be the opposite – successful traders mean more trades – more profits from spreads.
And speaking about market makers vs. ECN / STP / NDD models, the prospectus contains FXCM’s opinion on this. It used to be a market maker (principal broker) and turned into a No Dealing Desk (agency) broker. In the prospectus, highlighted by FT Alpahville, they explain the inherent problem:

Our agency model is fundamental to our core business philosophy because we believe that it aligns our interests with those of our customers, reduces our risks and provides distinct advantages over the principal model used by the majority of retail FX brokers. In the principal model, the retail FX broker sets the price it presents to the customer and may maintain its trading position if it believes the price may move in its favor and against the customer. We believe this creates an inherent conflict between the interests of the customer and those of the principal model broker. Principal model brokers’ revenues typically consist primarily of trading gains or losses, and are more affected by market volatility than those of brokers utilizing the agency model.

Izabella Kaminska at Alpahville makes a good point that it “takes one to know one” – in this case, very closely – they switched models so they know what the interest of the broker is when it is a market maker…

But, I do believe that FXCM’s current model is the better way for forex brokers. The IPO will add to their transparency and will hopefully impact others as well. And as aforementioned, tracking the share price will be quite interesting.

在广州看到惊人内幕：房地产业即将迎来倒闭潮

2011-07-26T23:21:00.000-04:00

在广州看到惊人内幕：房地产业即将迎来倒闭潮

和讯 2011-07-26 19:36:34

　　“最后一根稻草”压垮中国房地产企业——已近在咫尺!
　　由于过度重视与地方政府关系，而过度轻视宏观战略预测，过分蔑视社会公众怨声，中国大部分房地产企业正将迎来严峻宏观调控和市场泡沫破灭的严厉惩罚——未来6-12个月，中国房企将会有相当比例破产倒闭。

　　房地产企业的最后一丝侥幸正变成绝望。2010年调控以来，银根收紧，房地产的企业信贷和个人房贷都急剧紧缩，股市融资也停顿下来。2011年以来，房地产商的最后希望只有房地产信托了。但是这扇门也在逐渐关闭，一季度房地产信托总额由2011年 4季度的659亿下降到443亿元，占总信托的份额更是由14.9%骤降到4.69%。此后下降更快，而借贷成本急剧上升，由10%上升到20%，甚至个别达到30%。
　　这扇门终于在6月份关上了。从17日起，国内主要信托公司已经暂停除保障房以外的房地产信托业务。虽然此次监管层并未以红头文件的形式下发，而是采用了电话逐个通知的“窗口指导”。此外，监管层还要求今后信托公司凡涉及房地产相关业务，都要到银监部门逐笔审批。这意味着实际卡住了房地产信托。
　　房地产商应对宏观调控的另一个对策是，东方不亮西方亮，一线沿海城市已涸泽而渔了，就转战二三线城市，炒热这些地方的楼市，通过预售购房款的方式，以获得流动资金，维持一线城市的运转费用。今年上半年，二三线城市楼价继续上涨让它们又看到了一丝生机
　　上周，这两个指望绝处逢生，侥幸过关的最后幻想都破灭了。
　　7月18日消息，二三线城市的“限购令”名单不久将出炉。据悉，住建部已着手调查分析部分二三线城市和中小城市房价快速上涨的原因，并据此圈定新一轮的限购城市名单。这与国务院常务会议日前强调要求房价上涨过快的二三线城市也要执行限购政策的决定几乎同步。
　　7月20日，银监会召开2011年第三次经济金融形势通报分析会，刘明康主席要求，银行金融机构审慎开展与地方政府之间的战略合作，警惕网络借贷、民间借贷和小额贷款公司等领域的风险，密切关注二三线城市的房地产市场风险。
　　7月22日，中央政治局召开会议，会议指出：“要坚持不懈搞好房地产市场调控和保障性住房建设，坚持调控决心不动摇、方向不改变、力度不放松，坚决遏制住房价格过快上涨，确保落实保障性住房建设计划，确保建设质量，确保分配公平。”
　　从住建部到银监会，再到国务院，最后到最高核心层的党中央政治局会议，均一再强调“房地产调控的决心不动摇，力度不放松”。由此可以断定，已经关紧了的房地产融资大门不可能短期打开。除非相当一批房地产企业倒闭，由此带动房价较大幅下降，楼市调控成果得到明显体现。
　　时至今日，合法融资主渠道大门已经关严，地产商的“最后一根稻草”是民间借贷。上周，本人到广东调研，与当地两个代表性商会进行了较充分的交流，得知，即使是商会朋友之间，地产的借款利率已经达到了年40%——这一利率意味着，如果借款两年半，其本金都会被耗光。
　　现在已可以肯定地判断，中国地产商10年以来的好日子走到了尽头，很多地产企业已经深陷“四面楚歌”绝境，逼近“霸王别姬”时刻。在不远的将来，房地产业将发生很多令人唏嘘不已的悲剧。
　　然而，地产商未来的“悲惨世界”很少有人会同情。因为其中很多人的暴富本来就是对社会公众的侵夺，当然他们贪的是小头，地方政府占的是大利;因为中央三令五声，三轮调控，很多人置若罔闻，一路对抗走到黑;因为本人和中华元智库自2009年以来不断升级对房地产危机的警告力度，然而很多人将之作为耳旁风。
　　2009年10月19日，本人撰文《房地产泡沫已成中国人财富最大威胁》(首发于第一财经日报)指出：最令人头疼的是，房地产泡沫的隐患正日益放大，如果不能果断有效遏制其继续膨胀的态势，如再膨胀三年，将难免出现巨大雪崩，也难免将击穿中华文明复兴的经济底线，最糟糕的是，它与全球纸币崩溃 (主权债务危机)同时袭来，则中国国内矛盾将空前激化，中国将难免被迫用武力向外转嫁社会危机。
　　2009年年底，笔者连发《房地产泡沫硬在地方政府既得利益》、《结婚房为何会成为中国人命运绞索》、《楼市泡沫雪崩为何十倍猛于A股大跌》、《当泡沫难免，推高股价比推高房价好》、《中国楼市泡沫：黄金眼中大，人民币眼中小》(以上文章均刊发于第一财经日报)，为2010-2011必将越来越严厉的楼市调控预警。
　　2010年以来，中华元智库不断升级房地产危机预警，1月推出战略报告《中国房地产泡沫正将盛极而衰》;2010年3月，刊发《楼市轿子理论：坐轿者快把抬轿者压垮了》;4月刊发《房产盛极而衰黄金将成为中国投资品之王》(以上两篇文章刊发于第一财经日报);2011年1月，推出战略报告《中国楼市：回调或崩盘》;2011年3月，推出战略报告《中国楼市拐点已到》……如此不断预警，作为战略预测者的中华元智库已经是尽心尽力了，只能说破产倒闭真的是这些地产商的宿命了。
　　这种“战略迷失悲剧”仅仅地产商的笑话吗?非也，类似的悲剧正在金融业拉开帷幕，随着全球主权债务危机的蔓延，全球纸币危机的深化，纸币信用资产正日渐逼近大崩溃的前夜。倘若这个大崩溃像现在房地产危机这样降临，那些缺乏黄金、石油、铜等实物资产财富，主要是纸币信用资产——现金、债券、证券等的金融机构，将面临灭顶之灾。这包括中国大多数保险公司、证券公司、基金公司，相当大比例银行、信托等等，相当有可能遭遇严峻的信用风险，甚至一些金融机构将被清零。这个越来越大的未来悲剧可能，本人已经预警了5年时间。
　　“战略迷失悲剧”未来还可能发生在地方政府身上，过去很多年，地方政府一直是以“土地招拍挂”等手段，不断扩张既得利益，这样下去，终究有物极必反的时候。一言以蔽之，“公务员泡沫”将是中国最后的泡沫，而这个泡沫现也开始走向破灭的道路。

Worldly, Wise and Worried

2011-07-26T22:45:00.001-04:00

Why Euro May Keep Defying Gravity

2011-07-25T09:21:00.002-04:00

Why Euro May Keep Defying Gravity

By KELLY EVANS

Betting against the euro isn't a no-brainer.

The euro-zone economy is weakening, at least one nation is careening toward default, and the breakup of the 17-member currency bloc can't be entirely ruled out. In a sign that duress continues to spread, yields on 10-year Spanish and Italian debt rose on Friday despite the latest bailout deal reached for Greece. They now stand at about 5.8% and 5.4%, respectively, up about half a percentage point each from January.

.Yet all this has hardly torpedoed the euro. In fact, the currency has strengthened 6.6% against the dollar this year to $1.4358 as of Friday. It is nearly 11% stronger than a year ago, even as sovereign-debt troubles have continued to build and the euro zone's economic growth prospects have dimmed. It almost seems obvious the euro's next move should be down. Yet Nomura Securities, for one, barely expects it to budge. Analyst Jens Nordvig expects the euro will be at about $1.40 at the end of the quarter—and still around $1.40 at year end.

That is as much because of dollar weakness as euro strength. Indeed, the euro has weakened this year against other, sturdier currencies, such as the Swiss franc. U.S. fundamentals "make it tough to be a dollar bull," says Deutsche Bank currency strategist Alan Ruskin. The nation's weak economic recovery, high unemployment and, importantly, near-zero interest rates all make the currency relatively less attractive. That is likely to keep the euro around these levels until the Federal Reserve starts to raise interest rates or the European Central Bank lowers its own.

View Full Image

Andrea Comas/Reuters

The euro has strenghtened even as sovereign-debt troubles have continued to build and the euro zone's economic growth prospects have dimmed.
.The Fed is clearly on the sidelines for the time being. As for the ECB, it raised its benchmark rate this month to 1.5% and will be loath to reverse course unless its juggernaut economy—Germany—slows sharply. Indeed, strong export growth to emerging markets has helped propel the German economy despite the costlier euro. This, says Bank of America Merrill Lynch strategist David Woo, is a big reason the currency hasn't been weaker.

Of course, global economic growth looks to be slowing. A hard landing almost certainly would sink the euro and buoy the greenback. For now, though, euro strength isn't an oxymoron.

Write to Kelly Evans at kelly.evans@wsj.com

中国经济硬着陆风险加大人民币"空军"已出动

2011-07-25T09:06:00.000-04:00

中国经济硬着陆风险加大人民币"空军"已出动

　　在各路资金押注人民币继续升值时，有一些少数派选择了相反的方向。

　　"我们的确在做空人民币。"纽约投资公司Bienville Capital Management LLC的首席投资官卡伦?汤普森(Cullen Thompson)告诉财新《新世纪》，人民币兑美元贬值的可能性，至少比市场一致预期认为的要更大。

　　近日，海外市场做空人民币期权的价格小幅上升，显示做空人民币的交易在增加。尽管市场主流意见还是看多人民币，还没有出现多空转折点，但少数做空交易的出现，意味着人民币兑美元升值的压倒性一致预期，已出现分歧。

　　这一方面是因为汇改以来人民币升幅已然不小，另一方面是因为市场对中国经济的忧虑在增加。

　　中国经济增速、结构调整成败、地方政府债务风险、经常项目平衡状况、资本项目开放前景、通胀风险等经济基本面的多个因素，都将影响人民币兑美元汇率走势。

　　押注"可预见的意外"

　　"几个月之前，我们这样做了。"汤普森告诉财新《新世纪》记者，中国经济正走向"软着陆"或"硬着陆"，尽管下滑程度和时点尚不确定。早在今年4月，汤普森在一次对投资者的会议上称，"已经试图审慎地减少任何依赖中国经济高增速的重大杠杆风险。"

　　汤普森特地强调，"不一定将人民币贬值视为基准情形"。但他认为，中国经济的确有一些问题，考虑潜在风险的严重程度，任何事情都可能发生。

　　美国北卡罗来纳州的财富管理公司Broyhill Family Office也在做空人民币。该公司首席投资官克里斯多夫?帕维泽(Christopher Pavese)6月30日在公司网站发文称，不能确信人民币会贬值，但敢说其可能性比"市场先生"认为的要大得多。

　　"在发表这篇文章时，作者正通过传统的和衍生工具卖空人民币，尽管头寸随时都在变化。"该文末尾声明。

　　做空队伍中，更具影响力的是来自得克萨斯州的对冲基金Corriente Advisors LLC。这家公司赫赫有名，其首席投资官马克?哈特(Mark Hart)在2006年成立了美国次债危机基金，2007年推出欧洲主权债务危机基金，都成功做空，收益颇丰。

