Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading

Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading

Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading

Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

Continue Reading

Categorized | Financial

‘Tide of nationalism’ drives worsening pension deficits


Posted on November 27, 2016

Europe’s largest pension funds believe they will be severely hamstrung by the UK’s vote to leave the EU and what they see as a rise in nationalism following Donald Trump’s victory in the US presidential election.

According to a survey of 167 European pension plans, 92 per cent said market volatility would spike as a result of the “current tide of nationalism”, while two-thirds expect worsening pension deficits.

More than half additionally said investment returns would be handicapped by the Brexit vote, Mr Trump’s surprise victory and the forthcoming EU referendum in Italy.

Pascal Blanqué, chief investment officer at Amundi, the French asset manager that compiled the survey, said: “The current tide of nationalism has added yet another layer of uncertainty for pension investors. The result of the presidential election in America threatens old certainties.

“It is hard to imagine anything resembling a happy ending for any investor group.”

The Brexit vote presented immediate problems for UK pension funds, after the government moved to lower interest rates in July. The decrease forced the total pension deficit of the UK’s 350 largest companies up to £139bn at the end of the same month, which rose again to £189bn in August, according to Mercer, the pension consultancy.

The number of UK pension plans in deficit also increased to 4,995 after the UK’s vote on EU membership, according to Amin Rajan, chief executive of Create Research, the consultancy that co-wrote the report with Amundi.

“The Brexit vote has opened Pandora’s box. It may well trigger the return of volatility on the scale that roiled the markets during the Greek crisis of 2010-2013, if the divorce gets ugly and protracted,” he said.

“Pension funds will ultimately be punished if the politics of fragmentation is intensified by the outcomes of the forthcoming EU referendum in Italy and elections in Austria, France and Germany.”

The report, entitled “Expecting the Unexpected”, also found that 76 per cent of pension funds expect a “further disconnect” of market prices and their fundamentals as a result of the rise of nationalism, while 74 per cent expect “increased contagion susceptibility” between global markets.

The manager of one UK pension fund, who spoke to the authors of the report anonymously, said: “The real significance of the Brexit vote and the subsequent result of the US presidential election is that they show how nationalism now triumphs over globalism. Populism is on the rise in Europe and global trade and growth are at risk.

“The recovery period of our own pension scheme deficit is now extended from 10 to 15 years as a result.”