FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

March 31, 2009 • 6:53 am 0

Guotai to develop QQQ replica with Nasdaq

Nasdaq is introducing one of the most heavily traded ETFs in the world to Chinese institutional and retail investors. Powershares QQQ, one of the most heavily traded exchange-traded funds (ETFs) in the world based on the Nasdaq 100 index, will soon find a replica in China especially targeted at institutional and retail investors looking for cheap access in the QDII niche.

Guotai Asset Management says it has signed an official deal with Nasdaq OMX. The deal will allow Guotai to work exclusively with Nasdaq OMX in developing the fund house’s first QDII product based on the Nasdaq 100 index. With the product application already submitted to the China Securities Regulatory Commission, Guotai’s lovechild with Nasdaq OMX will likely surpass China Southern Fund Management’s planned QDII with Standard & Poor’s in becoming the first passive QDII in China.

The announcement comes after a frustrating year of shopping for a H-share deal in Hong Kong by Shelly Yang, vice-director in charge of international business at Guotai. Yang was last spotted ringing the opening bells for Nasdaq on Thursday, March 26 in New York with Guotai CEO Xu Jin.

The fund house anticipates, pending final regulatory approval, that the product will be ready in six to nine months time.

Cao Dongjie, former chief marketing officer at Guotai who now heads up the company’s operations in Shanghai, says the deal is strictly between Guotai and Nasdaq OMX for now. Invesco, the current fund sponsor to the Powershares QQQ ETF in the US, is not in any way involved, he says.

The fund house will announce further details on the fund’s market making mechanism and custodian arrangements at a later date, once these deals are final.

The original QQQ was first launched in March 10, 1999 by Nasdaq OMX and then transferred to Invesco Powershares on March 21, 2007. Invesco has recently celebrated the tenth anniversary of the portfolio. At the height of its popularity in 2004, the fund boasted $21 billion under management. As of the end of 2008, according to Invesco’s disclosures, total assets under management for its combined portfolio of Powershares products equalled $9.15 billion.

Since inception, the fund is down 5.11%, compared to a 4.90% drop by the Nasdaq 100 index. (The S&P 500 is down by 1.89% over the same period.)

In the dot-com era, the fund was seen by investors as a proxy to liquidity for technology stocks. Now the fund has such a diverse holding of US listed stocks that most analysts find it hard to classify the fund.

As of March 27, the fund had 66.8% of its assets in large-cap growth stocks, 8.69% in large-cap value, 20.85% in mid-cap growth and 3.66% in mid-cap value.

The fund has a 12.84% exposure to consumer discretionary, 1.25% to consumer staples, 18.42% to healthcare, 5.27% to industrials, 61.09% to information technology, 0.56% to materials, and 0.57% to telecom services.

Its top holdings include: Apple Inc at 11.82%; Qualcomm 6.90%; Microsoft 4.94%; Google 4.52%; Gilead Sciences 3.54%; Oracle Corp 3.37%; Cisco Systems 3.15%; Teva Pharmaceutical 2.88%; Intel Corp, 2.67%; and Research in Motion 2.27%.

Source:AsianInvestor, 31.03.2009 by Liz Mark

Filed under: China, Exchanges, Trading Technology, , , , , , , ,

March 30, 2009 • 9:23 am 0

Master Data versus Reference Data

Master data and reference data are two major data categories that are often thought of as the same. The reality is that they are quite different, even though they have strong dependencies on each other. Failure to recognize these differences is risky, particularly given the current explosion of interest in master data. Projects that approach master data as just “data” and fail to address its unique needs are likely to encounter problems. This is particularly true if such projects experience scope creep that leads them into the very different realm of reference data management.

Basic Categories of Data

Figure 1 shows how data can be separated into a number of different categories, arranged as layers. Perhaps the most important category is the transaction activity data. This represents the transactions that operational systems are designed to automate. It is the traditional focus of IT, including things such as orders, sales and trades. Below it is transaction audit data, which is data that tracks the progress of an individual transaction, such as Web logs and database logs. Just above transaction activity data is enterprise structure data. This is the data that represents the structure of the enterprise, particularly for reporting business activity by responsibility. It includes things such as organizational structure and charts of accounts. Enterprise structure data is often a problem because when it changes it becomes difficult to do historical reporting. (For example, when a unit splits into two, each responsible for a distinct set of products, how do we compare their current product sales performance to their performance prior to the split?) Enterprise structure data is a subject in its own right, which, alas, there is not enough space to discuss here.

