Officials question prospects of eurozone banking union | Venezuela devalues bolívar | Google chairman plans to sell 3.2M shares
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11 February 2013
CFA Institute: Financial NewsBrief
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EU's Rehn finds global monetary coordination necessary
EU Economic and Monetary Affairs Commissioner Olli Rehn wants international bodies, such as the International Monetary Fund, the Group of Seven nations and the Group of 20 countries, to better coordinate currency policy. "We need reforms in the international monetary system so as to avoid negative influences on international trade," he told Austrian magazine Profil. Rehn also says that although a stronger euro might be good for portions of the eurozone, many export-reliant southern nations would struggle. Reuters (09 Feb.)
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Officials question prospects of eurozone banking union
European officials are increasingly pessimistic about the chance of finishing banking-union rules by year-end. The biggest sticking point is the establishment of a resolution fund, which would take responsibility for failing banks. Analysts expect no German agreement on fund creation before an election in September, making finishing the law unlikely. "It's unrealistic to expect that we will have a resolution authority or resolution fund in time for the new [European Central Bank] bank supervision in March 2014," EU lawmaker Sharon Bowles said. Reuters (08 Feb.)
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Venezuela devalues bolívar
Venezuela devalued the bolívar by almost a third against the U.S. dollar, shifting the exchange rate from 4.3 to 6.3. Although experts say the move was necessary for Venezuela's fiscal stability, it likely will increase the inflation rate, which is already one of the highest in South America. The New York Times (tiered subscription model) (08 Feb.)
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Google chairman plans to sell 3.2M shares
Eric Schmidt, executive chairman of Google, plans to sell about 42% of his stake in the company during the next year. The 3.2 million shares are estimated to be worth $2.5 billion. Schmidt is selling the shares "as part of his long-term strategy for individual asset diversification and liquidity," according to Google. "This is a routine diversification of assets and Eric remains completely committed to Google." Reuters (08 Feb.), Bloomberg (09 Feb.), The Wall Street Journal (tiered subscription model) (08 Feb.)
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China passes U.S. to become world's largest trader
Chinese and U.S. statistics agree that China traded more goods than the U.S. did last year. The increase occurred despite China's economy being half of the size of the U.S. economy. "It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume," said Nicholas Lardy of the Peterson Institute for International Economics. Bloomberg (10 Feb.)
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Market ActivityAdvertisement
Holidays shutter most Asian markets; Pacific markets slip
Most Asian stock markets were closed Monday, with Japan celebrating National Foundation Day and Hong Kong, China, Taiwan, Singapore, South Korea and Malaysia celebrating Lunar New Year. Australia's S&P/ASX 200 slipped 0.2%, while New Zealand's NZX 50 inched down 0.1%. India's Sensex was down 0.1% early afternoon. Lunar New Year is expected to keep trading thin during the next several days. MarketWatch (11 Feb.), The Economic Times (India) (11 Feb.)
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MCX-SX debuts in India
MCX Stock Exchange opens for business this week as the third Indian stock exchange. MCX-SX includes 1,100 equities, its own 40-equity index -- the SX-40 -- and trading in equity derivatives. The bourse plans to challenge the Bombay and National stock exchanges by leveraging better technology and faster access. IndianExpress.com (India)/Press Trust of India (11 Feb.), The Economic Times (India)/Press Trust of India (11 Feb.), Financial Times (tiered subscription model) (10 Feb.)
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Economics
G-20 is expected to focus on positive economic signs
Leaders from the Group of 20 nations are set to meet Friday in Moscow, and analysts think that with enough positive signs in the world economy, the talks will be upbeat and forward focused. "On the whole, recent activity data have been encouraging of our view that the global economy is improving, albeit slowly," said Simon Hayes, a Barclays Capital economist. Even Japan has curbed currency-war fears in recent days, with Finance Minister Taro Aso suggesting that the yen's weakening has been too drastic. Reuters (10 Feb.)
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India says growth estimate likely will be revised to 5.5%
India's statistics ministry has estimated that economic growth for this fiscal year will be about 5%. The government responded by saying that the figure likely will be revised to 5.5% or higher because the estimate fails to take a growth surge into account. The Wall Street Journal (tiered subscription model) (08 Feb.)
