Interest rates have dropped 450 bp to record lows over the last 30 years. And they are at this level because the desire to invest and take a risk is lower than ever. It’s the weak demand from investment funds, not the central bank’s supply, which is the reason for the almost flat interest rate curve.
UBS | 2015 was likely to mark the fifth year of EM underperformance. The last time EM underperformed for as extended a spell as this was 1997-2001. And what a time to buy that was! Could 2016 provide a similar inflexion point? We would bet against it.
The implentation of Basel III is taking its time. The adjustment periods are very long and drawn-out; the refinement of the concept of capital will not be completed until 2022. We have also seen that the implementation of the TLAC requirements, ratified at November’s G20 meeting, will not happen quickly. Until these adjustments are completed, the banks and the markets will still feel there is no break from regulation.
UBS | We expect the primary investor focus in 2016 to remain on interest rates but some key debates should shift a long with the environment. A few of the debates we propose and analyze include: Will the realization of earnings from rates matter next year? How will investor perception of asset sensitivity evolve as rates start to rise? Will earnings from higher rates lead to less pricing discipline by trust banks? Is the M&A cycle peaking?
Jean Pisani-Ferry via Caixin | For the first time in several decades, a series of Western countries are simultaneously experiencing major political upheaval. In several of them, populist parties that challenge consensual principles and established policies, and candidates who define themselves as anti-system outsiders, are on the rise or already in power.
Medea Benjamin | It would certainly be easy to do a piece about ten horrible events from 2015—from the ongoing war in Syria and the refugee crisis, to the attacks in Beirut, Paris and San Bernardino, to the rise of Donald Trump and Islamophobia. But that wouldn’t be a very inspiring way to bid farewell to this year and usher in a new one. So let’s look at ten reasons to feel better about 2015.
China’s exports declined for the ninth consecutive month in November, falling even more than forecast (-6.8% vs -5% estimated). This data has set off alarm bells in the raw material markets and amongst producer countries, most of which are emerging economies, given that China is their main consumer on a global level. Raw material prices are at their lowest levels since the beginning of the last century.
Benjamin Cole via Historinhas | Westerners love to hazard guesses on China and that is what they are, guesses. Even a Mandarin speaker in Hong Kong (with whom I recently conversed), with family on the mainland and employed at a large private-equity fund, professes no special insights into opaque China. But China’s central bank, The People’s Bank of China, appears to have eschewed the advice of Western central bankers, and gunned the money presses this summer. Moreover, the PBoC tactic looks to be working.
Keith Weiner via TrumanFactor | Unless you’re living under a rock, you know that we have an administered interest rate. This means that the bureaucrats at the Federal Reserve decide what’s good for the little people. Then they impose it on us. In trying to return to freedom, many people wonder why couldn’t we let the market set the interest rate. After all, we don’t have a Corn Control Agency or a Lumber Board (pun intended). So why do we have a Federal Open Market Committee? It’s a very good question.
Caixin | Last month, the G-20 summit held in Turkey endorsed the G-20/OECD Principles of Corporate Governance. As a G-20 country, China is on board with the standards, too. That means Chinese companies, especially state-owned enterprises, must adhere to the principles.