Then we come to master data. Master data represents the parties to the transactions of the enterprise.

It describes the things that interact when a transaction occurs. For instance, master data that represents product and customer must be present before the transaction is fired to sell a product to a customer. Reference data is any kind of data that is used solely to categorize other data found in a database, or solely for relating data in a database to information beyond the boundaries of the enterprise.

Figure 1: Categories of Data

Know Your Data

If we accept these definitions, there is a big difference between master data and reference data. Definitions, however, are a cloudy issue. Some people tend to regard reference data as any data used in an application, but not created in that application. Thus a sales application that gets product data from some other application can view the product data as reference data. This is a big problem. If we do not have precise definitions for what we are talking about, then it is difficult to even exchange ideas, let alone implement solutions to address problems of either reference data or master data management. It is something I have witnessed in my work, and I have been particularly disappointed by projects where people with different and rather fuzzy ideas of what master data is try to work together. Unless everyone involved in such projects has a clear idea of what they are dealing with, they cannot understand where the boundaries of the projects lie, and they are forced back to very general and, frankly, fruitless approaches to whatever problems of reference or master data they are trying to solve.

The Difference of Identification

Let us look at some of the specific differences between reference and master data. Identification is a major one. In master data, the same entity instance, such as a product or customer, can be known by different names or IDs. For example, a product typically follows a lifecycle from a concept to a laboratory project to a prototype to a production run to a phase where it is supported under warranty and perhaps to a phase of obsolescence where it may no longer be produced or supported but is still covered by product liability responsibilities. In each of these phases, the name of the product may change, and its product identifier may, too. For instance, Microsoft’s Cairo project was eventually named Windows 2000. I worked at an organization that funded special projects, and the year was part of the project number. When a project took a long time to be formulated, management usually changed the year node in the project number to give a more up-to-date impression. Beyond product, we are all aware that customers can change their names, or have identical names, and how difficult it is for enterprises that interact with a large customer base to know which individual they are dealing with.

By contrast, reference data typically has much less of a problem with identification. This is partly because the volumes of reference data are much lower than what is involved in master data and because reference data changes more slowly. Existing issues tend to revolve around the use of acronyms as codes. Reference data, such as product line, gender, country or customer type, often consists of a code, a description and little else. The code is usually an acronym, which is actually very useful, because acronyms can be used in system outputs, even views of data, and still be recognizable to users. Thus the acronym USA can be used instead of United States of America. Some IT staff try to replace acronyms in reference data with meaningless surrogate keys, and think they are buying stability by such an approach. In reality, they are causing more problems because reference data is even more widely shared than master data, and when surrogate keys pass across system boundaries, their values must be changed to whatever identification scheme is used in the receiving system.

Thus we can see that in the area of identification, quite dissimilar problems exist if we compare master data to reference data. A single approach is never going to adequately address identification problems in both categories of data.

The Problem of Meaning

Reference data has one unique property that it shares with metadata but which is totally lacking in master data. This is semantic meaning at the row level. We are all accustomed to the idea that metadata items, such as an attribute of an entity in a logical data model (or column of a table in a physical database) have definitions. It is a little less obvious that items of reference data also have definitions. For instance, what is the definition of USA in a country code table? Does it include Puerto Rico, Guam or the U.S. Virgin Islands? For some enterprises, it may only be the lower 48 states. Consider a database table of customer credit category. It may have rows for platinum, gold, silver, bronze and plutonium. The definitions of these rows are very important for interpretation of reports that are organized by customer credit category and for understanding what business rules may be triggered when a customer is assigned a particular customer credit category.

By contrast, definitions are meaningless for individual rows of master data. Customer A is just Customer A, and Product X is just Product X. Rows of master data do not have meanings. On the other hand, there can be huge disputes about meaning when it comes the to entity level in master data. What is a customer? What is a product? I would love to know how many millions of dollars have been wasted trying to get single enterprise-wide answers to these questions. It is a little like chasing rainbows. The reality is that the definition of master data entities depends on context. A marketing department may view prospects as customers, whereas for accounts receivable, a customer may only be somebody who has paid for a purchase. Understanding and managing these contexts and the various definitions that go with them is a major challenge in master data management.

