Categories
Currency
  • How Far Will China Go? Charting the Future of RMB Internationalisation  

    Source: Elliot Hentov, State Street Global Advisors
    Date Submitted: 16 Nov 2017
    Views: 512
    Downloads: 7

    China’s capital account opening and RMB internationalisation has paused. Sceptics argue that the process has peaked due to risk of capital outflows as well as the Chinese government’s reluctance to cede more control to market forces. However, this underestimates hidden costs and structural forces at play that make the status quo unsustainable. We believe that further opening is therefore likely to proceed sooner, rather than later.
  • Central Bank Balance Sheet Policies and Spillovers to Emerging Markets 

    Source: HAOBIN WANG, MANMOHAN SINGH
    Date Submitted: 29 Sep 2017
    Views: 597
    Downloads: 17

    We develop a theoretical model that shows that in the near future, the monetary policies of some key central banks in advanced economies (AEs) will have two dimensionschanges in short-term policy rates and balance sheet adjustments. This will affect emerging market economies (EMs), especially those with a pegged exchange rate, as these EMs primarily use a single monetary policy tool, i.e., the short-term policy rate. We show that changes in policy rates and balance sheet adjustments in AEs may differ in their respective financial spillovers to pegged EMs. Thus, it will be difficult for EMs to mitigate different types of spillovers with a single monetary policy tool. In that context, we use the model to show how EMs might use additional toolscapital controls and/or macro-prudential policyto complement their monetary policy and financial stability toolkit. We also discuss how balance sheet adjustments that affect long-term interest rates may percolate to influence short-term interest rates via financial plumbing. 

  • The Anatomy of the Gold Crash of April 12-15, 2013 from a Liquidity Perspective – An Application of Donier and Bouchaud’s Measure of Illiquidity

    Source: Daniel Ceferino D. Camagay
    Date Submitted: 26 Sep 2017
    Views: 92
    Downloads: 5
    Gold crash of April 12-15, 2013 as seen from a liquidity perspective using Donier and Bouchard's measure of illiquidity
  • EM Weekly: Beta Sell-Off, Asia Least Hard Hit

    Source: Richard Briggs
    Date Submitted: 13 Aug 2017
    Views: 150
    Downloads: 5
    • Risk assets took a bump last week largely due to global, rather than EM, factors. DM underperformed EM in excess return terms. In IG, EM corporates generated excess returns of minus 0.38% versus minus 0.54% on DM. In HY corporates a similar story was true with excess returns of minus 0.44% versus minus 1.12% on DM.  
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    • One of the drivers of the risk off tone last week was the war of words between US President Donald Trump and North Korea's leader Kim Jong-un. That hit the Korean won hardest, it fell 1.64% versus the dollar over the week. Asian currencies were generally weaker last week, with the exception of the Chinese renminbi which strengthened by 0.98%. But in hard currency, the opposite was true with Korean names and sovereign debt generally outperforming IG counterparts.  
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    • In fact the hardest hit last week in the hard currency corporate and sovereign indices were the LatAm and sub-Saharan African credits which are usually caught up in any beta sell off regardless of the driver. Asian names, which tend to be tighter, higher rated and more defensive were the strongest performing last week in that risk-off environment, including Korea.
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    • Notable outliers to those broad moves last week included Teva which continued to sell off for a second week with very high trade volumes persisting after weaker 2Q17 results in the week before last. Teva was down by 1.62% in excess return terms. Venezuela and PDVSA were also among the bottom of the high yield indices' constituents for performance last week and continued to be very volatile, falling on average by 3.32% and 3.69% respectively in price terms last week. Kenya was at the stronger end of the sovereign index last week with excess returns of 0.71%, after relief that last week's elections didn't turn to violence, albeit with the result still being disputed and strikes planned on Monday.
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    • Issuance slowed to a trickle last week with $2.5 bn priced, of which $1.7 bn was rated high yield. The only sovereign new issue was Gabon (B3/B+) which priced a $200 mn tap of its 6.95% 2025 notes. There are several other sovereign new issues being rumoured as coming in the second half of August or early Autumn including Bahrain (euros), $2 bn from Oman and $3 bn from Nigeria.
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  • Business Cycles and the Cross-Section of Currency Returns

    Source: Steven J. Riddiough, Lucio Sarno
    Date Submitted: 09 Jul 2017
    Views: 146
    Downloads: 14
    In recent years, traditional foreign exchange market strategies, including carry, value and momentum have all underperformed markedly, raising major concerns about how investment managers should form currency portfolios. In this paper, we identify an alternative and theoretically motivated source of currency returns that is uncorrelated with existing strategies but generates substantial risk-adjusted returns. The strategy exploits cross-sectional variation in countries' business cycles by taking long positions in strong (overheating) economies and short positions in weak (below trend) economies. We find the strategy performs strongly both in- and out-of-sample and when using alternative techniques for measuring business cycles. Moreover, we provide evidence that a business cycle risk factor adds substantial pricing power to existing risk-based models when explaining the cross-sections of currency market returns, and thus we provide a rare link between macro-fundamentals and currency market returns.
  • China MSCI EM inclusion can be CNY & CNH positive