　　"市场参与者对中国的得意自满，与美国次债危机和欧洲主权债务危机之前的情景可怕地相似。"哈特去年11月就这样告诉投资者。他专门设立了中国机会基金(China Opportunity Master Fund)，试图从中国经济放慢中获利。

　　一位了解Corriente Advisors投资策略的美国资产管理公司人士告诉财新《新世纪》记者，这家公司是赌市场低估发生概率的金融事件，赌对就可以大赚，"他们不是觉得人民币的风险提高，而是认为市场对人民币的风险显著低估了。"

　　帕维泽认为，中国债务驱动的投机泡沫，可能导致人民币贬值成为"可预见的意外"。他所称的"可预见的意外"有三个特征：至少有一些人意识到有问题；随着时间推移愈发严重；最终会形成冲击力巨大的危机。

　　"预测这类事的时点富有挑战且令人沮丧，但时点存疑，并不意味着风险可以被忽视。"帕维泽说，每一位投资者都在寻找中国的投资机会，都认为中国会保持当前的增速，那么当这些人都错了时，会怎样呢？"至少值得在投资组合中采取一些保险措施，来对冲上述假设都是错误的风险。"

　　更重要的是，"采取保险措施对冲风险几乎是免费的。"帕维泽说。成本低廉也是汤普森的考虑之一，"做空期权的确很便宜。"

　　投资公司和对冲基金做空人民币的一个主要工具，是买入人民币看空期权，多为一年期。

　　一位欧洲银行驻香港的外汇交易员介绍，有两个指标可以判断海外做空人民币行为的程度。一是对冲基金共买了多少金额，"这个很难找到"；二是期权的价格。

　　7月初市场上买入一年后美元兑人民币汇率为1:7.0的看空期权，每100万美元面额的期权，需支付2200美元。但四个月或者半年前，只需要支付500美元至600美元。

　　一位做空人民币的美国对冲基金人士也告诉财新《新世纪》记者，现在人民币看空期权的价格几乎是一年前的2倍，过去几周这类期权的价格正在上升，但仍然是有吸引力的。而且，他认为，价格上升，恰恰是更多人开始关注中国波动性的信号。

　　上述外汇交易员说，过去在外汇市场上提人民币贬值，海外投资者都不屑一顾，但现在情况在改变。

　　人民币看空期权的吸引力在于，既可以对冲人民币贬值风险，也可以获得利润。上述美国对冲基金人士介绍，有两种获利方式，第一种是持有期权，等候人民币贬值；第二种是，在市场波动中，在较高价格时卖出期权获利，"风险在于，期权市场流动性不足。"

　　两种做空逻辑

　　财新《新世纪》记者采访发现，做空人民币主要基于两种逻辑，一是危机论，即认为由于房地产泡沫、地方政府债务等风险，中国经济可能"硬着陆"，中央政府会采取刺激政策，人民币贬值是其中之一；二是升值到位论，即考虑到中国高通胀及高房价，以及贸易顺差的缩小，人民币兑美元即将升值到位甚至已经到位，若央行不干预，市场力量驱动下可能会贬值。

　　"苍蝇不叮无缝的蛋"。对冲基金做空一国货币，多是因为预计经济基本面可能出现问题。

　　帕维泽，就很担忧中国的政府债务风险。

　　审计署6月27日公布的地方政府债务数据显示，过去三年，地方政府债务占GDP的比重从17%增长至27%，且60%以上投向基础设施，近四分之一的债务偿还依赖土地收入。

　　看到上述数据，帕维泽担心，在货币条件收紧和全球经济更脆弱的情况下，一旦信贷投放放慢，对经济产生实质性制约，地方债务违约会快速增长。

　　Bienville Capital Management对中国经济和人民币的关注已经超过18个月。汤普森接受财新《新世纪》记者采访时说，做空人民币，只是为防范中国潜在的"硬着陆"或者"软着陆"风险而采取的措施之一。中国经济的问题，"短期内是通胀，中国的通胀不仅仅是周期性的，会制约政策的灵活性；中期内，信贷问题可能出现，而且其规模和严重程度会超过以前曾经出现过的问题。"他强调，中国经济从便宜的贷款中获益，而一旦大量流动性消失，问题就会显现，对于已经非常脆弱的全球经济有负面影响。

　　哈特从去年就开始看空人民币。他在去年11月对投资者的一次会议上指出，中国不适当的低利率和人为压制汇率的做法，在房地产和银行信贷等多个领域带来危险的泡沫。

　　不过，也有人认为，中国经济危机导致人民币贬值的逻辑，未必讲得通。

　　"这种逻辑是不了解中国的政策特点，即使经济真的硬着陆，也不一定会让人民币贬值。"渣打银行大中华区研究主管王志浩接受财新《新世纪》记者采访时说，2008年应对危机中，中央政府通过大量投资项目和提高出口退税刺激经济，并没有动用人民币贬值工具，只是把人民币重新与美元挂钩。

　　上述美国资产管理公司人士也提醒，中国的汇率政策不一定和财政政策、货币政策同步。"首先我不认为中国经济会硬着陆，即便硬着陆，反映到人民币汇率上也有很长的周期。"

　　从经济基本面来看，看空人民币的第二种逻辑是，认为人民币已经接近均衡估值。

　　2005年7月汇改以来，人民币兑美元升值近22%。中国贸易不平衡局面已经明显改善，贸易顺差占GDP的比重从2007年的7.5%降至2010年的3%左右。

　　一位外汇管理部门人士认为，从理论上讲，近期经常项目收支尤其是贸易收支失衡状况的改善，显示人民币汇率不存在大幅升值的基础。从股价、房价等资产价格相对境外高估的情况看，人民币汇率甚至有贬值的可能。

　　此外，通胀在人民币汇率调整中扮演越来越重要的角色。今年2月4日，美国财政部发布的半年度汇率政策报告指出，由于中国通胀明显高于美国，经过通胀调整的人民币实际升值速度更快，会达到年10%的升值幅度。

　　升值到位论也遭到质疑。王志浩认为，下半年贸易顺差还会增加，因为进口增速会放慢，而出口态势还不错。即使资本账户逐步放开，也没办法一两天之内平衡资本账户。所以，"双顺差会继续，还会有升值压力。"6月，中国贸易顺差高于预期达到220亿美元。

　　人民币走向何方

　　跟踪外汇市场十多年的研究人士亚当?克里兹(Adam Kritzer)赞同人民币继续升值的经济基础已经相对薄弱，但他认为，这并不意味着人民币"不会或不应该继续升值"。

　　"投资者的行为经常是非理性的。"克里兹接受财新《新世纪》记者采访时说，未来几年，中国可能会有经济下滑或金融危机，迫使外国投资者停止押注人民币进一步升值。但现在的现实是，外国投资者仍然很高兴地忽视基本面，盲目地把大量资金投向中国项目，直接或间接地赌人民币继续升值。

　　上述香港对冲基金人士也认为，从购买力看，可以认为人民币是高估的，但是高估并不能成为看空的理由。

　　总部位于伦敦的对冲基金蓝金资产管理公司(BlueGold Capital Management LLP)宏观经济与货币业务常务董事任永力(Stephen Jen)认为，回答"人民币是否会贬值"的关键考虑是，对于人民币汇率，中国决策者可能做什么？

　　"市场压力对人民币的真正影响，并没有对其他货币那么大。"任永力接受财新《新世纪》记者采访时说，尽管人民币已经有弹性多了，但在人民币兑美元汇率的变动速度方面，政策影响仍然是相当重要的一个因素。"外汇储备累积的速度仍然非常快。这表明，人民币兑美元变动幅度，是在决策者而不是投资者在掌控中。"

　　一位华盛顿对冲基金的中国研究总监认为，中国央行手握逾3万亿美元外汇储备，能掌控人民币升贬，如果有贬值压力，可以抛售美元买入人民币。

　　对此，汤普森认为，人们提到中国的大规模外汇储备是正确的，但是其风险在于，如此大规模的流动性有可能突然间消失。

　　任永力认为，只要中国政府把通胀视为比增长更重要的首要焦点，人民币兑美元就会继续升值。然而，如果下半年全球经济实质性放缓，削弱了中国政府对经济增长的信心，可能会看到人民币升值速度放慢。

　　上述华盛顿对冲基金的中国研究总监认为，即使中国经济减速，仍然大大高于美欧的增速，所以，人民币升值速度可能会放缓，但方向不会变。

　　不过，近期市场数据传递的一些信号，显示人民币兑美元升值预期趋弱，值得进一步关注。

　　5月开始，一年期无本金交割远期外汇交易(NDF)显示人民币升值预期逐步下降。一年期NDF与当天人民币兑美元中间价相比显示的升值幅度，从4月29日的3.02%降至7月19日的1%。

　　同时，国内人民币远期结售汇(DF)与NDF价格持续出现倒挂。招商银行金融市场部分析师刘东亮接受财新《新世纪》记者采访时说，DF与NDF价差往往较为敏感的反映了升值预期的强弱，一般海外NDF反映的升值预期比DF更大，也就是NDF值小于DF，当NDF大于DF时，意味着海外投资者的升值预期减弱，海外投资者对汇率预期变化更为敏感，因此出现倒挂值得关注。

　　从历史数据看，2005年7月汇改以来，DF与NDF价格倒挂的现象出现过三次。第一次在2008年三季度至2009年一季度，与这次倒挂相伴随的是，人民币兑美元长达两年的升值停滞期；第二次在2010年二季度短暂出现，当时监管部门反复重申人民币不会一次性升值，市场升值预期不断削弱；第三次，则是从5月开始价差收窄，间或出现倒挂。

　　刘东亮认为，中国贸易顺差趋势性收窄、通胀高企对升值空间的侵蚀、套利空间前景收窄、宏观经济降温等诸多因素作用下，人民币兑美元单边升值的趋势已经接近尾声，未来半年，人民币升值可能会继续，但半年以后，人民币很可能结束单边升值阶段，进入双向波动甚至阶段性贬值。

　　此外，最新公布的外汇储备数据显示，上半年最后两个月，外汇储备增幅大幅回落。二季度新增外汇储备1528亿美元，较一季度环比回落22.56%。特别是5月和6月，新增外汇储备仅分别为202亿美元和315亿美元，而当月贸易顺差分别为131亿美元和223亿美元，若考虑外商直接投资(FDI)，最近两个月资本流入放缓，甚至可能资本流出，或许也是人民币升值预期减弱的信号。(财新网)

FX eCommerce - Single Dealer Platforms

2011-07-22T13:12:00.000-04:00

http://www.finextra.com/community/fullblog.aspx?blogid=5213
FX eCommerce - Single Dealer Platforms

14 Apr, 2011 18:57 I recently completed some research on single dealer platforms or FX eCommerce systems, which are designed for market makers and dealers in foreign currency trading. My research covered FX aggregation, pricing, auto-hedging, position-keeping, smart order routing and internalization.

Here are a few tidbits from the research:

FX single dealer platforms aggregate liquidity from dozens of sources, identify base pricing, determine and publish pricing to clients, manage positions, handle order flow, automatically hedge positions, route orders to counterparties, and internalize client orders.

The FX market is highly fragmented, with hundreds of dealing banks, ECNs, and interdealer brokers all publishing prices and competing for order flow. Pricing approaches are not standardized. Liquidity may be reflected as streaming quotes, live resting orders, indicative prices, request for quotes, or request for streams.

Every FX deal involves two currencies – one being bought and the other being sold. This means that the dealer takes a position with every execution of a customer order, and those positions have to be hedged promptly to reduce risk. However, prices offered by other banks can shift rapidly, and quotes are not always firm, which makes routing orders and ensuring execution more complicated. The life span and nature of each price varies by venue and sometimes by message. Some venues want a “last look” option allowing them to take a look at the markets before they automatically execute an order. This might result in them rejecting an order at a quoted price even if the price was valid when the order was sent.

Most FX market data is delivered in pulse intervals instead of continuously, and substantial activity can occur outside of regular data distribution intervals, which also affects the validity of prices, especially in a high frequency trading environment.

Geography also plays a role. Since the dealing banks are geographically distributed around the globe, prices have a varying amount of latency when they first arrive, adding more complexity that has to be considered by the pricing engine, smart order router, auto-hedging and risk management.