Therefore, semantic issues are yet another significant difference between master data and reference data. The problem of getting, storing and making available definitions for individual rows of reference data is not the same as the need to understand the contexts and related definitions at the entity level in master data. These diverse challenges require very different solutions.

Links between Master and Reference Data

There are many other detailed differences between master and reference data, but there are also important linkages that complicate management approaches. Perhaps the most critical is the integration of the update cycle. When a new product, customer or other item of master data is introduced, there is always a possibility that new reference data will be required. Perhaps a new product will require a new product line or product category. This is particularly true in enterprises where the operationalization of the business is not well integrated with information systems. In such cases, nobody really understands the impact on data of introducing a new product as part of an entirely new product line. Perhaps it is not fair to blame business personnel for this, because they typically have enough problems to deal with in such a situation. Notwithstanding, in such cases, the addition of a new product record now requires the coordinated addition of a new product line record. If there is complete separation of master and reference data management, this can be a nightmare. It is particularly true if master and reference data are so separated that updates occur in different databases at different times. The result can be “orphan” product line and product records floating around the databases of the enterprise for a period of time.

What this shows is that while it is important to understand the differences between reference and master data, we must still think carefully about enterprise information architecture as a whole. The specific approaches that can solve the specific problems of master and reference data management must be set within a strategy of the overall management of enterprise information. None of this is particularly easy. What is exciting about the present moment in information management is that closer attention is being paid to these difficult problems, and the will and resources exist to try to solve them. Hopefully in the next few years we will see conceptual and practical innovations in master and reference data management that will be of enormous benefit to the enterprises that adopt them.

Source:Information Management Magazine, April 2006 by Malcolm Chisholm

Filed under: Data Management, Library, News, Reference Data, Risk Management, , , , , , , ,

March 30, 2009 • 5:29 am 0

Master Data Management: Data Strategy Autum 2008

Selected white papers & articles from Data Strategy Journal Autum 2008 on Master Data Management (MDM).

Golden Copy or Unified View (David Loshin)

Perusing the published literature on Master Data Management (MDM), as well as reading press releases, news stories, and listening to case studies and assorted podcasts and web seminars, it is not unusual to come across the phrase “golden copy” in reference to the result of a master data consolidation activity. Presumably, the term “golden copy” implies a record that epitomizes the highest quality information, on which any application can depend. The expectation is that the data integration and consolidation features of the MDM program are able to absorb all the various and sundry records from across the enterprise into this perfect data set.

Master Data Managment Governance (Malcom Chisholm)

Data administration has in the past placed great emphasis on the logical level of data management.  This has meant that data models, business processes, architectures, and application functionality have received a great deal more attention than physical data values in production databases.  Yet, master data management (MDM) is fundamentally concerned with managing physical data values in production databases.  These management requirements cannot be fully answered by abstracting the problems of MDM back to logical layer of data models, architectures, and so on.

Six Sigma and Master Data Managment (Joe Danielewicz)

Master Data Management (MDM) programs are inherently risky because they are long running and span several business functions. Business thinks Master Data quality is an IT problem and IT knows MDM won’t succeed without Business ownership. Applying Six Sigma methodologies helps you manage a challenging program using well understood management techniques that serve to remove risk and improve communication.

Source: Data Strategy Journal Autum issue 2008

Filed under: Data Management, Library, News, Reference Data, Risk Management, Standards, , , , , , ,

March 30, 2009 • 5:12 am 0

Enterprise Data Management: Optimaizing with Maturity Models – White Paper Jan 2009 – LakeFrontData

Download: EDM_Maturity_Model_Jan_2009 LakeFrontData

Understanding and Optimizing your firm’s Data Managment Capabilities  using Maturity Models

Source: LakeFrontData, January 2009

Filed under: Data Management, Data Vendor, Library, Reference Data, Risk Management, Services, Standards, , , , , ,

March 30, 2009 • 4:38 am 0

Evaluation Prices Report March 2009 – Inside Reference Data

Download: Evaluation Prices Report March 2009 – Insided Reference Data

In today’s market, many data managers talk about funding for projects being pulled and limited spending on new initiatives. But this is not necessarily the case for evaluated prices. Turbulent
market conditions and a focus on reducing risk have led to a rapidly growing demand for evaluated prices—a demand that has rocketed so fast that some worry vendors have not had time
to prepare for the consequences.

