Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Categorized | Banks, Financial

Japan’s record cash pile no good for banks


Posted on September 26, 2016

People walk past the Bank of Japan building in Tokyo...People walk in front of the Bank of Japan (BOJ) building in Tokyo August 20, 2007. BOJ will scrutinise the impact of turmoil in global financial markets at a policy meeting this week, with worries over market sentiment seen marking it hard to justify a rate hike. REUTERS/Toru Hanai (JAPAN)©Reuters

Earlier this month, when the Tokyo University of Agriculture found that the average lifespan of the nation’s dogs and cats was at record highs, most brokers knew what to do. They found three stocks that could immediately be pitched as “pure-plays” on the Japan pet longevity story.

But when the Bank of Japan said the cash and bank deposits of the nation’s corporations were at a record high of ¥242tn ($2.4tn) — as it did on Monday in a quarterly report — most brokers were stumped.

    There is no shortage of things to say about the figure itself — it’s just that none of it puts a compelling “buy” on Japanese equities. What is particularly jarring is that the record has been achieved despite Japan’s year-old corporate governance code, which was supposed to put pressure on companies not to hoard cash.

    In fact, the bolder brokers say that the present situation presents an obvious “sell” on Japan’s banks — a sector that was struggling to convert deposits into loans anyway, and has been suffering since the BoJ’s negative interest rate policy (Nirp) made making deposits costly. Accordingly, when the Topix banks index plunged 30 per cent between the announcement of Nirp in January and mid-August, few thought the move overdone.

    Over the past six weeks, though, the Topix banks index has rallied 20 per cent from that low — a move driven by optimism that the BoJ would show some form of mercy to the banks via policy decisions, and that its buying of exchange traded funds (ETFs) would start to favour those tracking the banks-heavy Topix over the banks-underweight Nikkei 225.

    Last week, when both of these hopes seemed to come true, the banks rally appeared justified.

    On closer inspection, however, the banks index may be set up for a fierce correction. The BoJ’s new policy may steepen the Japanese government bond yield curve, but it does so at the longer dated end that benefits life insurers, not the banks. On ETFs, the steep collapse of the Nikkei-Topix ratio from a 17-year high last month suggests the market has already thoroughly priced-in the BoJ purchasing policy shift. In the past, a growing mountain of deposits was great for the banks. These days, it’s for the dogs.

    leo.lewis@ft.com