China adopted its first corporate governance code in 2001, ahead of many APAC peers, with updates in 2011 and 2016. As China’s market becomes more accessible to global investors, corporate governance practices will likely face increased comparison to global standards. Our report references MSCI ESG Research’s rich corporate governance data to examine the opportunities and risks to minority shareholders presented by current corporate governance practices in the MSCI China Index.
LONDON (Reuters) – Most banks will not have to hike capital significantly to meet stricter rules to counter trading risks, a survey showed on Tuesday, after Asian nations sought to delay introducing the code citing concerns about the need for more funds.
The code, known as the “fundamental review of the trading book” or FRTB, was drawn up by the Basel Committee on Banking Supervision and tightens “market risk” capital requirements.
LONDON (Reuters) – Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.
Bank for International Settlements researchers said it was hard to assess the risk this “missing” debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.
The CBOE Volatility Index® (VIX) measures the implied volatility of the S&P 500® over a 30-day period. It is widely followed by market participants across asset classes to gauge market sentiment. Traditionally, fixed income market participants have incorporated it into macro analysis.
Can VIX-related products be used as hedging tools for some bond sectors that exhibit certain equity-like features? For high yield and emerging market bonds, credit and liquidity risks are more defining than duration risk. Dor and Guan (2017) demonstrated that equity futures can be used to hedge high yield portfolios. We investigated a correlation analysis of high yield and emerging market bonds to VIX and VIX futures.
Contingent Convertible bonds – known as “CoCos” – have grown popular among European (and increasingly Asian) financial institutions since the 2008-09 financial crisis. They offer attractive yields but come with a challenge: figuring out when a CoCo bond is at risk of being converted to equity, which effectively can eradicate the bond’s value.
The answer, as MSCI’s Gergely Szalka writes in a new blog post, may lie in having a dedicated risk model that picks up on early warning signs. Gergely shows how MSCI’s CoCo pricing podel would have detected the rising risk that preceded this year’s collapse of Spain’s Banco Popular ahead of a standard risk model.
Liquidity may be defined as the ability to buy or sell a bond within a reasonable period of time and at a reasonable price. A simple way to compare two bonds is through the use of Trade Reporting and Compliance Engine (TRACE) daily volume data. The data represents the daily aggregation of each reported trade throughout the day. The existence of reported volume data can be indicative of the frequency of trading. For example, if a bond has volume data for 20 of the last 22 trading days, then it trades relatively frequently—nearly every day. The volume data itself can also indicate the size in which it trades daily. For two bonds, we can compare the turnover rate, defined as the total volume traded in 22 days as a percentage of the amount outstanding. For example, a bond may be considered more liquid relative to another one if a larger portion of its total outstanding is traded over a one-month period.
Rising demand for socially responsible and purpose-driven finance has resulted in new ways of putting capital to work the world over. In the past decade, what is now known as “impact investing” has challenged the long-held view that social returns should be funded by philanthropy and financial returns should be funded by mainstream investors.
ISDA will host an introductory webinar tomorrow (Thursday, September 14) at 8:00 am NY time / 1:00 pm London time to provide an overview of an initiative to facilitate the adoption of emerging technologies, such as distributed ledger and smart contracts. The webinar will cover the importance of common data and process standards to aid interoperability, and will provide an update on ISDA’s work to identify and define core lifecycle events and actions and consolidate them within a so-called common domain model (CDM).
All participants must register in advance to listen to the webinar by clicking here.
Commentary: A decade after the August 2007 “Quant Liquidity Crunch,” Peter J. Zangari, global head of research and product development, writes about the changes and lessons learned from this event and the ensuing financial crisis. Among them: Best-in-class risk management is now integrated into the investment process and investors have placed greater emphasis on alternative sources of return, from factor investing to private asset classes.
In June 2017, the $23 billion Vodafone-Idea Cellular merger got the go ahead from the Competition Commission of India. A few days later, the government announced a deal between two public sector undertakings (PSUs) – the Oil & Natural Gas Corporation (ONGC) and Hindustan Petroleum Corporation Ltd (HPCL). The Rs. 28,000 crore ($4.4 billion) merger involves ONGC buying up the 51% government stake in HPCL.
As of January 1, 2018, IFRS 9 will replace the current IAS 39 across several jurisdictions, including many European countries.
By focusing on expected credit losses, IFRS 9 will represent a significant shift from IAS 39 (incurred losses) since the new impairment requirements determine that expected losses will have to be computed not only for non-performing assets, but also for performing assets, with a direct impact on Profit and Loss (P&L).
In the tailwinds of 2016 when LIBOR finally crossed 1%, and given the prospect of further rate hikes, senior loans are poised for an uptick in demand. But is there room for more?
Join us as we explore why the fundamentals of floating-rate instruments are increasing institutional allocations to senior loans at home and abroad.
Leading industry practitioners will examine:
A risk/reward analysis of leveraged loan fundamentals
How index-based strategies and ETFs impact depth of liquidity in primary and secondary senior loan markets
The refinancing effect – how stronger demand is weighing on credit spreads and yields
- Ted Basta, Senior Vice President, Market Data, Loan Syndications and Trading Association
- Myles Gilbert, Managing Director, Cambridge Associates LLC
- Jason Giordano, Director, Fixed Income Product Management, S&P Dow Jones Indices
- James Meyers, CFA, Director of Fixed Income ETF Product Strategy, PowerShares by Invesco View the Speaker Bios
LONDON (Reuters) – Banking regulators will postpone their next meeting in another bid to agree on global capital rules, taking more time to try to overcome objections from European banks to minimum capital levels, people familiar with the talks said.
The negotiations are being closely watched by thousands of lenders, even though the rules would not come into force until 2024 or 2025, and Standard Chartered said on Wednesday it would not pay a dividend because of the regulatory uncertainty.
One of the lessons from the August 2007 “quant liquidity crunch” – now about to mark its 10-year anniversary – was that institutional investors underestimated the speed and magnitude of losses that can take place over very short periods. The challenge that remains for investors today is to find real-time data to help them respond to market events as they unfold. This need for transparency is especially true where fund managers have exposure to factors that may experience high volatility in crisis periods.
As a follow up to the previous article, Bond Connect officially launched on July 3, 2017. Bond Connect allows international market participants to trade China’s interbank bonds through the Hong Kong Stock Exchange. It marked a milestone in China to further open up its capital market, following the China Interbank Bond Market (CIBM) announcement last Read more […]
The term “sustainable development” has been in existence for decades — 30 years ago, in 1987, the World Commission on Environment and Development proposed developing new ways to assess progress toward sustainable development in the “Brundtland Report.”
Historically, there was a lack of comprehensive goals or targets for “the future we want” and a lack of adequate monitoring of progress toward enduring human and environmental well-being. This absence of an overarching framework limited the ability to assess progress toward attaining sustainable development.
In his latest whitepaper, Giorgio Baldassarri, Ph.D. discusses the differences and similarities of two of our fundamentals-based credit risk models, and how their outputs can help you distinguish the real drivers of risk.
2017 Retail Bankruptcies Set Record Pace – Which Companies Are Most At Risk?
If bankruptcies continue this year at their first-quarter pace, the Retail sector could join Oil & Gas as one of the most distressed industries of 2017. Already the number of bankruptcies year-to-date has come close to 2016’s total of 18.
In this article, we analyze the major trends converging to cause this march towards possible “Great Recession” credit risk levels in the retail markets, showcasing S&P Global Market Intelligence’s analysis of the 10 most vulnerable public US retail companies using our Probability of Default (PD) Fundamentals model.
How does increased credit risk in the retail sector affect your exposure?