Source: Inside Reference Data, March 2009

Filed under: Data Management, Data Vendor, Library, Market Data, News, Reference Data, Risk Management, Standards, , , ,

March 28, 2009 • 7:44 am 0

Asia’s Private-Banking shakeout to intensify, says UBS

Asia’s private-banking industry will experience a “big shakeout” as the global recession saps investors’ appetite for risk and drives down fees, according to UBS AG. 

The Zurich-based bank, Switzerland’s biggest, and other firms will have to cut compensation, the biggest cost component of the business, said Tee Fong Seng, Head for Key Clients in Asia-Pacific at UBS’s wealth-management unit. Costs haven’t declined with revenue after the industry grew, “maybe a bit too aggressively,” in the last few years, he said. 

“There was a sense of optimism leading up to 2005, 2006, 2007, and things just received carried away,” Tee said today at an industry conference in Singapore. “The present business model of banking is not sustainable, it has to change. Revenue is coming down.” 

Assets under management at UBS’s private-banking unit in the region have fallen “substantially,” after growing to more than US$200 billion in 2007 from US$75 billion at the end of 2004, he said. 

The wealth-management industry is seeking to win back the trust of clients whose wealth has been eroded by global financial turmoil. Individuals worldwide with more than US$1 million probably saw the value of their assets shrink by about 20% to 25% in 2008, Stephen Wall, a London-based director at Scorpio Partnership Ltd, said in an interview. 

Cutting Edge 
In 2007, wealthy people’s assets rose 9.4% to US$41 trillion, while the total number of high-net-worth individuals rose 6%, according to the latest survey by Capgemini SA and Merrill Lynch & Co. 

Clients prefer “simple direct investments” in equities, bonds and precious metals, shunning “complex structured products” that pay higher fees, said Kwong Kin Mun, head of private banking in South Asia at Singapore-based DBS Group Holdings Ltd 

“When we go back to clients with terms like ‘innovation’ and ‘cutting edge,’ they are really viewed with suspicion and in some cases disgust,” Kwong said. “The credit crunch right now has developed into a kind of a revenue crunch and the whole industry is trying to find the right model.” 

If the “risk aversion” lasts for another nine to 12 months, it will have “tremendous impact on the wealth management industry,” Kwong said. “Most of us have built our models on a very bullish assumption.” 

High Costs 
Private banks competing to manage the region’s riches were recruiting senior bankers from their competitors as recently as two-years ago, leading pay to escalate. Private bankers will have to be “more realistic” in their salary expectations, UBS’s Tee said. 

Costs that were built up in the past were “well taken care of by the revenue generation,” he said. 

New York-based Morgan Stanley is trying to cut its “variable costs,” said Tan Su Shan, the bank’s head of wealth management in Southeast Asia and Australia. “We’ve come to realise that our fixed costs have been too high,” she said. 

Aggressive Strategy 
“Three or four-years ago, most of the industry players realised that excesses had built up, but none was brave enough to stand against this very strength,” said DBS’s Kwong. “Most, if not all, of the industry players continued to carry out a very aggressive growth strategy on the premise that perhaps Asia would take over the driver’s seat in world economic growth and therefore private wealth would continue to grow incessantly.” 

Financial institutions worldwide have reported US$1.3 trillion of losses and shed more than 286,000 jobs since the US subprime mortgage market collapsed, data compiled by Bloomberg show. 

“The modern wealth management market has never been through a decline like this,” said Scorpio Partnership’s Wall. “It’s been experiencing about 15 years of growth and it’s become a massively professional industry. Now it appears that all the professionalism didn’t work, it’s become a basic average man-on-the-street investor kind of process. Banks haven’t lived up to expectations.” 

Source: Bloomberg, 27.03.2009

Filed under: Asia, Banking, News, Risk Management, Services, Wealth Management, , , , , , , , , , , , ,

March 28, 2009 • 7:31 am 0

Unrest looms in Asia Pacific amid financial crisis: UN

Asia and the Pacific face a “marked risk” of social unrest as the global financial crisis bites, but the region continues to lead international prospects for recovery, a UN survey said Thursday.

The annual survey said that the region faces multiple layers of crisis ranging from financial breakdown, food and fuel price instability and climate change that could have wide-ranging effects this year.

There was “fresh evidence mounting that the worst has yet to come,” with a big slump in trade, the region’s engine of growth, according to the Economic and Social Survey of Asia and the Pacific 2009.

“There is a marked risk that the financial crisis could converge on itself in a downward spiral of deepening recession, social unrest and political instability,” said the survey.