    Source: CIBC (Patrick Bennett)
    Date Submitted: 19 Jun 2017
    Views: 179
    Downloads: 16
    After some years of false starts, Chinese A-shares are expected to be included in the MSCI Emerging Market Index
  • Bangladesh National Budget Review FY'18

    Source: EBLSL Research Team
    Date Submitted: 04 Jun 2017
    Views: 763
    Downloads: 130
    The 46th National Budget of Bangladesh and 11th by Finance Minister AMA Muhith has been proposed on 1st June, 2017. Proposed budget size for FY ’18 is BDT 4002.66 bn which is 18.0% of GDP. This is the largest budget in the history of Bangladesh. Target Revenue is BDT 2879.91 bn caused a deficit amounting to BDT 1122.75 bn which will be financed through domestic sources (BDT 603.52 bn) and External Borrowings (BDT 519.24 bn).
     
  • Indicators DZ and RDZ: Essence, Methods of Calculation, Signals and Rules of Trading

    Source: Serhiy Kozmenko,
    Date Submitted: 07 Apr 2017
    Views: 121
    Downloads: 3
    Speculators exert more and more influence on prices on world exchange markets. Often the result of this is a formation of so-called “bubbles” with subsequent shocks to national and global economy. The purpose of speculators is earnings in a relatively short period of time using the differences in prices for exchange assets. Most of the speculators as a reference point for decision-making use technical analysis methods (prediction of future prices based on previous prices). Using more sophisticated methods gives advantage and opportunity to earn on a relatively short-term fluctuations in the exchange markets. General rules of technical analysis applied to all types of exchange markets – foreign exchange and stock markets, commodity markets and markets for derivative financial instruments. Thus, developing of a new technical indicator or trading strategy for FOREX (foreign exchange market) can be applied to analyze prices of gold or oil, stock indices and stock prices.
  • Detecting 'Fake' Price Movements: A Convergence/Divergence Indicator

    Source: Guglielmo Maria Caporale, Luis A. Gil-Alana
    Date Submitted: 07 Apr 2017
    Views: 2402
    Downloads: 21
    This paper develops a new pair trading method to detect “fake” price movements and arbitrage opportunities that is based on a convergence/divergence indicator (CDI) belonging to the oscillatory class. The proposed technique is applied to a cross-currency pair (EURAUD, 2010-2015), and trading rules based on CDI signals are obtained. The CDI indicator is shown to outperform others of the oscillatory class and to generate profits (in the case of EURAUD) without the need for incorporating additional algorithms in the trading strategy. The suggested approach is of general interest and can be applied to different financial markets and assets.
  • Is There a Friday Effect in Financial Markets?

    Source: Guglielmo Maria Caporale,
    Date Submitted: 07 Apr 2017
    Views: 1888
    Downloads: 17
    This paper tests for the presence of the Friday effect in various financial markets (stock markets, FOREX, and commodity markets) by using a number of statistical techniques (average analysis, parametric tests such as Student's t-test and ANOVA analysis, non-parametric ones such as the Kruskal-Wallis test, regression analysis with dummy variables). The evidence suggests that stock markets are immune to Friday effects, whilst in the FOREX Fridays exhibit higher volatility, and in the Gold market returns are higher on this day of the week. Using a trading robot approach we show that the latter anomaly can be exploited to make abnormal profits.
  • Is There Really a Renminbi Bloc in Asia?

    Source: ; Pontines, Victor | February 2014, Pontines, Victor
    Date Submitted: 27 Feb 2017
    Views: 243
    Downloads: 4
    Kawai, Masahiro; Pontines, Victor | February 2014
  • Currency market in Azerbaijan: Why the national currency is losing its value?

    Source: Development, Center for Economic and Social
    Date Submitted: 01 Feb 2017
    Views: 130
    Downloads: 0
    Development, Center for Economic and Social | December 2016
  • NZFC-To Carry, Or Not To Carry, That Is The Question

    Source: Jedrzej Bialkowski, Glenn Boyle, Mark Carrodus
    Date Submitted: 11 Jan 2017
    Views: 288
    Downloads: 5
    In the paper, we use unique and proprietary information on industry stop-loss rules to evaluate the feasibility of currency carry trades considered by academic researchers. We find that these rules cause reported carry trade profitability to largely disappear, with most trades having to be closed out early. The much-vaunted profitability of the carry trade appears to depend on staying the course, contrary to standard risk management policies. This calls into question much of the literature that seeks to explain reported carry trade returns.
  • Transparency in FX Trades is Vital

    Source: QIC
    Date Submitted: 28 Dec 2016
    Views: 457
    Downloads: 0
    The foreign exchange (FX/forex) market is a colossus dwarfing the world’s equity and bond markets. Yet it remains remarkably opaque requiring intensive attention to detail, process discipline and client-first values to ensure that institutional investors’ FX exposures are properly managed. Even small cost slippages can be detrimental when large sums are at stake.
  • Active Currency: A Vital Diversifier in a Low Yield World Part 1