This is a fascinating market with a lot of complexity that makes it very interesting. It is clear that an event-driven architecture is absolutely critical for creating an FX eCommerce system.

Morgan Stanley Comes Up Golden

2011-07-22T10:41:00.000-04:00

Morgan Stanley Comes Up Golden

By AARON LUCCHETTI

After a series of missteps, Morgan Stanley found its footing in the second quarter, generating its highest quarterly revenue since 2007 and overtaking rival Goldman Sachs Group in bond trading for the first time since the financial crisis.

.The New York investment bank's surprise performance was driven partly by its decision to take on more risk when trading on behalf of clients during the quarter—a move that contrasts with Goldman's risk-aversion during the same period.

The results were a much-needed win for James Gorman, Morgan Stanley's chief executive, who is under pressure to improve the firm's inconsistent performance and catch up with rivals such as Goldman and J.P. Morgan Chase & Co.

Morgan Stanley reported a quarterly loss of $558 million but that was due to a $1.7 billion charge incurred when Japanese bank Mitsubishi UFJ Financial Group last month restructured its investment in the investment bank. Morgan Stanley's per-share loss of 38 cents was far smaller than the 64 cents expected by analysts, according to Thomson Reuters.

Morgan Stanley shares soared 11.4%, or $2.48, to $24.20 in its biggest one-day percentage gain since early 2009.

"It's hard to remember the last time they were the outperformer," says Jeff Harte, a banking analyst with Sandler O'Neill.

.Morgan Stanley has suffered several fits and starts—especially in its trading business, where it suffered large losses on risky bets—and turned in subpar results when it cut back risk in 2009.

Mr. Harte said the second-quarter results released Thursday were "a step in the right direction, but give me three really good quarters, and I'll say they're definitely there."

Morgan Stanley's quarterly net revenue of $9.3 billion was its highest since the three-month period ended May 2007 and bested analysts' estimates by about 16%. They were especially striking given the weak quarter at Goldman Sachs, which had $7.3 billion in revenue. The two banks' results ended a nine-quarter streak in which Goldman revenue topped Morgan Stanley's, often on the back of savvy trading in stocks, bonds and commodities.

This quarter, Morgan Stanley's revenue beat its bigger rival in bond trading and investment banking. Morgan Stanley's fixed-income and commodity division had net revenue of $2.1 billion, but the number was boosted by a $470 million gain related to its financial exposure to bond-insurance firms. Goldman's fixed-income, currency and commodities division, by contrast, had revenue of $1.6 billion during the quarter.

In stock trading, Morgan Stanley's $1.85 billion in revenue trailed Goldman's $1.92 billion, but the results were Morgan Stanley's best since 2008.

"We're very pleased that we're executing and continuing to build share with clients," said Ruth Porat, Morgan Stanley's chief financial officer, in an interview. She said the firm's gains in trading came in part from efforts to get more business out of existing trading clients across a variety of services from prime brokerage for hedge funds to currency, interest rates and commodity trading.

The firm's stock- and bond-trading results came from taking more risk and increasing the amount of capital its traders can use to serve investors that want to buy and sell securities. Morgan Stanley has been increasing a measure of its trading risk—called "value at risk," or VAR—which attempts to estimate what the firm might lose in a single trading day based on its holdings and past market volatility.

In the second quarter, the firm's VAR increased on average to $145 million from $121 million in the first quarter and $139 million during the second quarter of 2010. Ms. Porat noted in a call with analysts that the risk measurement declined toward the end of the second quarter as investors pulled back from trading due to fiscal concerns in Europe and the U.S.

Morgan Stanley's investment-banking business brought in $1.7 billion, up 40% form the previous quarter and 57% from the second quarter of 2010. Both merger-advisory and underwriting fees rose sharply as the firm benefited from winning mandates to advise on large stock offerings and takeover deals during the quarter.

Unlike its trading divisions, Morgan Stanley's investment-banking department has stayed near the top of the pack, taking advantage of the banking consolidation that followed the 2008 crisis and left fewer competitors. Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co., most notably, went away or were swallowed by bigger commercial banks.

This year, Morgan Stanley has helped lead several big IPOs, such as that of commodities producer Glencore International PLC and social networking firm LinkedIn Corp. Morgan Stanley could also be well positioned if technology IPOs continue to become more popular for fast-growing private companies.

Mr. Gorman said Morgan Stanley was continuing its work to turn around the firm amid "unquestionably challenging markets."

He noted that the firm has made progress on many of the 10 items he felt the firm needed to improve on when he started as CEO in January 2010.

.One item was restructuring the relationship Morgan Stanley forged with Japanese bank Mitsubishi UFJ during the financial crisis. Mitsubishi UFJ made an emergency $9 billion investment in Morgan Stanley that carried a hefty quarterly dividend. Last month, the two firms restructured the investment. Mitsubishi UFJ got a bigger stake, but now owns common shares that don't require Morgan Stanley to pay the high dividend. In addition, Mr. Gorman said, the common stake aligns the two firm's interests better.

Mr. Gorman also indicated he would push for more cost-cutting at the firm's brokerage joint venture with Citigroup. Morgan Stanley, which owns 51% of the joint venture, plans to buy the rest over the next few years. While revenue has steadily grown in the joint venture, progress cutting costs and boosting pre-tax margins to 20% has gone more slowly.

"We remain very focused on expenses in this business," says Mr. Gorman. "Margins must improve and do so soon."

Ms. Porat said the firm would continue to prune some of the firm's underperforming brokers in an effort to increase margins. Overall, the firm would likely keep head count constant or reduce it slightly, mainly through slowing down hires. Some analysts say that Morgan Stanley may not need to cut as many staffers as other Wall Street firms in a difficult environment because it was smaller in some key areas such as trading in 2009 and 2010.

Morgan Stanley "should be less exposed" to some of the macroeconomic weakness, because they have been in a rebuilding mode and come from a weakened base," says Howard Chen, an analyst with Credit Suisse.

"MUFG prospers when Morgan Stanley prospers," said Mr. Gorman.

Write to Aaron Lucchetti at aaron.lucchetti@wsj.com

Greece Gets New Bailout as U.S. Nears Brink

2011-07-22T08:58:00.000-04:00

Greece Gets New Bailout as U.S. Nears Brink

By CHARLES FORELLE, PATRICIA KOWSMANN and COSTAS PARIS

BRUSSELS—Euro-zone leaders agreed Thursday on a new €109 billion ($157 billion) bailout for Greece and new steps to prevent its debt crisis from metastasizing across the Continent—in a plan expected to trigger the first debt default by a nation using the common currency.

.The meeting also produced a stark and open-ended declaration: The wider euro zone is committed to financing countries that take bailouts—thus far, Greece, Ireland and Portugal—for as along as it takes them to regain access to private lenders.

The move is a bold bid by Europe's leaders to corral an 18-month-old debt crisis that is veering dangerously out of control. Markets stopped lending to Greece, then Ireland, then Portugal. Fearful that policy makers have no concrete strategy for shoring up the larger economies of Spain and Italy, investors have lately soured on them as well. After months of dithering, European leaders resolved that they had to stop the bleeding.

Still, it remains to be seen whether the tourniquet will hold. Even after the new plan, Greece will have a staggering load of debt.

.Thursday's agreement was the fruit of several concessions. European Central Bank Jean-Claude Trichet lost a fight to prevent default. German Chancellor Angela Merkel pried open her reluctant nation's pocketbook to write another check and be on the hook for still more.

French President Nicolas Sarkozy, though he lost a bid to tax banks to pay for the bailout, may have come out the best by urging Ms. Merkel to a more proactive approach to the debt crisis.

..In a declaration crafted here after hours of haggling, and a whirlwind trip Wednesday to Berlin by the French president, the leaders put forward billions more in new loans to Greece. But they extracted a price: Greece's private-sector creditors will accept a bond exchange that gives them less than originally promised.

The euro zone had long insisted that none of its 17 members could contemplate not repaying its debt, and the European Central Bank vigorously fought a default to the very end. Mr. Trichet joined Ms. Merkel and Mr. Sarkozy at their meeting in Berlin on Wednesday to press his case once more. But Greece was reeling under its huge burden, and its woes were threatening to engulf other countries.

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.To push back against that contagion, the euro zone also agreed Thursday to a wide expansion of its €440 billion bailout fund. That vehicle, once restricted to lending to countries near the brink of collapse, will now be able to buy euro-zone bonds on secondary markets to move prices and lend directly to countries even before they lose access to private funding. That could even include lending money to finance bank recapitalizations.

The leaders also agreed to cut the once-lofty interest rates that the bailout fund charges and extend to as much as 30 years the maturities of the loans it provides.

"We created a solid firewall and better fire-brigade equipment," said Herman Van Rompuy, the European Union president.

That creation had been a long time coming. In spring of 2010, when the euro zone was debating the first Greek bailout, the countries—at the firm insistence of Germany—decreed that rescue loans would come only when absolutely needed, and would be issued at punitive rates to discourage countries from slacking on reforms and falling back on cheap aid.

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Zuma Press

Greek Prime Minister George Papandreou in Brussels on Thursday.
.Germany has made a stark reversal. Chancellor Angela Merkel, once the euro zone's "Madame Non," led a push to assemble the new Greek bailout program. In the face of stiff domestic opposition to creating what the German press dubbed a "Transferunion," she opened the door to far greater fiscal aid than her country had once contemplated. In return, she won a commitment that banks and other creditors—and not just taxpayers—would have to bear some of the burden.

The new plan for Greece will work as follows: The euro zone's bailout fund and the International Monetary Fund will lend the country roughly €109 billion over the next three years at around 3.5% interest.

Private creditors who hold Greek debt that matures in the coming years will "voluntarily" turn in their bonds and accept new ones that mature far in the future. The Institute of International Finance, a banking trade group, said its members had committed to participate in the exchange.

The banks, Germany and France's largest institutions among them, offered to take new 30-year or 15-year Greek bonds. The offer includes a menu of four different flavors of bonds with varying coupons and types of insurance—some would be backed by triple-A-rated collateral. Some of the bonds on the menu include a 20% discount to principal.

The euro-zone leaders said the private sector's "contribution" would amount to €37 billion through 2014 and €106 billion through 2019, though it didn't detail the calculation. They also said a debt buyback program would yield an additional €12.6 billion by taking Greek debt off the markets at discount prices.

Charles Dallara, chief executive of the Washington-based IIF, which has been leading negotiations for the private sector, said he believed the deal should put an end "to the uncertainty swirling around the future that was hindering any capacity for the Greek economy to grow."

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EPA

German Chancellor Angela Merkel, right, talks to the head of the International Monetary Fund, Christine Lagarde, and French President Nicolas Sarkozy at the EU summit in Brussels on Thursday.
.The nature of the private-sector contribution—and how it is calculated—is murky. But it appears that a relatively small portion of it would come from actually renouncing principal the creditors are owed. A large part will come from accepting to be repaid late at low interest rates.

In any case, the exchange would cause ratings companies to place Greece into "selective default"—a term indicating it has defaulted on some obligations but is honoring others. It isn't clear how long Greece would remain in that situation.

That has a side effect: The European Central Bank has made clear it wouldn't accept defaulted bonds as collateral for its lending operations. That would be devastating to banks—especially Greek banks—that rely on using their holdings of Greek bonds to get quick cash from the ECB. To counteract that, the euro-zone countries committed to providing "credit enhancement"—guarantees or other measures—that would allow the ECB to continue to accept Greek debt.

WSJ's Charles Forelle reports from the Euro Summit on efforts to put a final stamp on a bailout package for Greece that could run as high as $100 billion. Photo: GEORGES GOBET/AFP/Getty Images
.Mr. Trichet, the ECB president, made clear he was a reluctant participant in the arrangement. But he said governments would provide some €35 billion of insurance in case the Greek collateral isn't solid. He added that the ECB's own holdings of Greek bonds would be "fully and integrally honored."

European leaders took pains to separate Greece from other countries. Greece "requires an exceptional and unique solution," they said in a statement. Other euro countries "solemnly reaffirm their inflexible determination to honor fully" their own sovereign bonds, the statement said.