A key trigger for unrest was that millions of Asian migrants are returning to their rural homes in search of work after losing jobs in the crisis-hit export sector, UN Undersecretary General Noeleen Heyzer said.

“Asia-Pacific is under multiple threats and the gains that have been made in terms of development can be lost very easily,” Heyzer told AFP in an interview ahead of the report’s launch in Bangkok.

Investment in job security and social safety nets for the poor must be sought urgently, she said, adding: “If we do not address the growing disparities we are going to find it’s going to create social unrest.”

The survey estimated some 24 million people could lose their jobs as a result of the economic slowdown. It added that only 30 percent of the region’s elderly receive pensions and 20 percent of people have access to healthcare.

The report also cited climate change as a threat because of an increased incidence of natural disasters in Asia-Pacific, which experiences almost half of the world’s disasters and is home to nearly two thirds of their victims.

But sounding an optimistic note, the report said reforms introduced in recent years following the 1997 Asian Financial Crisis meant the region could be a future bright spot.

Its developing countries “would emerge as primary sources of any world economic growth that might take place in 2009, thus providing some global stability,” the report said.

Heyzer said the real opportunity for the region’s countries lay in investing in each other.

Asian countries should resist the temptation to increase barriers to labour migration, Heyzer said, citing Malaysia’s decision this month to cut the number of foreign worker permits it issues by 70 percent.

“All this makes it extremely difficult for communities under stress to survive,” she said, adding that it also increased people smuggling and illegal trafficking.

“This is the time to invest in Asia-Pacific solidarity,” she said.

Source: AFP 27.03.2009

Filed under: Asia, News, Risk Management, , , , , , ,

March 28, 2009 • 1:09 am 0

BMV – Bolsa Mexicana de Valores February 2009 Performance Report

Click here to download BMV February 2009 Monthly Performance Report

Source: MondoVisione, 27.03.2009

Filed under: BMV - Mexico, Mexico, News, , , ,

March 27, 2009 • 7:23 am 6

Obama rejects China’s call for new global currency

US President Barack Obama has defended the dollar as “extraordinarily strong” and rejected China’s call for a new global currency as an alternative to the dollar.

He said investors considered the United States “the strongest economy in the world with the most stable political system in the world” even as it was reeling from a prolonged recession stemming from financial turmoil.

People’s Bank of China Governor Zhou Xiaochuan had called for a replacement of the dollar, installed as the reserve currency after World War II, with a different standard run by the International Monetary Fund.

As far as confidence in the US economy or the dollar, I would just point out that the dollar is extraordinarily strong right now,” Obama told a White House press conference on Tuesday.

He said that although the United States was “going through a rough patch” at present, it enjoyed a “great deal of confidence” from investors.

“So you don’t have to take my word for it,” he said.

“I don’t believe there is a need for a global currency,” Obama said, in what appeared to be a break from tradition among US presidents not to comment directly on the dollar’s value.

Zhou suggested the IMF’s Special Drawing Rights, a currency basket comprising dollars, euros, sterling and yen, could serve as a super-sovereign reserve currency, saying it would not be easily influenced by the policies of individual countries.

China is the largest creditor to the United States, being the top holder of US Treasury bonds worth 739.6 billion dollars as of January, according to US figures. It is also the world’s largest holder of US dollars as a reserve currency, at more than one trillion dollars.

Zhou’s comments came just two weeks after Chinese Premier Wen Jiabao, in a rare expression of concern, called on US economic planners to safeguard Chinese assets.

“We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets,” Wen said as the United States grappled with the worst financial turmoil since the Great Depression.

The latest Chinese concern came as the dollar took a beating following the Federal Reserve’s decision last week to buy up to 300 billion dollars in long-term US Treasury bonds and boost its purchases of mortgage securities by 750 billion dollars in an effort to revive the ailing economy.

The decision, according to foreign exchange dealers, made US assets less attractive to investors worried that the US Federal Reserve move would end up debasing the world’s reserve currency.

Despite the financial meltdown at home, the dollar has been mostly regarded as “safe haven” by investors averting risks amid a global economic slump.

US Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner on Tuesday also defended the dollar at a congressional hearing.

At the hearing, a lawmaker asked the two financial chiefs: “Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested by China?”

Geithner immediately responded, “I would.”