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Trade data point to surprise U.S. Q4 growth
A Commerce Department announcement that the U.S. trade deficit in December sank to its lowest point in three years likely means that gross domestic product rose slightly in the fourth quarter. The government recently announced that it had estimated a 0.1% drop in GDP. "Trade data for December paint a reassuring and encouraging picture of the U.S. economy at the end of last year," said Chris Williamson, Markit Group's chief economist. Reuters (08 Feb.)
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Fitch keeps Spain's rating at investment grade
Spain's BBB rating is two levels above a high-yield bond, but Fitch Ratings plans to keep it there. Fitch said Spain still has some fiscal maneuverability and its debt level will peak at less than 100% of gross domestic product. The debt rating remains one level above ratings by Moody's Investors Service and Standard & Poor's. Bloomberg (08 Feb.)
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Increased Chinese credit could prompt market instability
Credit issuance in China rose 50% from December to January, possibly worrying regulators. "This practically guarantees policy tightening in the immediate future," said Ken Peng of BNP Paribas. Financial Times (tiered subscription model) (08 Feb.)
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CFA Institute: Fourth Annual Middle East Investment Conference
20?21 March 2013
Jumeirah Emirates Towers
Dubai, United Arab Emirates

Hosted with CFA Society Emirates

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Geopolitical/Regulatory
IOSCO focuses on how to avoid another MF Global
Regulators worldwide are seeking a way for investors to get their assets back in the event of an insolvency, a default or a resolution, according to the International Organization of Securities Commissions. IOSCO says it has guidance on how authorities can better supervise financial intermediaries that hold client assets. Bloomberg Businessweek (08 Feb.)
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EU vows to fight U.S. attempts to ease data-privacy bill
EU Justice Commissioner Viviane Reding refuses to bow to pressure to ease a proposed data-protection law. Lobbyists want exemptions for U.S. technology companies. Financial Times (tiered subscription model) (10 Feb.)
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EU looks to force banks to remain benchmark-rate setters
The European Commission is working on legislation that would force banks to remain on panels that set the Euro Interbank Offered Rate and other benchmark interest rates. "The commission will propose further legislation on benchmarks in the second quarter of 2013 in order to further clarify the framework under which benchmarks should operate," Internal Market Commissioner Michel Barnier said. "Any banks considering withdrawing from the contributing panels should therefore take into account that they may be required to rejoin the panels." Meanwhile, the European Central Bank is encouraging banks to remain on such panels, saying they play a key role in monetary policy. Reuters (08 Feb.), Reuters (08 Feb.), Bloomberg (08 Feb.)
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SEC ties to private sector are problematic, report says
A Project on Government Oversight report notes a "revolving door" between the Securities and Exchange Commission and entities it oversees. "The close linkage between the regulators and the regulated can influence the culture, the values, and the mindset of the agency," the report says. Reuters (11 Feb.), The New York Times (tiered subscription model)/DealBook blog (11 Feb.)
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Basel III could be delayed in U.S. by impact study
A possible Senate bill would require a quantitative-impact study before the U.S. implements rules by the Basel Committee on Banking Supervision. Although an actual congressional vote could be difficult to achieve, analysts say legislative pressure on regulators might be enough to dissuade them from Basel III adoption indefinitely. Risk.net (subscription required) (08 Feb.)
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ASX gets reprieve on cash-equities competition
The Australian government has postponed for two years a decision on allowing competition in clearing and settling of cash equities, meaning ASX, the country's largest exchange operator, retains its monopoly. The government cited concerns about cost and regulatory burden, but officials reiterated their pledge to allow competition in over-the-counter derivatives clearing. Fox Business/Dow Jones Newswires (10 Feb.), Financial Times (tiered subscription model) (11 Feb.)
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21?22 March 2013
The Westin Boston Waterfront
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Financial Products
Janus "absolute return" fund comes with twist
Janus Capital Group is launching its 18th investment strategy, the Janus Diversified Alternatives Fund, since CEO Richard Weil took the reins in 2010. With the latest fund, Janus is striving to rethink the way investors treat risk. The Denver Post/Reuters (07 Feb.)
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