Ireland and Portugal, both receiving European aid, will get breaks on their interest rates to 3.5%. For Ireland, which was paying around 6% on the EU portion of its €67.5 billion bailout, that is a victory. Previous attempts to lower its interest rate had been stymied by French insistence that Ireland's low corporate tax rate be raised. That demand is dropped.

—Stephen Fidler and Marcus Walker contributed to this article.
Write to Patricia Kowsmann at patricia.kowsmann@dowjones.com, Costas Paris at costas.paris@dowjones.com and Stephen Fidler at stephen.fidler@wsj.com

US Long Bond Rallies On Debt-Ceiling Hopes

2011-07-20T09:18:00.002-04:00

US Long Bond Rallies On Debt-Ceiling Hopes

By Cynthia Lin

Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A surge of optimism Tuesday about the U.S. government making progress toward a budget deal helped 30-year Treasurys recoup sharp losses suffered in the previous session, to post their strongest session in more than four months.

President Barack Obama's mid-afternoon remarks included praise for a sweeping deficit-reduction plan by the so-called "Gang of Six" that involves spending cuts, entitlement-program modifications and tax reforms--all deep-rooted measures that ratings firms are calling for in order to rein in the nation's rising debt load.

The plan, which appeared to garner a flood of bipartisan support, is among the first positive signs that the U.S. debt crisis impasse is finally cracking. Still, some analysts are pessimistic about a solution until they see it officially put in place.

"This is all still so much political theater on everyone's parts, it's pretty horrendous," said Joe Burke, the head of government bond risk management at Interactive Brokers. "It wasn't just surprising that [Treasury bonds] rallied, but how fast it did. If someone were to come out and say they weren't going for it, we'd be right back to where we started."

Aside from the late-day bond rally, the rest of the Treasurys market traded with little conviction because investors struggled to balance the euro-zone debt crisis against the still-unsigned U.S. debt deal. Treasury notes hovered around par for most of the session despite a strong jump in U.S. stocks helped by a better-than-expected jump in June U.S. housing starts.

The debt ceiling debate "is keeping Treasurys in a holding pattern as people await a resolution," said Scott Sherman, interest rate strategist at Credit Suisse.

For months, investors regarded the U.S. debt limit discussions as trivial, showing little concern that the world's largest country might default on its debt. In fact, Treasurys enjoyed months of heavy buying, fueled by the euro-zone debt crisis that drove investors into safer assets. This came even as the Treasury Department's Aug. 2 deadline for Congress to increase the nation's borrowing limit inched closer and ratings firms had threatened to strip U.S. debt of its top-notch grade.

But investors have started getting uneasy about holding longer-dated U.S. government debt, which would stand to lose the most if market participants lose faith in the value and credibility of Treasurys. It wasn't until Obama's reassurances Tuesday that 30-year bond prices rallied, more than recovering Monday's steep selloff and almost erasing the losses over the past four sessions combined.

Many traders say a technical default would spark a sharp, but short-lived exodus from Treasurys. But they think there are better chances that the debt ceiling is lifted in time and that a longer-term plan to cut fiscal spending will hurt stocks and boost appetite for Treasurys.

Analysts at Nomura recommend buying Treasurys on price dips, maintaining faith that the debt ceiling will be resolved and ongoing euro-zone fears will drive Treasury prices higher. Hartford Investment Management says the debt ceiling debate is adding upward pressure on Treasury yields and expects the benchmark 10-year to go as high as 3.35% in the near-term.

In late-afternoon trading, the 30-year bond rose 1 28/32 in price to yield 4.179%. Benchmark 10-year notes fed off the momentum, rising 10/32 to yield 2.873%. Two-year notes fell 1/32 to yield 0.371%. Bond prices and yields move inversely.

US Swap Spreads Mixed
U.S. two-year swap spread, which measures the differential between the two-year swap rate and two-year Treasury yield and is a main gauge of credit risks, was 0.25 basis point tighter at 29.00 basis points. The 10-year swap spread was 2.75 basis points wider at 14.50 basis points.

COUPON ISSUE PRICE CHANGE YIELD CHANGE
3/4% 2-year 100 0/32 dn 1/32 0.371% +1.2BP
1 1/4% 3-Year 100 0/32 dn 1/32 0.622% +0.8BP
2 1/4% 5-year 100 11/32 dn 0/32 1.428% +0.2BP
2 7/8% 7-Year 101 15/32 up 4/32 2.144% -2.2BP
3 5/8% 10-year 102 5/32 up 10/32 2.873% -3.6BP
4 3/4% 30-year 103 11/32 up 1 28/32 4.179% -11.1BP
2-10-Yr Yield Spread: +255.0BPS Vs. +255.2PS
Source: Tradeweb

-By Cynthia Lin, Dow Jones Newswires; 212-416-4403; cynthia.lin@dowjones.com

Bumpy Ride Likely for Treasurys

2011-07-18T09:24:00.000-04:00

Bumpy Ride Likely for Treasurys

By CYNTHIA LIN

NEW YORK—As the clock ticks down on a deal to raise the debt ceiling, the partisan bickering and floating of trial balloons are pricking Treasury bond holders' nerves.

For months, Treasurys investors largely brushed off any notion that the world's largest economy would miss an interest payment and face losing its top triple-A rating. The euro-zone debt crisis and fragile U.S. economy consumed much of the attention, fueling a three-month run-up in Treasury prices as investors sought financial safety.

But prospects of a technical default are getting hard to ignore without a signed agreement as the calendar heads toward the Treasury Department's Aug. 2 deadline, when the U.S. is supposed to run out of money to pay all of its bills.

Word of a $1.5 trillion agreement on spending cuts between Republicans and Democrats sparked a selloff in Treasurys Thursday. It wasn't so much a reaction of hope, but rather frustration, analysts say, since stocks ended lower alongside the drop in Treasury prices. Some say the figure was disappointing, falling short of the $4 trillion in budget savings needed and $2 trillion from a Republican proposal last weekend.

For the week, Treasury prices rose, pushing the benchmark 10-year yield to 2.910% on Friday, from 3.014% a week earlier.

Other plans have emerged, such as Minority Leader Mitch McConnell's arrangement to allow the president to lift the debt ceiling on his own, and House Majority Leader Eric Cantor's "Cut, Cap and Balance" approach.

"The market doesn't know what to react to because there's such a cacophony out of Washington," said Ward McCarthy, chief financial economist at Jefferies. "Until they've sign on the dotted line, no one is going to believe they've agreed on anything."

Throw ratings companies in the mix, and the consequences of a missed payment, however technical, looms larger. Standard & Poor's said Friday there is a chance it will downgrade the U.S. even before a missed debt payment if it sees the probability of a default rising further between now and Aug. 4, when S&P said an interest payment is due. Moody's put the U.S. on negative watch Wednesday, following through on a promise made last month if it felt there was a lack of progress in Washington.

While it is hard to imagine a world where U.S. government debt isn't the global investment safe haven, investors are getting increasingly anxious.

The 30-year bond, where owners stand to lose the most if the value or credibility of U.S. debt is in question, has underperformed, with its yield rising faster than those of shorter-dated notes.

Justin Lederer, senior strategist at Cantor Fitzgerald, said he expects "extreme volatility" in the Treasury market to persist as the budget debate drags on. "Across the market, it's a tug of war back and forth ... and on the long end, there's a fear of what the long-term outlook for the economy is."

For the week ended Wednesday, global fund tracker EPFR found that there was a notable turn within U.S. bond-fund inflows toward those mandated to invest in intermediate five- to eight-year debt. "There was not much interest in longer-term" U.S. debt, said EPFR analyst Cameron Brandt. "I would say it is tied to the uncertain fiscal monetary outlook for the U.S."

Some Asian nations, among the biggest foreign owners of U.S. debt, have been quietly wringing their hands over the battle on Capitol Hill. Officials and analysts there have voiced concerns but said they have few alternatives for parking their cash.

But signs of anxiety reflected in the markets remain contained, and U.S. analysts say a default at home could be very different from any of those abroad.

"A ratings downgrade would be about politics, not about the U.S.'s ability to pay. Markets do understand that," said Ira Jersey, interest-rate strategist at Credit Suisse.

In fact, if no agreement is reached by Aug. 2, Kevin Giddis, president of fixed-income capital markets at Morgan Keegan, says that Treasurys could even gain in that scenario. "As counterintuitive as this may sound, my guess is that Treasurys will initially rally on the news," Mr. Giddis said, citing how investors "instinctively" head to U.S. government debt while in risk-off mode.

Write to Cynthia Lin at cynthia.lin@dowjones.com

统计局：6月份70个大中城市房价仅3个同比下降

2011-07-18T08:37:00.000-04:00

统计局：6月份70个大中城市房价仅3个同比下降

　　6月份70个大中城市住宅销售价格变动情况

　　一、新建商品住宅(不含保障性住房)价格变动情况

　　(一)与上月相比，70个大中城市中，价格下降的城市有12个，持平的城市有14个。与5月份相比，6月份环比价格下降和持平的城市增加了6个。价格上涨的城市中，环比涨幅均未超过0.5%，涨幅比5月份缩小的城市有24个。

　　(二)与去年同月相比，70个大中城市中，价格下降的城市有3个，涨幅回落的城市有28个。6月份，同比涨幅在5.0%以内的城市有39个，比5月份增加了3个。

　　二、二手住宅价格变动情况

　　(一)与上月相比，70个大中城市中，价格下降的城市有19个，持平的城市有12个。价格上涨的城市中，环比价格涨幅均未超过1.0%，涨幅在0.5%以内的城市有36个。

　　(二)与去年同月相比，70个大中城市中，价格下降的城市有5个，比5月份增加了1个。涨幅回落的城市有24个。6月份，同比涨幅在5.0%以内的城市有48个。

　　2011年6月份70个大中城市住宅销售价格指数

　　2011年6月份70个大中城市新建商品住宅分类价格指数

　　2011年6月份70个大中城市二手住宅分类价格指数

　　说明：

　　1、从2011年1月份起，国家统计局开始实施《住宅销售价格统计调查方案》(以下简称《新方案》)。由于《新方案》对数据来源渠道、指标设置、计算方法等影响价格指数计算的主要因素都进行了相当大的调整，因此今年前11个月数据与以往历史数据不完全可比。

　　2、同比价格指数的计算方法。鉴于网签数据从2010年12月份起开始上报，前11个月的网签数据缺失，故不能计算今年1-11月份各月与网签数据同一口径的同比价格指数。为保持同比价格指数计算和发布的连续性和稳定性，满足有关方面的需要，国家统计局采用2010年的有关房价统计数据和2011年按网签数据计算的房价数据，根据同比指数和环比指数之间的数学关系，对6月份同比价格指数的计算进行了技术处理：将2010年7-12月份(6个月)的环比数据连乘，再乘以2011年前6个月的环比数据生成本月同比价格指数。以此类推可计算其他月份的同比价格指数。计算公式表示为：

　　其中：P201006……P201012分别表示2010年6-12月份各月价格，P201101……P201106分别表示2011年1-6月份各月价格。

　　3、2011年6月份，62个城市的新建住宅价格指数根据网签数据计算，其他8个城市根据统计系统房地产开发统计报表中各个项目的分类销售面积和金额数据计算。62个网签数据城市分别是：北京、天津、石家庄、太原、呼和浩特、沈阳、大连、长春、哈尔滨、上海、南京、杭州、宁波、合肥、福州、厦门、南昌、济南、青岛、郑州、武汉、长沙、广州、深圳、南宁、海口、重庆、成都、贵阳、昆明、西安、兰州、西宁、银川、乌鲁木齐、秦皇岛、包头、丹东、吉林、牡丹江、无锡、扬州、徐州、温州、金华、安庆、泉州、九江、济宁、洛阳、平顶山、宜昌、岳阳、常德、惠州、湛江、韶关、桂林、北海、三亚、泸州、南充。6月份新增加的城市是安庆、济宁和常德。

　　4、新建住宅含保障性住房；新建商品住宅不含保障性住房。

　　5、表格中"--"表示本月无成交记录。(国家统计局网站)

　　七十个大中城市住宅销售价格指数(2011年6月)

　　

　　

　　

China Stumbles in Yuan Grand Plan

2011-07-15T09:32:00.000-04:00

China Stumbles in Yuan Grand Plan

LINGLING WEI And BOB DAVIS

BEIJING—When China announced a flagship program to make its currency more international in the summer of 2009, it cited "the growing call" from Chinese trading partners to use the yuan in cross-border transactions. More than a year later, the People's Bank of China touted the program as a "breakthrough," citing a surge in the amount of trade in the currency.