“And the chair?” the lawmaker asked, turning to US Federal Reserve chair Bernanke.   ”I would also,” Bernanke said.

The idea of a global currency determined by multilateral organisations is not new, said John Lipsky, the IMF’s first deputy managing director. ”But it’s a serious proposal,” he said in Washington.

And he hastened to add, “I don’t think even the proponents think it as a short-term issue but as a longer-term issue that merits serious study and consideration.”

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said the dollar would remain unchallenged as the top reserve currency even as emerging economies such as China play a more critical role in the global economy.

He said, “I don’t expect major structural changes in the role that the dollar plays today as a reserve currency.”

The debate over the dollar’s role came ahead of the G20 summit of developing and industrialised nations on April 2 in London, where world leaders and international organisations, including the IMF, are to discuss reforming the financial system.

Russia has also proposed the summit discuss creating a supranational reserve currency. The IMF created the SDR as an international reserve asset in 1969, but it is only used by governments and international institutions.

Source: AFP, 26.03.2009

Filed under: News, , , , , , , , , , , , , ,

March 27, 2009 • 2:15 am 0

Stocks Will Drop; Banks Will Go Belly Up – Roubini says

 The stock market will drop as major banks go belly up says Nouriel Roubini, the NYU economist that successfully predicted the current economic collapse. Below is the text from an interview Mr. Roubini gave today on Bloomberg TV.

U.S. stocks will fall and the government will nationalize more banks as the economy contracts through the end of 2009, said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

“The stock market is a bit ahead of the real macroeconomic and financial news,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, said in an interview with Bloomberg Television in London today. “We’ll have some major banks going belly up that will need to be taken over.”

The global equity rebound in March that sent the Standard & Poor’s 500 Index to its best monthly advance in 17 years is a “bear-market rally” and U.S. Treasury yields will “remain relatively low” as investors flock to the safest assets, Roubini said. Treasury Secretary Timothy Geithner’s new plan to remove toxic debt from financial companies won’t be enough for insolvent banks, he said.

Roubini’s outlook contrasts with predictions this week from Templeton Asset Management Ltd.’s Mark Mobius and Traxis Partners LLC’s Barton Biggs, who said that equities are poised to rally as government efforts to revive the economy and banking system begin to work. Investors are “way too optimistic” about the prospects for a recovery in the economy and earnings, Roubini said.

For full article click here

Source: Infomation Clearing House, 27.03.2009

Filed under: Banking, News, , , , , , , , , , , , ,

March 27, 2009 • 12:30 am 0

BMV Bolsa Mexicana nominates Luis Tellez Kuenzler as Chairman

Bolsa Mexicana de Valores SAB, the operator of Latin America’s second-largest stock exchange, nominated to chairman the former transport secretary Luis Tellez Kuenzler. The nomination is supported by the 23 exchange members of the Mexican Stock Exchange.

His nomination will be subject to approval at the annual shareholder meeting next month, April 27th, the Bolsa said today in an e- mailed statement.

Source: BMV, 25.03.2009

Filed under: BMV - Mexico, Mexico, , , , ,

March 27, 2009 • 12:01 am 6

China wants new reserve currency to replace dollar

PBOC governor Zhou Xiaochuan suggests a super-sovereign reserve currency to help alleviate China’s dependence on the dollar.

Just weeks before the Group of 20 meeting in London, where leaders of industrial and developing nations will meet, China has proposed revolutionising a key part of the global financial system by replacing the dollar as the world’s global reserve currency with a super-sovereign reserve currency. Zhou Xiaochuan, governor of the People’s Bank of China, published the proposal on the bank’s website in both Chinese and English this week.

Zhou is building on an idea tabled earlier this month by a group of countries including China, India and Russia.

Without explicitly referring to the dollar, he talks about the problems inherent in using a national currency as the global reserve — the main problem being that a country has to balance its domestic monetary policy goals with the international responsibilities of its currency. And when a national currency is used to price commodities and trade, the monetary authority issuing the cash will be unable to resolve economic balances by adjusting its exchange rate.

But the US does benefit in some ways from having the main global reserve currency since it allows for easy borrowing from other countries, keeps interest rates low and stimulates spending. Of course, this has proven to be a double-edged sword for the US, since excessive borrowing contributed to the subprime crisis.

Instead, Zhou suggests a super-sovereign reserve currency, based on special drawing rights (SDR), which in turn would be based on a basket of major currencies used in international trade. The responsibility of looking after the SDRs will fall to the International Monetary Fund (IMF).

