Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Currencies

Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Categorized | Banks, Currencies

Fresh EM opportunities come with risk


Posted on September 26, 2016

Argentine President Mauricio Macri speaks during the last session of the Argentina Business and Investment Forum in Buenos Aires, Argentina, on September 15, 2016. / AFP PHOTO / EITAN ABRAMOVICHEITAN ABRAMOVICH/AFP/Getty Images©AFP

Mauricio Macri

    Our round-up of the week’s best comment and analysis from the Financial Times looks at the fresh opportunities offered by the recent revival of emerging markets but also cautions on lessons for investors eight years on from the Lehman bankruptcy.

    The selection is taken from our Markets Insight and Smart Money columns, written by industry contributors and FT commentators.

    Argentina is a prime example of both the opportunities and risks inherent in emerging markets, argues the FT’s John Authers.

    “Emerging markets as a whole are also enjoying an upswing. If ever there was an opportunity to pile into a value opportunity, this would appear to be it. And yet. Argentina, notoriously, has been here before. Argentina’s political instability, and penchant for populism, defaults and devaluations, makes investors wary.”

    Emerging economies are having a big impact on the gold market, according to David Marsh and Ben Robinson of the Official Monetary and Financial Institutions Forum. “In the further development of the Ages of Gold, the metal’s monetary renaissance that started in 2008 may have some way further to run.”

    But the cheap money policies of the global central banks are a cloud on the horizon for emerging markets, notes the FT’s Henny Sender.

    “It is hard not to conclude that the end of cheap money will cause valuations to reverse and drop. Indeed, it is disconcertingly easy to argue that the financial world is more vulnerable to a taper tantrum now than it was in the spring of 2013.”

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    Lehman lessons

    A similar sombre note on cheap money is struck by John Authers in a two-part look at the health of the financial system eight years after Lehman in The Long View.

    “Should cheap money finally spark growth and inflation, it would be a consummation devoutly to be wished. But the market is positioned for the opposite. The higher rates that would follow, pumped through a conservative banking system in which far fewer banks make a market, could spark a new crisis.”

    The Lehman crash left a legacy of anger against bankers that has spilled over into today’s divisive political battles, he explains, yet there remains frustratingly little true clarity.

    Even those banks that survived 2008 in the best shape have suffered reversals of fortune as the sales-driven culture of Wells Fargo becomes mired in scandal and huge fines, notes the FT’s Ben McLannahan.

    “The scandal has already cost Wells its crown as the world’s biggest bank by market capitalisation, nudged aside last week by JPMorgan Chase. But few rivals are enjoying watching the bank squirm, because they know that retributions will wash over them too.”

    Corporate tourists

    Plans by Canadian group Intertain to move its listing from Toronto to London catches the analytical eye of the FT’s Dan McCrum.

    “Corporate tourists are something else entirely. A company which decides to list its shares overseas should be approached more like a salesman offering a free lunch and the chance to hear a presentation about a timeshare opportunity. Start with a question: don’t they have perfectly good capital markets where you come from?”

    Libor pains

    Citigroup’s Mohammed Apabhai spells out the implications of a striking rise in Libor/money market rates.

    “Investors would be wise not to ignore the pervasive impact of changes to money market regulations. Higher dollar Libor rates could argue for a stronger dollar against most currencies — the yen excepted — and higher equity and bond volatility argue for an increased allocation to cash, a shortening in duration and ‘bond refugee’ stocks.”

    Good calls?

    The FT’s Neil Collins casts aside his usual sceptical nature about flotations in the case of the expected IPO of a big UK mobile phone group.

    “A good rule for the cautious investor is never buy a share until the company has been publicly listed for at least a year. However, there is an exception to test every rule, and this year’s monster flotation, O2, may be it. A big company priced to go is a rarity. Pay attention.”

    Of limited value

    Don’t ignore the drawbacks of relying on price-earnings ratios when assessing stock market value, advises the FT’s Miles Johnson.

    “Back in 2009, stocks as a whole would have appeared to many casual observers as misleadingly expensive rather than cheap if they relied on the p/e of the S&P 500.”

    stephen.smith@ft.com