Best of the web & events
Jonathan Boyd rounds up the best news and analysis from Investmenteurope.net.
Berlin accepts possibility of Greek default
Germany’s economy minister Philipp Roesler, head of Angela Merkel’s junior coalition partner the Free Democrats Union party, wrote in German newspaper Die Welt that Berlin was effectively prepared for any orderly default by Greece.
He said there could “no longer be any taboos” in discussing stabilising the shared currency.
Roesler wrote: “If there are breaches of the rules, there must be tough requirements… And if there are continued breaches, a withdrawal of voting rights for a time in the EU Council of Ministers should not be a taboo.”
EU urges Spain to try harder to control deficit
The European Commission urged Spain and other EU member states facing market pressures to press ahead with reforms to ensure they meet their fiscal targets and overcome the crisis, according to Spanish press reports.
The commission believed Spain may find it difficult to meet its adjustment targets for the public deficit. According to commission forecasts, the Spanish deficit will be 6.3% of gross domestic product (GDP) this year and 5.3% of GDP in 2012, the Spanish business daily Expansión reported.
The EU as a whole was expected to grow by about 1.9% in 2012. The Spanish Government envisaged the deficit to be 6% of GDP this year and 4.4% of GDP in 2012.
SNB decision on CHF causes ‘chaos’ for NOK
The Swiss National Bank’s decision to effectively devalue the Swiss franc led to chaos hitting trading in the Norwegian krone as one of the few other currencies investors were willing to buy.
Norwegian currency trading volatility on the day was the equivalent of that seen across the entire previous nine months. Trading volumes were three times the daily average.
However, there were mixed views in Norway about whether the NOK could take over the burden previously placed on the CHF. Liquidity was one concern expressed.
Some criticised the wisdom of calling the CHF overvalued on a purchasing-power parity basis, saying:
“Financial transactions determine the exchange rate of the Swiss franc, and not the relative price of hamburgers.”
Hedge fund gains 78% in August
Opti Global Macro fund, from FSA- and FINRA-authorised American manager Opto Global Macro LLC, gained 77.7% for the month of August, taking its year to date performance up 84.1%.
This made it the top performer over the period, according to US-based monitor, Institutional Advisory Services Group.
The group reported gains of between 59% and 10.4% from: Stratford Capital Management; Kinkopf Capital Management; Superfund Group; Purple Valley Capital; Siwtzerland’s Rho Asset Management and Altradis Capital; Chadwick Investment Group; Neural Capital; Insignia Futures & Options; and Dunn Capital Management.
JPM AM goes overweight in India
JP Morgan Asset Management moved overweight in Indian equities for the first time in at least a year, attracted by valuations and secular growth.
The manager made the changes to its regional equity portfolios reflecting its positive view on the subcontinent. It said:
“True, India has been the worst-performing Asian market year-to-date… [but] in our view, the Indian stock market has already priced in many of the negative factors.” JPM AM is expecting benefits from moderating inflation and robust consumer spending.
Swedish funds industry hails proposed tax cuts
Swedish government proposals to apply a lower rate of tax on a new type of investment savings account have been we lcomed by the Swedish Investment Fund Association (Fondbolagens förening).
The association previously lobbied hard for the government to adjust its initial proposals for introducing the new type of account, Investeringssparkonto, through its upcoming autumn Budget.
The government’s key concession was to remove a fiscal multiplier based on the government borrowing rate + 0.75%.
The rate is used as a reference rate for tax legislation, but the fund association said the multiplier was unfair.
OBSR: neutral on equities
Market volatility means that despite share price falls equities still face possible downside, while yields from fixed income could remain low for some time yet, according to OBSR’s latest monthly global investment strategy summary.
There is little to cheer about across any of the main asset classes considered by summary research author and investment strategist Andy Brunner.
“Even after a 12% or so fall in equity markets, risks remain elevated and further high levels of volatility are still probable,” he wrote.
Morningstar: Danish TERs ‘cheapest in Europe’
Total Expense Ratios (TERs) on funds in Denmark are generally lower than anywhere else in Europe, regardless of whether a product is an equity, fixed income or balanced fund, according to analysis from Morningstar Danmark and published by The Federation of Danish Investment Associations (InvesteringsForeningsRådet).
The average TER in Danish equity funds in 2010 was 1.49%, according to the analysis, or equivalent to DKK149 per annum for every DKK10,000 invested. The average across all of Europe was 1.74%.
Research queries EM equities performance
Capital Generation Partners published research suggesting that emerging market equities do not necessarily outperform developed market returns over the long term, countering a widely held belief that investing in emerging markets for the long term can generate stable outperformance.
The truth about Investing in Emerging Markets, commissioned by the Judge Business School in Cambridge, showed that emerging market equity portfolios with three-year and five-year time horizons did not consistently outperform developed market equities, whether on a total return or a risk-adjusted basis.