Not everything went according to plan.

The move had important, unintended side effects, including giving companies and investors a way to profit from the difference in interest rates between China and other countries, and opening a path for "hot money" to flood the country.

It also has boosted, rather than reduced, the amount of foreign-exchange reserves piling up in China's coffers—the opposite of what Beijing intended when it opened the yuan for foreign trade.

This, in turn, could add to China's already difficult battle to tame an inflation rate running at more than 6%, as the central bank needs to print more yuan to buy up the dollars flowing into the country.

China's stumbles in trying to get its currency more widely accepted outside its borders underline a fundamental contradiction at the heart of Beijing's plans: The Chinese authorities want to keep a tight grip on the value of the yuan to keep exports booming, while at the same time encouraging more foreign companies and investors to use it.

China is trying to blunt the rise of the yuan by keeping its appreciation sharply controlled, but the internationalization program puts upward pressure on the currency.

There is a "tension in the short run between managing yuan appreciation and increasing the yuan's prominence in global trade and finance transactions," says Brookings Institution China scholar Eswar Prasad.

.On Tuesday, the People's Bank of China said foreign-exchange reserves jumped by $153 billion in the second quarter to $3.2 trillion.

Of that increase, $48 billion, or about a third, was attributable to China's decision to allow the yuan to be used in foreign-trade transactions, estimates Zhu Chaoping, head of research at ChinaScope Financial, a market-research firm in Hong Kong.

In the prior two quarters, the trade program added a total of $83.5 billion to China's reserves, Mr. Zhu calculates.

China had hoped that allowing the yuan to be used more freely abroad would boost demand for the currency, also known as the renminbi or RMB, and reduce the amount of dollars entering the country.

For the long term, China wants to turn the yuan into a global reserve currency that is used for investment, trade and loans, as the dollar and euro are.

A widely accepted yuan could help Chinese companies alleviate foreign-exchange risks. Chinese exporters, in particular, fear the yuan's continued appreciation against the dollar—a rise China's leaders have tried to restrain—would expose them to losses if they can be paid only in greenbacks that have been steadily losing value.

The yuan is widely seen as undervalued, so only overseas sellers are interested in the trade.

Nearly 90% of cross-border trade settled in yuan in the first quarter—totaling 360.3 billion yuan, or 7% of China's total trade—involved China's imports, according to data provided by the People's Bank of China, a sign foreign demand for yuan hasn't picked up much.

Shanghai Flying Horse Imports & Exports Co., a state-owned company that exports clothing and textiles, is among the first batch of companies in the city authorized to use yuan to settle trade.

Still, nearly all of the company's exports are settled in dollars, according to Mao Xiaohua, a manager at Shanghai Flying Horse.

"Renminbi settlement certainly would be good for us because that would reduce our foreign-exchange risks," Ms. Mao said. "But our customers in Europe and the U.S. are all unwilling to pay in renminbi....It seems that they totally dismiss the idea of renminbi settlement."

The Chinese authorities want to keep a tight grip on the value of the yuan to keep exports booming, while at the same time encouraging more foreign companies and investors to use it. Above, The Great Wall in April.
.The fact that importers are using yuan means that dollars build up at a more rapid clip in the Peoples Bank of China's vaults because importers don't need to tap them.

"Everyone thinks there is a one-way bet on which way the currency will move," so only those that get paid in yuan are interested in the business, says University of California at Berkeley economist Barry Eichengreen. "When you internationalize, you can't control all the uses to which money is put."

Chinese economist Yu Yongding, a former adviser to the People's Bank of China, recently told a Chinese newspaper that "to date, renminbi trade settlement hasn't helped Chinese companies reduce foreign-exchange risks, but has helped foreign companies cut risks."

Some companies also have used the trade-settlement program to profit from the difference between higher yuan interest rates in mainland China and lower U.S. dollar rates in Hong Kong, according to bankers and analysts.

Such transactions could be used by speculators betting on the yuan's rise and have the potential effect of adding to China's dollar reserves.

Asia Pulp & Paper Co., an Indonesian paper maker, recently directed its Hong Kong subsidiary to borrow U.S. dollars at low rates, using its yuan deposits as collateral, says a person familiar with its operations.

APP then took the dollars and paid for goods produced by its mainland subsidiaries, effectively using low-rate U.S.-dollar loans instead of higher-rate yuan loans.

At the end of a complex series of transactions, APP was able to repay the dollar loans with yuan obtained from the internationalization program.

APP benefitted in two ways: It borrowed in dollars at low rates and paid off the loan with yuan that had appreciated in value since the beginning of its dealings.

APP declined to comment.

Li Bo, director of the Chinese central bank's currency policy division, said in an April speech that the goal of the cross-border yuan program was to help Chinese companies reduce foreign-exchange risks and to ease cross-border trade and investment.

PBOC officials declined to comment for this article.

Harvard economist Jeffrey Frankel said China is unusual in pressing to give its currency a bigger international role. Japan and Germany, after World War II, and the U.S. after World War I resisted such efforts because they worried their currencies would strengthen and make their exporters less competitive.

For now, China's central bank is struggling to keep up with companies looking to use the internationalization program as a channel for so-called hot money, which can contribute to dangerous bubbles in China's real-estate market and stock exchanges, as investors look to park their money in sectors seen as paying a high return.

The State Administration of Foreign Exchange, the central bank's currency watchdog, has put in place a "special campaign" to crack down on speculative money flows.

This week, the regulator fined Guangzhou Teng Hang Metal Materials Co., of Guangzhou, China, which buys steel scrap from overseas for recycling, for manipulating its import payments.

More
Companies Worry: If Yuan Floats, Could It Fall?
.The company inappropriately deferred payments of $1.3 million, SAFE alleged.

Delaying payments for imports is a long-used tactic by Chinese companies to benefit from yuan appreciation.

Experts on China's foreign-exchange regulations say the availability of yuan settlement has the potential to make this form of arbitrage even more profitable, because companies now have access to even more favorable yuan exchange rates overseas.

The yuan is valued slightly more against the U.S. dollar in Hong Kong than it is on the mainland.

A manager at Guangzhou Teng Hang declined to comment on SAFE's finding and the fine levied by the agency.

"I'm not aware of that," he said.

The SAFE program may be having some impact.

According to UBS AG economist Wang Tao, speculative inflows—or capital seeking short-term returns—slowed to $24 billion in the second quarter, from an estimated $90 billion in each of the previous two quarters.

Write to Lingling Wei at lingling.wei@wsj.com and Bob Davis at bob.davis@wsj.com

Why These Two Silver ETFs Are Poised For Massive Profits (AGQ, PSLV, SLV, ZSL, GLD)

2011-07-14T10:35:00.000-04:00

Why These Two Silver ETFs Are Poised For Massive Profits (AGQ, PSLV, SLV, ZSL, GLD)

July 13th, 2011

Goto comments Leave a comment

George Maniere: Most investors believe that the reason silver is about 50 times cheaper than gold is because it’s a more abundant resource. It’s a simple example of the law of supply and demand. Having done some study on this I was amazed to find that this is simply not true. The amount of available silver is far less than the amount of available gold. I believe that the divergence in the price between an ounce of gold (NYSE:GLD) and an ounce of silver will be closing and soon.

This is a fact that is overlooked by the many seasoned silver investors. While global silver mining has increased significantly over the past two decades and silver output has more than doubled since the early 1990’s, the global demand for silver is outpacing the global supply. In fact according to a report from the CPM group, a commodities research and asset management team, global silver production has been unable to meet global demand for more than fifteen years. The world’s silver mines are simply not producing enough silver to meet demand. [more reading: $60 Silver: How Investors Should Play This Silver ETF Trade]

For those of you that read me on a regular basis know that I have been a gold and silver bug since I was a child and my Grandma used to teach my brother and I about coin collecting. Back then it was a hobby. You also know that I have written on more than one occasion that I have more than my fair share of physical gold and silver. I have also written about the logistical problems of holding physical. Storage and safety are two issues that come to mind immediately. One of my readers wrote to me that if I have physical gold and silver I also better have a gun and be prepared to use it. He signed off “I remain long Gold, Silver and Lead!”

In 2010 the global demand for silver exceeded 1.05 billion ounces while the global mining only produced 700 million ounces. That begs the question, where is the surplus coming from? The answer is that over the last two generations major government stockpiles of silver have been sold off to supply the shortfall. The United States government alone has supplied nearly 5 billion ounces of silver into the market since World War II. [more reading: Gold & Silver ETFs: Buy High and Sell Higher]

While silver is 17.5 times more abundant in the Earth’s crust than gold the amount of above the ground gold far exceeds the amount of silver. This is because silver has industrial uses. Products like CD’s, cell phone batteries, calculators, printed circuit boards, hearing aids, electronic switches, TV screens, catalytic convertors, inks, computer monitors and thousands of other products use silver in their production. There are new technologies every day that use silver.

What do we do with these products when they have out lived their usefulness? We throw them away. That is because it is so labor intensive to reclaim the silver, it ends up garbage dumps. Indeed, I predict that garbage dumps will be a source of silver in the future. So while gold is produced but silver is consumed. Even though gold is highly desired, silver is needed. Add to this that the middle class man would rather own 40 ounces of silver than one ounce of gold and you can see why I believe the divergence in price between gold and silver will not last long. I’m not saying that it will be one for one but a ratio of 15 to 1 seems more like a realistic possibility in the near future. [more reading: Silver ETF Investors May Need To Be Patient For The Next Payoff]

OK. I have a nice position in physical and I want to use ETF’s to buy my positions to take advantage of these parabolic runs we have experienced. I have decided to use two silver ETF’s. The Sprott Physical Silver Trust (NYSE:PSLV) and Proshares Ultra Silver ETF (NYSE:AGQ). I have shied away from using the iShares Silver ETF (NYSE:SLV) because there is ample evidence that if SLV was ever asked to produce the underlying asset it would not be able to do so. Add to this that a look at the chart below will show in the last run up PSLV actually outperformed SLV. I conclude that this is because they do hold the physical silver.

I also have done a lot of study about ProShares Ultra Silver ETF (NYSE:AGQ). This ETF makes no bone about the fact that they don’t hold silver. What you are buying are futures contracts that are leveraged 2 to 1. It is not a trade for the faint of heart. Yesterday while Nero fiddled and the market sold off for the second day I was watching AGQ and I knew that today it would bounce. I bought 10,000 shares at $174.92 at 2PM on Tuesday and prayed. I innately knew that gold would make a big move today and whatever happened in the market gold would carry silver with it. For safety I had a tight stop under it so I knew if it went badly I would be out without too much pain. See the Chart from today below.

In the pre-markets I saw that AGQ was going to open at 183.00 so I knew things would go my way. And boy did it! At 11:27 AM on Wednesday I sold all 10,000 shares at $198.88. That’s a realized profit of 23% in I day! I do want to stress that while it worked remarkably well today this is a stock that is used for day trading. I want to stress that as I have already written this holding is not for the faint of heart. If this holding goes the wrong way you get wiped out in a heartbeat.

In conclusion, I will continue to build my position in PSLV on any weakness and when the opportunity arises and I am sure as sure can be I will float like a butterfly and sting like a bee with AGQ.

Related ETFs: ProShares Ultra Silver (NYSE:AGQ), ProShares UltraShort Silver (NYSE:ZSL), iShares Silver Trust (NYSE:SLV), SPDR Gold ETF (NYSE:GLD), Sprott Physical Silver Trust ETF (NYSE:PSLV).

Written By George Maniere From Investing Advice

In 2004, after retiring from a very successful building career, I became determined to learn all I could about the stock market. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please feel free to email me at maniereg@gmail.com.

Draghi Says EU Debt Crisis Is in New Phase

2011-07-13T09:12:00.002-04:00

Draghi Says EU Debt Crisis Is in New Phase

By Lorenzo Totaro and Jeffrey Donovan - Jul 13, 2011 6:56 AM ET

Governor of the Bank of Italy Mario Draghi addresses business leaders at an economic council in Berlin on May 25, 2011. Photographer: Odd Andersen/AFP/Getty Images

Europe’s debt crisis has entered a new phase and policy makers must come up with a “clear” response to stop the contagion that threatens the region’s single currency, said the European Central Bank’s incoming President Mario Draghi.