“A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity,” says Zhou. “And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic balances,” thereby reducing the probability of further economic crises.

The idea of sidelining the dollar has, as you might expect, not gone down well in the US where President Barrack Obama said that the dollar is “extraordinary strong” and that there is no need for a global currency.

The proposal “has the potential to lead to one of the most profound reforms of the global monetary system in the coming decades,” says Jun Ma, Deutsche Bank’s chief economist for Greater China. He admits, though, that to implement the proposal would be an extremely complicated task.

China is clearly concerned about its $1.5 trillion exposure to the US currency, which is an unavoidable consequence of the current financial system. As China stacks up dollars from its massive trade surplus, it has little alternative but to put them into dollar-based assets – primarily Treasury bills and agency debt.

In recent months, China and the US have engaged in a public spat over currencies: only a few days after Obama assumed the presidency, Treasury secretary Timothy Geithner labelled China a currency manipulator. And earlier this month, Chinese premier Wen Jiabao said at a press conference that he was worried about China’s Treasury holdings and that he wanted an assurance that China’s investments were safe.

Addressing delegates of the Credit Suisse Asian Investment Conference in Hong Kong this week, economist Professor Joseph Stiglitz said the dollar is no longer a good store of value. And much of his audience seemed to concur. Against this backdrop, the G20 meeting looks set for some heated debate.

Source: FinanceAsia.com, By Daniel Inman , 26.03.2009

Filed under: China, News, , , , , , , , , , , ,

March 26, 2009 • 12:03 pm 0

Korea Exchange launches new trading system

The Korea Exchange (KRX) launched successfully the next generation IT system (EXTURE) on March 23, 2009.

The EXTURE consolidates the trading systems, clearing and settlement systems and information dissemination systems of the 3 former exchanges that were consolidated under the KRX.

In terms of efficiency, processing capacity, flexibility and reliability, the KRX’s next generation IT system is one of the most advanced systems in the world. Thus, it is anticipated that it will become a new growth engine of the KRX.

Specifically, to effectively accommodate the market liquidity, the processing capacity of system has been upgraded to 40 million quotes per day, which is 2 times the capacity of existing system. The roundtrip latency for order execution has been reduced to less than 0.08 seconds, which is one of the best in the world.

With the launch of the next generation IT system, all functions related to trading, e.g., order routing, order matching and execution, dissemination of market data, management of customer account book, etc., which the 3 Markets have been handling independently, will be integrated and standardized into a single process. Consequently, the internal efficiency of the member companies will be enhanced and it will also be an occasion for fundamentally improving the KRX’s business practices.

Using the next generation IT system, the KRX intends to accommodate various products to be developed and introduced after the enforcement of the Financial Investment Services and Capital Market Act; establish the mechanisms for cross-boarder trading with such exchanges as CME and Eurex; and export the Korean-style market standards to the other foreign markets.

Source: KRX 25.03.2009

Filed under: Exchanges, Korea, News, Trading Technology, , , , , , , , , , , ,

March 26, 2009 • 9:41 am 1

Mexico Is UBS’s Favorite Latin American Equity Market (updated)

 

25.03.2009 Inca Cola    A UBS report dated March 25th  that includes the company’s call on Mexico and the transcript of a very interesting conference call between four Mexico sector experts (namely UBS Mexico economist Gabriel Casillas, Latin America FX strategist Marcos Mollica, Latin America fixed income strategist Alvaro Vivanco and Mexico equity strategist Tomas Lajous). Here’s an excerpt from the report to whet your appetite. It’s well worth reading the rest, so use that link (UBS Making Sense of Mexico_UBS_25march2009)
The main conclusions (of the conference call debate) are as follows: First, this will almost certainly continue to be a very weak year for Mexican growth, although we do look for stabilization by end-year and recovery in 2010. On the other hand, despite fears of widening current account deficit and external corporate debt, the Mexican foreign financing position actually looks well-supported – and this in turn means that although we don’t expect a sharp recovery in the level of the peso, we also don’t see sharp depreciation risks from here. With the surprise 75 basis-point cut by the central bank last Friday we are no longer taking strong positions in the domestic rates market, preferring to focus on external bonds and CDS. And finally, while the equity market has already fallen to very inexpensive levels, in light of ongoing earnings risks we prefer to wait for more visibility before jumping back in to buy stocks.
                                                         ***
I think UBS has been calling Mexico really well recently and this paper just is more confirmation. There’s no need to fall for all the ‘failed state’ idiocy propagated by those who want to see that wall finished (Fox News et al)but on the other hand the big exposure the country has to the USA (traditionally the market for 80% of all exports)means that there are real economy woes still in the pipeline, so no need to exposure yet.