“It’s now necessary for those trying to manage the sovereign crisis to give certainty, to define with clarity the political objectives, the scope of the instruments and the amount of resources available,” Draghi said today in a speech in Rome. “It’s a necessary step to ensure the stability of the euro area and its currency.”

European governments can no longer count on their financing costs remaining similar to those of Germany, the region’s strongest economy, simply because of their participation in the single currency, he said.

“The solvency of the sovereign states is no longer something acquired he said, but something earned with high and sustainable growth, which is only possible if budgets are in order,” Draghi, who also heads the Bank of Italy said. “Today’s cost of credit reflects that new reality.”

Draghi’s comments at the annual meeting of Italy’s banking association came after Italian bonds and stocks plunged in recent days on concern the country would struggle to reduce the euro-region’s second-biggest debt. The yield on Italy’s 10-year bond reached the highest since 1997 and financing costs at a sale of treasury bills surged on investor concern that Italy would be the next victim of the region’s debt crisis.

Bonds Gain

Italian bonds gained today on pledges by the government for swift passage of a 40 billion-euro ($64 billion) deficit- reduction plan that seeks to balance the budget in 2014. The premium investors demand to hold Italy’s 10-year bond over German bunds fell 17 basis points to 269.3, down from a euro-era record of 348 reached during trading yesterday.
Italian Finance Minister Giulio Tremonti, speaking at the same conference, said the plan would be passed by both houses of parliament by July 15. Opposition parties have agreed to ease passage of the measure in the legislature.
“Italian politicians decided to respond firmly to market concerns over the credibility and implementation of the 40 billion-euro fiscal package,” Fabio Fois, European economist at Barclays Capital in London said in a note to investors. “These are clearly positive developments. The fiscal plan was originally supposed to be voted on at the beginning of August.”

Asset Sales

The deficit plan is “an important step in strengthening the public accounts” that will help reduce the debt, Draghi said. He also called on the government to explain details of additional measures for 2014 that will be needed to achieve the balanced budget.
Tremonti did say the government was considering a plan to sell off more state-owned assets “once the crisis passes.”

Austerity measures won’t be enough for Italy and other euro-region countries to reduce debt if not accompanied by policies to boost economic growth, Draghi said. The Bank of Italy expects Italian growth to continue to lag behind the euro area average for the next two years, he said. Second-quarter growth did expand at a similar pace as that of the euro region, Draghi said, reversing the trend in the first three month when Italy grew 0.1 percent, a fraction of the 0.8 percent rate for the euro area.

In contrast to many European economies, Italy has the advantage of a solid banking system and a declining jobless rate, Draghi said.

Italian lenders will pass stress tests this week with a “significant” margin of capital above the core Tier 1 minimum, he said. He estimated the lenders still need to boost capital by 20 billion euros to meet Basel 3 standards for 2019, he said.

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net. Jeffrey Donovan at jdonovan26@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

中国强劲GDP回击硬着陆人民币升值压力陡增

2011-07-13T08:21:00.002-04:00

中国强劲GDP回击硬着陆人民币升值压力陡增

手机免费访问　www.cnfol.com　2011年07月13日 17:23　中金在线/财经编辑部　

　　统计局：中国经济硬着陆风险比较小

　　国家统计局新闻发言人盛来运今天(7月13日)表示，从当前和今后一个时期看，中国经济增长的动力仍然比较强劲，经济增速快速回落的风险比较小。

　　国家统计局今天发布数据显示，二季度国内生产总值(GDP)同比增长9.5%，较一季度回落0.2个百分点，但仍处较高水平。

　　从经济“三架马车”来看，盛来运认为，今年是“十二五”开局之年，各地投资愿望很强烈。同时，目前民间投资同比增幅高于全国平均水平，说明市场自主投资动力比较强。

　　上半年，全国固定资产投资同比增长25.6%，其中地方项目投资同比增长28.1%，中央项目增长为负3.8%。按照企业性质分，国有及国有控股同比增长14.6%，低于全国水平11个百分点，“表明非国有及国有控股企业的投资增长快于全国平均水平”。

　　消费方面，上半年城镇居民人均可支配收入为1.1万元，扣除价格因素，实际增长7.6%，农村居民人均现金收入3706元，扣除价格因素实际增长13.7%。上半年，社会消费品零售总额同比增长16.8%。

　　盛来运表示，进出口增速虽然回落幅度较大，但是目前20%左右的增速仍然较高，并且上半年顺差仍然在稳定增加。

　　按贡献划分，上半年最终消费对GDP的贡献率为47.5%，资本形成总额对GDP的贡献率为53.2%，货物和服务进出口对GDP的贡献率为负0.7%，三大需求对经济增长的拉动点数分别是4.6、5.1和负0.1个百分点。

　　对于先期发布的物价指数，盛来运分析称，6月物价同比增幅较高主要是翘尾影响和食品价格较高所致，后期物价虽然上升压力较大，但是维持物价稳定的因素也在增加。

　　盛来运说，今年3月-5月，物价环比上涨中一个很重要推动力量是非食品价格上涨在增强，但是6月发生变化，非食品价格指数环比与5月比持平，CPI中7个非食品大类中有三个大类开始环比下降。

　　“这种状况值得观察，”盛来运说，如果是趋势性的话，对后期物价走势产生重大影响，并且也说明前期关于物价的调控政策正在取得积极成效。

　　至于下半年中国宏观经济面临的最大挑战，盛来运指出，还是如何处理好经济平稳较快发展、管理好通胀预期以及更好地调整经济结构之间的关系。一方面物价水平还在不断创新高。目前，国外流动性仍然非常充裕，国内也面临成本长期上升的压力，物价调控面临很大压力。另一方面，结构调整难度也比较大，传统的体制和机制根深蒂固。比如重工业增速仍然偏快，节能减排的任务形势比较严峻。

　　盛来运认为，下一阶段仍然要把物价的调控放在宏观调控的首位，但是也要利用好经济走稳的时机，利用价格上涨的倒逼机制，加快结构调整和发展方式转变。

　　财新网王晶

Forex Trading: Market Maker Vs. ECN

2011-07-13T07:36:00.000-04:00

Forex Trading: Market Maker Vs. ECN

Posted: Dec 27, 2006 | Reprints

Grace Cheng

The trading platform usually comes with free charting software and news feeds. (For related reading, see Demo Before You Dive In.)
Some of them have more user-friendly trading platforms.
Currency price movements can be less volatile compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.

Cons:

Because they may trade against you, market makers can present a clear conflict of interest in order execution.
They may display worse bid/ask prices than what you could get from another market maker or ECN.
It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives. Market makers may also move their currency quotes 10-15 pips away from other market rates.
A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.
Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution", which means their orders may not get filled at the prices they want.

How Electronic Communication Networks or ECNs WorkECNs pass on prices from multiple market participants, such as banks and market makers, as well as other traders connected to the ECN, and display the best bid/ask quotes on their trading platforms based on these prices. ECN-type brokers also serve as counterparties to forex transactions, but they operate on a settlement rather than pricing basis. Unlike fixed spreads, which are offered by some market makers, spreads of currency pairs vary on ECNs depending on the pair's trading activities. During very active trading periods, you can sometimes get no ECN spread at all, particularly in very liquid currency pairs such as the majors (EUR/USD, USD/JPY, GBP/USD and USD/CHF) and some currency crosses.

Electronic networks make money by charging customers a fixed commission for each transaction. Authentic ECNs do not play any role in making or setting prices; therefore, the risks of price manipulation are reduced for retail traders. (For more insight, see Direct Access Trading Systems and the Electronic Trading tutorial.)

Just like with market makers, there are also two main types of ECNs: retail and institutional. Institutional ECNs relay the best bid/ask from many institutional market makers such as banks, to other banks and institutions such as hedge funds or large corporations. Retail ECNs, on the other hand, offer quotes from a few banks and other traders on the ECN to the retail trader.

Pros:

You can usually get better bid/ask prices because they are derived from several sources.
It is possible to trade on prices that have very little or no spread at certain times.
Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.
Prices may be more volatile, which will be better for scalping purposes.
Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.

Cons:

Many of them do not offer integrated charting and news feeds.
Their trading platforms tend to be less user-friendly.
Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.
Traders have to pay commissions for each transaction.

Which Type of Broker Should I Use?The type of broker that you use can significantly impact your trading performance. If a broker does not execute your trades in a timely fashion at the price you want, what could have been a good trading opportunity can quickly turn into an unexpected loss; therefore, it is important that you carefully weigh the pros and cons of each broker before deciding which one to trade through.

The foreign exchange market (forex or FX) is an unregulated global market in which trading does not occur on an exchange and does not have a physical address of doing business. Unlike equities, which are traded through exchanges worldwide, such as the New York Stock Exchange or the London Stock Exchange, foreign exchange transactions take place over-the-counter (OTC) between agreeable buyers and sellers from all over the world. Because this network of market participants is not centralized, the exchange rate of any currency pair at any one time can vary from one broker to another. (To get a complete overview of forex, see The Forex Market and A Primer On The Forex Market.)

The main market players are the largest banks in the world, and they form the exclusive club in which most trading activities take place.This club is known as the interbank market. Retail traders are unable to access the interbank market because they do not have credit connections with these large players. This does not mean that retail traders are barred from trading forex; they are able to do so mainly through two types of brokers: markets makers and electronic communications networks (ECNs). In this article, we'll cover the differences between these two brokers and provide insight into how these differences can affect forex traders. (To continue reading on this subject, see The Foreign Exchange Interbank Market, The Global Electronic Stock Market and Electronic Trading Tutorial.)

How Market Makers WorkMarket makers "make" or set both the bid and the ask prices on their systems and display them publicly on their quote screens. They stand prepared to make transactions at these prices with their customers, who range from banks to retail forex traders. In doing this, market makers provide some liquidity to the market. As counterparties to each forex transaction in terms of pricing, market makers must take the opposite side of your trade. In other words, whenever you sell, they must buy from you, and vice versa.

The exchange rates that market makers set are based on their own best interests. On paper, the way they generate profits for the company through their market-making activities is with the spread that is charged to their customers. Spread the difference between the bid and the ask price, and is often fixed by each market maker. Usually, spreads are kept fairly reasonable as a result of the stiff competition between numerous market makers. As counterparties, many of them will then try to hedge, or cover, your order by passing it on to someone else. But there are also times in which market makers may decide to hold your order and trade against you.

There are two main types of market makers: retail and institutional. Institutional market makers can be banks or other large corporations who usually offer a bid/ask quote to other banks, institutions, ECNs, or even retail market makers. Retail market makers are usually companies dedicated to offering retail forex trading services to individual traders.

Pros:

by Grace Cheng

Grace Cheng is a forex trader, creator of the PowerFX Course and author of "7 Winning Strategies for Trading Forex" (2007, Harriman House). This revealing book explains how traders can use various market conditions to their advantage by tailoring a strategy to suit each one. The book is a perfect complement to the PowerFX Course. The PowerFX Course, designed for both new and current traders, teaches tools and trading approaches that combine technicals, fundamentals and the psychology of trading forex. It also includes Grace's proprietary tips and tricks. Grace's works have been published in The Trader's Journal, Technical Analysis of Stocks & Commodities, Smart Investor and other leading trading/investment publications.

CME Broadens Currency-Trading Products

2011-07-11T10:13:00.000-04:00

CME Broadens Currency-Trading Products

Exchange Group Plans Futures on Chinese Yuan, Denominated in Dollars; Moving Beyond the Pork-Belly By JACOB BUNGE

CME Group Inc. is revamping its offering of renminbi futures, taking advantage of swelling demand for new ways to trade the Chinese currency and accelerating a push into international foreign-exchange markets.

In August, the CME will introduce new futures contracts on the Chinese currency, calculated in U.S. dollar terms, refreshing a push by the world's largest futures exchange into the world's second-largest economy. An average $21 billion in renminbi-linked derivatives was traded per day in 2010, according to the Bank for International Settlements. Nearly all of that took place off of exchanges.

Craig Donohue, chief of CME Group, above in January. 'There's a pretty big opportunity for us,' he has said.
.CME, which runs Chicago's 160-year old futures markets, is also considering new contracts and services linked to the currencies of India and Latin America.

The expanded range of contracts forms the keystone of the Chicago company's international ambitions as it tries to keep pace with rapidly consolidating rivals, moving beyond the pits trading pork bellies, wheat and corn. The shift is part of CME's efforts to parlay its history in commodities futures into a leading role in the $4 trillion-a-day currency markets.

Foreign exchange was CME's fastest-growing business in 2010 and appears to represent its best chance to win business from overseas traders.

So far, the CME is having some success. Last year, daily trading in CME currency futures for the first time surpassed the volume in its agricultural commodities business.

"There's a pretty big opportunity for us," said Craig Donohue, chief executive of CME. "FX is still a reasonably modest part of our overall business."

View Full Image
.In May, CME earned an average of 85 cents per currency contract traded, making them more profitable than more-popular futures on interest rates and stock indexes, which brought in a respective 49 and 71 cents, on average. Commodity futures contracts bring in fees well over a dollar per contract. Last year, currencies made CME about $180 million in revenue.

The thinking is that as trading in currencies and related products increases and as more derivatives are directed toward exchange platforms, CME will benefit.

CME's latest push into currency trading follows a costly foray into the market a few years ago. The company was unable to gain traction with its FXMarketspace cash trading platform; the venture ultimately contributed to a $28 million writedown in 2008. Mr. Donahue acknowledged that venture was too ambitious.

This time, CME is sticking closer to its home base: the futures market.

CME is promoting its currency contracts to customers that frequent its markets in crude oil, metals and stock-index futures in a bid to become the single largest point of trade for currencies.

."Trading it at CME is in our comfort zone," said Eddie Linker, managing member of PNT Financial, a Chicago trading firm that started up in currency futures six months ago, after years of dealing in agricultural markets.

Last month, more than $134 billion per day in foreign-exchange contracts were traded through CME, putting it on par with its biggest rivals.

Icap PLC's EBS trading system is the largest, with an average $174 billion traded each day in June. Thomson Reuters reported $158 billion for its own system.

Prices of the contracts track daily fluctuations in exchange rates for the world's major currencies, and many firms now use currency futures for the same goals as spot cash transactions. Cash transactions may require a line of credit through a bank, while futures contracts don't. That, and the advent of high-speed electronic trading, have lured investors.

"People have adopted futures trading on FX for many reasons, including the security of the transaction on a centrally cleared exchange," said Greg Wood, vice president of advanced execution services for Credit Suisse. "It's additive to the whole. This is business that wouldn't necessarily have been done elsewhere due to the ease of access for clients already trading other types of futures electronically."

Foreign-exchange contracts have proven a source of strength for CME in the years since the credit crisis, which dealt a blow to its larger futures markets linked to Treasury yields and other interest rates. The exchange company has also seen fluctuating volumes in futures on benchmark stock indexes, as a result of volatility in the U.S. stock market.

Still, despite its growth, CME's market remains too small for some to transact the serious deals that characterize the interbank market in currency trading.

"Futures are still not liquid enough to do large size," said Jonathan Xiong, managing director in the global asset-allocation group of Bank of New York Mellon, which manages $240 billion on behalf of sovereign-wealth funds and pension plans. "It's not unknown for an institutional manager to do $1 billion or $2 billion worth of, say, New Zealand dollars in forward [trades], and the futures markets aren't liquid enough."

CME's growth in currency futures has ruffled some feathers, particularly among Wall Street banks.

In years past, as CME rose as a currency-dealing power, a few instructed their staff to steer clear of the Chicago markets because they represented competition to their own dealing desks, according to people familiar with the matter.

Futures contracts, which build in leverage, theoretically give customers a means to circumvent going to a bank for credit needed to trade in cash. Now, thanks to the heavy turnover created by high-frequency and professional traders, the business done at CME has become too big for anyone to ignore.

"I think the banks have woken up to the fact that our growth trajectory, at about $135 billion a day, is quite a significant amount of volume," said Roger Rutherford, CME's head of currency markets and a former executive with cash-settlement house CLS Bank.

Write to Jacob Bunge at jacob.bunge@dowjones.com

Tough Era for 'Macro' Funds

2011-07-11T09:14:00.000-04:00

Tough Era for 'Macro' Funds

By TOM LAURICELLA

Today's markets seem like they are tailor-made for money managers investing based on big-picture, "macro" themes such as the European debt crisis and economic woes in the U.S. Instead, many are struggling.

Macro-focused managers have been tripped up by whiplash-inducing swings in stocks, currencies and commodities, often brought about by the latest twists and turns of impossible-to-time political developments. Stubbornly low U.S. Treasury yields have been a trap for managers worried about inflation and the deteriorating U.S. fiscal outlook. Making matters worse is a tendency of markets around the world to move in lock step.

.Even when events play out as predicted, the markets haven't responded the way many had expected. A prime example is the euro, which has risen against the dollar even as the European debt crisis has worsened.

"It's been a very difficult period," says Mark Enman, who oversees research on global macro hedge funds for Man Investments, a unit of Man Group PLC. "There's a lot of angst and 'woe is me' out there. The mood is not great."

Macro funds generally hunt among global financial markets in search of opportunities created by big-picture economic, fiscal and political trends. In the first half of 2011, the HFRX Macro Index, which tracks the performance of 500 hedge funds that follow a macro strategy, fell 2.2%. The index lost 1.8% in June after a 2.2% drop in May.

By comparison, the Standard & Poor's 500-stock index gained 5% through the end of June, and the MSCI All Country World Index rose 3.4%. In the bond market, the Barclays Aggregate index, which tracks investment-grade bonds issued in the U.S., gained 2.7% in the first half of the year. And over the past 12 months, the 6.9% gain in macro funds pales in comparison to gains in many stock markets that topped 20%. "The markets have fooled a lot of people," says veteran hedge-fund trader Victor Sperandeo, head of Alpha Financial Technologies.

Some of the biggest names are having a tough 2011, according to people with knowledge of the returns. So far this year, Moore Capital Management LP's Remington Investment Strategies has lost 3.9%. Fortress Investment Group LLC saw its Macro Fund lose 1.8% in June and 3.6% for the first half, the people said. At Tudor Investment Corp., the firm's flagship BVI Global fund lost 2.9% in June having gone into last month flat for the year, according to people familiar with the matter.

Of course, not all managers are in the red.

At Brevan Howard Asset Management LLP, the firm's $25 billion Master Fund posted a 0.8% gain in June and is up 4% for the year, according to people familiar with the matter.

For many, the performance woes come at a time when investors are pouring money into macro hedge funds. In the first quarter, macro funds took in $11.9 billion, more than one-third of all new hedge-fund investments, according to Hedge Fund Research. That contrasts with the 7% in the first quarter of 2010. But macro trends lately have been short-lived, and market swings have been particularly sharp.

"Outside of the credit markets in Europe, everything has been range-trading with very low liquidity," says Guillermo Ossés, a managing director at HSBC Global Asset Management. "People put on a position, the market moves against them, and they get stopped out," meaning they have to quit their position, he says. "Then they reverse course, the market moves against them, and they get stopped out again."

The end of June was particularly painful. Many fund managers belatedly turned bearish on stocks as the global economy weakened. But the S&P 500 surged more than 4% in the final days of the quarter.

That reversal came a week after many traders were blindsided by the International Energy Agency's plan to release 60 million barrels of oil into the market, sending oil prices sharply lower.

Another challenge has been the tendency for markets around the world to move in synch—the "risk on, risk off" trading seen since the financial crisis. When investors are in "risk on" mode, they bid up investments such as stocks, and sell safer assets such as U.S. Treasurys.

That lock-step trading has been a problem for stock pickers and macro managers alike. Among funds focused on so-called long-short strategies, which involve betting on and against stocks, a tendency for many individual stocks to move together has made it extremely challenging, traders say.

With Spain's economy in bad shape, one trade for a macro manager might be to bet against Spanish stocks and buy German stocks. "But even though Spain is one of the countries in the worst shape, its index rallies along with everything else," says Mr. Sperandeo of Alpha Financial Technologies. "We live in a very correlated world, and there's very little you can do to diversify."

Many macro managers have also been frustrated by the buoyancy of the U.S. Treasury market. When the U.S. economy improved in the first quarter, they jumped on bets that prices of long-term Treasurys would fall. Instead, the economy softened and, despite the political bickering over raising the debt ceiling, Treasurys rallied.

"Not too many [macro] guys made money in Treasurys, but plenty of people lost money," says Man's Mr. Enman.

Even with the European debt crisis, where many macro managers correctly expected conditions to deteriorate, making money has been a challenge. The crisis led many to bet the euro would fall. Instead, it has gained 7% against the U.S. dollar this year.

Write to Tom Lauricella at tom.lauricella@wsj.com

A Smoking June for Hedge Funds

2011-07-08T09:23:00.000-04:00

A Smoking June for Hedge Funds

By MATT WIRZ

For some investors in the municipal-bond market, June added insult to injury.

In an otherwise bleak month for many investments, tobacco bonds were star performers, rising an average of 10%. Some jumped more than 60%.

But many municipal-bond funds missed out on the gains. They had been forced to sell the bonds months earlier, often at a big loss, after a credit-rating downgrade made them noninvestment grade.

Instead, the big beneficiaries were hedge funds that scooped up the bonds at pennies on the dollar. Municipal bonds overall returned 0.35% in June, according to Barclays Capital's municipal-bond index.

Tobacco bonds have been part of the municipal-bond market for about a decade. They are sold by states and backed by payments from cigarette manufacturers that flow from a legal settlement in the late 1990s. The downgrade of many of the bonds by Standard & Poor's in November caused forced selling by municipal-bond funds that aren't able to hold noninvestment-grade debt.

The exodus helped trigger a broader wave of selling across the market.

Big hedge funds like Brigade Capital and GoldenTree Asset Management snapped up the debt on the cheap, according to people familiar with the matter. Smaller firms such as Venor Capital Management and Foxhill Capital Partners also jumped in.

"We started off looking at the muni market early this year because it was selling off so much from concerns about the states, and the bonds that were selling off most were tobacco bonds," says Michael Wartell, co-founder of Venor, in New York.

..Mr. Wartell says he put a small piece of his $700 million fund in tobacco bonds this spring, buying them for as little as 1.5 cents on the dollar. The bonds offer a so-called asymmetric investment, Mr. Wartell says, meaning they have little downside but have a chance of producing outsize gains.

Some of the bonds that Venor bought rose more than 60%.

The rebound in the bonds, most of which jumped in the second half of June, came at a fortuitous time for the hedge funds that bought them.

Worries about U.S. economic weakness and Greece's debt restructuring roiled financial markets and drove the average hedge fund to a loss of 0.72% in May and 1.36% in June, according to a weighted index maintained by Hedge Fund Research.

The sudden bond rally was fueled by news of a tentative settlement among states and tobacco companies, including Phillip Morris USA, a unit of Altria Group Inc.; Reynolds American Inc. and Lorillard Inc., which would open the way for as much as $5 billion to flow to bondholders.

"This [recent settlement] is the first good news tobacco buyers have had in some years and recently hedge funds have legged into positions that have benefited," says Peter Bartlett, co-head of municipal capital markets at Citigroup.

To be sure, municipal bondholders that aren't restricted to investment-grade debt still hold some tobacco bonds.

Citigroup has handled about $3 billion in sales of tobacco bonds this year, many of them from traditional tax-exempt-bond investors to hedge funds, according to the bank.

Citigroup estimates that it handled about 60% of all transactions in the market. About $54 billion of tobacco bonds are outstanding.

Since the bonds are sold by state governments, they have the tax-exempt status of municipal bonds.

Hedge-fund managers like Mr. Wartell started looking at the debt in late 2010, after signs that a prolonged decline in cigarette consumption was moderating.

For example, one 30-year bond sold by New Jersey was yielding about 8.5% in March, compared with an average 7% for a taxable junk bond.

The gamble paid off in June, when news of the settlement broke.

The 30-year New Jersey bond jumped to 68 cents on the dollar after the settlement news, up from 61 cents in May, a gain of 11.5%.

The state's zero-coupon bonds, which don't pay interest until they mature, jumped to 4 cents at the end of June from 2.5 cents in May, a gain of about 60%.

Foxhill, which has had net gains of 20% this year, bought some zero-coupon tobacco bonds in March and April.