 

09.03.2009  Mexico replaced Brazil as UBS AG’s favorite equity market in Latin America because investors have already factored in a “severe” recession this year.

Declines this year means Mexican stocks are trading at the lowest valuations in at least the past 10 years, while the nation’s largest companies will probably be able to return to profit by raising prices, UBS strategists led by Damian Fraser wrote in a March 9 report. The slump is a “contrarian buying opportunity” for investors in the medium term, they added.

Mexico’s Bolsa Index has dropped 32 percent in dollar terms this year, outpacing a 3.6 percent retreat in Brazil’s Bovespa. The Mexican benchmark index is valued at 11 times reported earnings, compared with 8.7 times for the Brazilian stock index, according to data tracked by Bloomberg.

“For the first time in recent history, Mexico’s market multiples are in line with Brazil’s — despite comprising less cyclical, more defensive stocks,” the analysts wrote. “While a deep recession is now expected and priced into Mexican valuations, it is less priced into Brazil’s mainline stocks.”

America Movil SAB, Latin America’s largest wireless carrier, and Grupo Televisa SAB, the world’s biggest Spanish-language broadcaster, are among Mexican companies that make up UBS’s top 10 recommended stocks in Latin America, the brokerage said.

Mexican companies enjoy “substantial pricing power” and are less exposed to swings in global economic growth, the strategists wrote. Earnings this year are still expected to “materially disappoint” given the recession and a weak exchange rate, they said.

Peso’s Slump

The peso has dropped 32 percent in the past six months and plunged to a record low against the dollar yesterday on concern the U.S. recession is sapping demand for exports and slowing dollar inflows from remittances, tourism and foreign direct investment. It’s the worst performer among seven Latin American currencies tracked by Bloomberg.

The weakening peso is unlikely to cause fiscal or debt problems for Mexico because of the nation’s “small” holdings of dollar debt, the strategists said. The country continues to earn dollars from its oil exports, they added, and its largest companies also have “limited” foreign currency debt.

Brazil’s ‘Neutral’ Rating

UBS has an “overweight” recommendation for Mexico and rates Brazil “neutral.” The brokerage previously said on Dec. 3 Brazil was its favorite equity market in the region for 2009 because the shares are undervalued, the economy might expand faster than estimated and the central bank had room to lower interest rates.

A continued slump in economic growth will probably hurt Brazil’s largest companies more than those in Mexico, the analysts said in yesterday’s report. The companies in Brazil are in industries including mining, steel and oil that rely on global demand for commodities, they added.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, and Cia. Vale do Rio Doce, the world’s No. 1 iron-ore producer, account for almost a third of the nation’s benchmark index. Vale is among six Brazilian companies that make up the top 10 stocks recommended by UBS in the region.

Source: Bloomberg contact Shiyin Chen in Singapore schen37@bloomberg.net 09.03.2009

Filed under: Banking, Brazil, Latin America, Mexico, News, , , , , , , , , ,

March 26, 2009 • 6:31 am 0

TSE Tokyo Stock Exchange “Business Plan for FY 2009-Action Plan 2009-” drawn up

 

In March 2008, Tokyo Stock Exchange Group, Inc. (TSE Group) formulated and published the “Medium-Term Management Plan” targeting the period from FY 2008 to FY 2010.

As FY 2009 is the second year of that plan, TSE Group drew up the “Business Plan for FY 2009 -Action Plan 2009-” in order to achieve the goal previously set forth, by taking into account the results of efforts made in FY 2008 and changes in the business environment.

TSE Group, as part of the central infrastructure of the Japanese financial and capital market, will continue making its utmost efforts to achieve the goals laid out in the Medium-Term Management Plan.

For details see documents as of 24.03.2009

Business Plan For FY2009-Action Plan 2009
IT Master Plan For FY2008 to FY2010 

Source: TSE, 25.03.2009

  

Filed under: Exchanges, Japan, Trading Technology, , , , , , , ,

Follow

Get every new post delivered to your Inbox.