While the $50 million fund still suffered overall losses of 1.5% in June, it would have been down more without the tobacco-bond windfall.

"It definitely made a positive impact," says Neil Weiner, Foxhill's founder.

—David Kesmodel contributed to this article.
Write to Matt Wirz at matthieu.wirz@wsj.com

Private payrolls rise by 157,000 in June: ADP

2011-07-07T09:35:00.000-04:00

Private payrolls rise by 157,000 in June: ADP

57 By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — Private-sector employment rose 157,000 in June, according to Automatic Data Processing Inc.’s employment report released Thursday, in what could be a signal that the recent economic soft patch may not last long.

The headline number surprised Wall Street, coming in more than double the 70,000 increase expected by economists.

With the report typically considered the first stab at counting job gains each month, markets will be watching the ADP data closely because last month’s report accurately predicted the sharp drop in nonfarm payroll subsequently reported by the government for May.

On Friday, the Labor Department will report on June’s nonfarm payrolls, which also include the public sector. Economists polled by MarketWatch are looking for a gain of 115,000 and for the nation’s unemployment rate to remain steady at 9.1%. See MarketWatch economic calendar.

This would be a pickup from the slow growth of 54,000 in nonfarm jobs added during May.

“A number like this, while it is just one month’s number, suggests that really maybe what happened [in May] was a pause in the economic expansion and that, as we head in summer months, we are going to pick up some momentum,” said Joel Prakken, chairman of Macroeconomic Advisers.

Job gains were a revised 36,000 in May, compared with the initial estimate of just 38,000, the ADP data also showed.

Still, the current labor market remains decidedly weak, and it will take much more than one strong month to move it into healthy territory and make a meaningful dent in the unemployment rate.

Over the past two years, there have been periods where it looked like some healing would take place only to see subsequent months prove disappointing.

Other indicators have shown continued tough times in the labor market.

On Wednesday, outplacement consultancy firm Challenger Gray & Christmas Inc. reported that planned layoffs were 41,432 in June, the second straight monthly rise.

In addition, jobless claims have topped the key 400,000 mark for 13 straight weeks after touching a three-year low of 375,000 in late February. When the U.S. economy creates lots of new jobs, new applications for unemployment benefits usually drop well below 400,000 for a prolonged period.

Shortly after the ADP data came out, the Labor Department reported a drop in first-time filings for unemployment benefits for the week ended July 2, to 418,000 from the prior week’s 432,000. Read ‘U.S. requests for jobless benefits decline’

Details
According to the ADP report, employment in the service-producing sector rose 130,000 in June, after a 46,000 gain in May, according to ADP.

Employment in the goods-producing sector rose 27,000 after a drop of 10,000 in the prior month.

Manufacturing employment rose by 24,000 in June after a 10,000 drop in the prior month.

In June, employment gained 88,000 among small-sized businesses, 59,000 among medium businesses and 10,000 among large businesses, according to ADP.

“There is a lot in this report that makes me feel better about the direction we are heading in now after last month’s pause,” Prakken said.

ECB Raises Rate to Highest Since March 2009

2011-07-07T08:47:00.000-04:00

ECB Raises Rate to Highest Since March 2009

By Gabi Thesing - Jul 7, 2011 7:45 AM ET

Business ExchangeBuzz up!DiggPrint Email .. Weaker growth may help curb price pressures and prompt the ECB to raise interest rates less aggressively than investors and economists initially estimated, said Julian Callow, chief European economist at Barclays Capital in London.

Officials meeting in Frankfurt today increased the benchmark interest rate by 25 basis points to 1.5 percent. Photographer: Chris Ratcliffe/Bloomberg
.The European Central Bank raised interest rates to the highest in more than two years to keep up its fight against inflation as the region’s sovereign debt crisis persists.

Officials meeting in Frankfurt today increased the benchmark interest rate by 25 basis points to 1.5 percent, matching forecasts by all 55 economists in a Bloomberg News survey. That’s the highest since March 2009. The central bank will raise borrowing costs further in October, according to a separate survey.

Policy makers are trying to balance the risks of further turmoil in debt markets against the danger that Germany’s export-led recovery will fuel a wage-price spiral. While the yield on Greek, Irish and Portuguese two-year bonds all exceed 15 percent, inflation across the region has breached the central bank’s 2 percent limit for the past seven months.

“We will see another rate increase before the end of the year because the inflation outlook warrants it,” said Laurent Bilke, head of inflation strategy at Nomura International Plc in London. “At this level, the impact on the periphery is marginal. That leaves Trichet with the freedom to really draw a line in the sand with governments and remind them that it’s their job to fix the crisis.”

ECB President Jean-Claude Trichet holds a press conference at 2:30 p.m. in Frankfurt to explain today’s decision. The Bank of England today kept borrowing costs at 0.5 percent. In Sweden, the Riksbank raised its benchmark repurchase rate to 2 percent on July 5, the seventh increase in a year. The People’s Bank of China yesterday raised key rates for the third time this year.

‘Critical Phase’
European bond yields rose to a record on renewed concern that the debt crisis is spreading across the region after Moody’s Investors Services cut Portugal’s credit rating to junk on July 5. Trichet is at odds with European leaders over how to contain the debt crisis, saying it’s up to nations to plug budget gaps as policy makers fight price gains.

European finance ministers earlier this month authorized an 8.7 billion-euro ($12 billion) loan payout to Greece in an attempt to avert the region’s first sovereign default. Standard & Poor’s and Fitch Ratings have both indicated they would cut Greece to default if leaders went ahead with a plan to ask creditors to roll over expiring Greek bonds into new debt.

“We’re entering a more critical phase” and there’s “a lot of uncertainty in the market,” Christopher Pissarides, professor at the London School of Economics, told Bloomberg Television in an interview in Brussels yesterday.

Price Pressures
While leaders are still seeking ways to fight the crisis, Europe’s recovery is already losing momentum. Services and manufacturing growth slowed more than estimated in June and economic confidence weakened. In Germany, Europe’s largest economy which has powered the region’s recovery, investor sentiment dropped to a 2 1/2-year low last month.

Weaker growth may help curb price pressures and prompt the ECB to raise interest rates less aggressively than investors and economists initially estimated, said Julian Callow, chief European economist at Barclays Capital in London.

“This may in fact be Trichet’s last interest-rate increase,” he said. “It’s not just Greece; the sands are shifting in the global economy under the ECB’s feet.”

The ECB last month forecast euro-region growth to slow to 1.7 percent next year from 1.9 percent in 2011. The inflation rate may fall below its 2 percent ceiling in 2012, averaging 1.7 percent, the central bank estimated. In June, consumer prices rose 2.7 percent from a year earlier.

Rate ‘Appetite’
Surging energy and commodity costs prompted the ECB to raise interest rates in April. Trichet as recently as June 30 called for “strong vigilance” on price pressures, a term used in the past to signal an imminent rate increase.

Trichet, who retires at the end of October, today may also face questions over the ECB’s collateral policy. Banks can currently obtain as much money as they need for up to three months against eligible assets including government bonds. ECB policy makers have said they may no longer accept Greek debt as collateral if the country defaults.

It’s a “game of poker,” said Christian Schulz, an economist at Joh. Berenberg Gossler & Co in London, who used to work at the ECB. “The ECB knows it’s the last line of defense in the euro zone but it really is up to the front lines, in other words the governments, to do their job.”

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

work

Attack on Volcker Rule Seen Exaggerating Cost of Disruption to Bond Market

Attack on Volcker Rule Seen Exaggerating Cost of Disruption to Bond Market

Lobbying Priority

‘Lawyer and Psychiatrist’

‘Some Liquidity Impact’

Defining Prop Trading

Less Liquidity

Bid-Ask Spread

Volcker Complaint

Volcker Blames Lobbyists

Fund Managers

Rules ‘Too Onerous’

兔尾行情收官在即 证监会龙年伸出"五爪"迎春

温家宝要求提振股市 坚决抑制社会资本脱实向虚、以钱炒钱

温家宝要求提振股市 坚决抑制社会资本脱实向虚、以钱炒钱

第四次全国金融工作会议今召开 三大焦点受关注

China central-bank chief on yuan, 2012 forecasts

China central-bank chief on yuan, 2012 forecasts

Caixin: China’s macro-economic policies were adapted to fit changing economic situations in 2011. How do you see the economic situation in 2012 and corresponding policy options?

China’s consumer price index (CPI) grew 4.2% in November, 1.3 percentage points below October’s and below market expectations. How do you view this change?

How do you assess the effects of China’s integrated use of quantitative tools and target-price-based instruments to achieve regulatory goals in 2011?

Since November, the Chinese financial institutions’ yuan funds outstanding for foreign exchange have continued to decrease. Has this provided a certain amount of room for choice in monetary policy?

You mentioned that now is a special time (for China’s economic development). But is it also a time of reform?

Calls for market-oriented interest-rate reform have been heard frequently over the past year. How do you see the timing for further reform, and the risks?

The upcoming U.S. presidential election has created some pressure for yuan appreciation. On the other hand, from a market perspective, the yuan has showed a tendency to devalue. What is your opinion of this trend and any corresponding advancement for exchange-rate reform?

Is the current two-way volatility of the yuan a temporary phenomenon, or does it fundamentally indicate that the yuan exchange rate has already been overshot?

With the exchange rate approaching to the equilibrium point, can capital-account convertibility be put on the agenda as well?

How do you view relations between yuan internationalization, market-oriented reform of the capital account, and maintaining the value of foreign reserves?

BRIC Decade Ends as Growth Peaked: Goldman

BRIC Decade Ends as Growth Peaked: Goldman

BRICs Slowdown

‘Meaningfully Slower’

2011 Losses

Peak Expansions

Fund Flows

Rate Cuts

Easing Policies

Relative Valuations

Want Want, Redecard

‘Structural Weaknesses’

Labor Supply

Europe Crisis Reflects Deeper Ideological Divide: Eric Fine

Europe Crisis Reflects Deeper Ideological Divide: Eric Fine

Cautionary Tale

三大积极因素助力A股企稳回升

President Barack Obama channeled the national frustration with the economy that threatens his political standing and challenged the U.S. Congress to pass a $447 billion jobs plan tilted heavily toward the Republican prescription of tax cuts.

Norway buffs armor as currency wars open new front

Oil sustains Norway as EU wallows in debt

屈宏斌：三大方案拆除平台债炸弹

屈宏斌：三大方案拆除平台债炸弹

'Dow Theory' Confirms Sell Signal

Japanese, Swiss Move to Push Currencies Lower

A Bet on a Falling Stock Market

Swiss central bank battles to halt franc’s rise

Swiss central bank battles to halt franc’s rise

‘Massively overvalued’ franc hurts economy, SNB says; euro surges

Debt Ceiling's Overlooked Flash Crash

Euro Pressured by European Crisis

Forex Role Players: ECN, STP, DD, etc

Broker types and revenues: fixed vs variable spreads vs commission

Conclusion:

Benefits of trading with No Dealing Desk brokers

FXCM Agency Model

在广州看到惊人内幕：房地产业即将迎来倒闭潮

Worldly, Wise and Worried

Why Euro May Keep Defying Gravity

中国经济硬着陆风险加大 人民币"空军"已出动

FX eCommerce - Single Dealer Platforms

Morgan Stanley Comes Up Golden

Greece Gets New Bailout as U.S. Nears Brink

US Long Bond Rallies On Debt-Ceiling Hopes

Bumpy Ride Likely for Treasurys

统计局：6月份70个大中城市房价仅3个同比下降

China Stumbles in Yuan Grand Plan

Why These Two Silver ETFs Are Poised For Massive Profits (AGQ, PSLV, SLV, ZSL, GLD)

Why These Two Silver ETFs Are Poised For Massive Profits (AGQ, PSLV, SLV, ZSL, GLD)

Draghi Says EU Debt Crisis Is in New Phase

Draghi Says EU Debt Crisis Is in New Phase

Bonds Gain

兔尾行情收官在即证监会龙年伸出"五爪"迎春

温家宝要求提振股市坚决抑制社会资本脱实向虚、以钱炒钱

温家宝要求提振股市坚决抑制社会资本脱实向虚、以钱炒钱

第四次全国金融工作会议今召开三大焦点受关注

中国经济硬着陆风险加大人民币"空军"已出动

中国强劲GDP回击硬着陆人民币升值压力陡增