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 240
    Downloads: 0
    There weren’t many winners from the washout of the 2008 financial crisis, but as the efficient market theory floundered, Keynesian economic policy re-emerged to steady the ship. Easy money sloshed through the US economy and before long other countries were following suit.
  • Active Currency: A Vital Diversifier in a Low Yield World Part 2

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 261
    Downloads: 0
    In Part 1 we explored the benefits of utilising active currency to counter the low bond yields currently plaguing fixed income portfolios. Part 2 digs deeper and looks at three factors which are making it harder for bonds to play their traditional role as the ballast within portfolios. But there is an upside: active currency is becoming a vital return source in the fixed income manager’s toolkit. It’s rare for the vagaries of fixed income markets to make the leap into the mainstream finance media, but at times last year it was near impossible to go a week without stumbling across another article decrying diminished bond market liquidity.
  • The Right Time for Dynamic Currency Hedging

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 447
    Downloads: 0
    Amid an environment where asset return expectations are in the low single digits, it’s more important than ever to seek out an edge, either in the form of boosting returns, or providing downside protection.
  • Currency Decision Could Make All the Difference in a Low Yield World

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 249
    Downloads: 0
    This third instalment in our currency management series builds on ideas we shared in the first and second parts of the compendium, Transparency in FX Trades and Dynamic Currency Hedging, respectively. The motivation for our latest thoughts is a conviction that currency hedging decisions can be a source of extra return, without undue risk, in a world of historically low yields.
  • 【China Market Strategy】Outlook 2017: High-Wire Act

    Source: Hao Hong, CFA
    Date Submitted: 07 Dec 2016
    Views: 2264
    Downloads: 12
    This research appears on WenXin's blog "Hong Hao China Strategy" on 4 December 2016.
  • 【中国市场策略】2017年展望:微妙的平衡

    Source: Hao Hong, CFA
    Date Submitted: 07 Dec 2016
    Views: 507
    Downloads: 12
    This research appears on WenXin's blog "洪灝的中国市场策略" on 4 December 2016.
  • AFM – Global price discovery in the Australian dollar market and its determinants

    Source: Fei Su
    Date Submitted: 23 Nov 2016
    Views: 212
    Downloads: 0
    Using intraday trading data over the period of January 1999 to December 2013, we examine the price discovery in the Australian dollar (AUD) market as well as its determinants. We employ a non-parametric Two-scale Realized Variance (TSRV) estimator to measure the global information distribution in trading of AUD. We find that the European market and U.S. market, particularly the overlapping trading session of London and New York, are the most important markets for price discovery in AUD market. The empirical results also confirm that more favorable market states and more unexpected order flows on macroeconomic announcement days make a significant contribution to the price discovery in AUD market. Furthermore, we document that a higher level of market integration and international consolidation contributes to the price discovery process in the long-run.
  • Emerging market equities: an Australian perspective

    Source: Daniel Radcliffe, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 358
    Downloads: 5
    Examines investing in emerging markets from an Australian perspective; noting how currency relationships reduce risk for Australian investors.
  • Equity home bias in Australian superannuation funds

    Source: Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 239
    Downloads: 3
    Equity home bias for Australian super funds is modelled as a 2-asset choice under the influence of legacy, a trade-off between expected returns against portfolio risk and peer risk, and adaptive expectations, and taxation differences.
  • Crises and Central Banks

    Source: Ishwar Chidambaram
    Date Submitted: 02 Nov 2016
    Views: 3422
    Downloads: 286
    A post-crisis look at the increasingly fragmented monetary policies of global Central Banks and the implications for Main Street
  • This is a test article

    Source: Joe Bloggs, Jane Doe
    Date Submitted: 18 Oct 2016
    Views: 248
    Downloads: 0
    Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed a nulla vitae purus rutrum aliquet. Donec eu vestibulum leo, non accumsan mi. Ut risus lacus, pellentesque id feugiat eget, mollis eget lorem. Aliquam commodo blandit est eget facilisis. Etiam erat est, bibendum at ipsum id, ornare dictum ipsum. Nam non nisi eget justo iaculis vulputate. Cras nec maximus risus. Nullam fermentum lacus at diam ultricies, a congue velit condimentum. Curabitur pellentesque turpis vulputate nunc porttitor, sed dictum enim hendrerit. Sed dignissim sapien eget mi viverra, placerat vestibulum risus pulvinar. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Morbi sit amet diam eget mauris aliquet scelerisque. In consectetur quis ipsum id condimentum. In fermentum orci vel odio ultricies, a maximus velit pharetra. Nullam consequat ante ipsum. Vivamus vestibulum turpis dignissim, sollicitudin tortor eget, fermentum sem. Donec malesuada nibh nec libero sollicitudin vestibulum. Etiam vitae faucibus lectus, sed mattis dui. Donec ac felis commodo, fringilla nisi sit amet, tincidunt justo. Curabitur eu leo nec mi tristique maximus.
  • Interview: Yuan Devaluation Likely

    Source: Richard Duncan
    Date Submitted: 14 Oct 2016
    Views: 355
    Downloads: 0
    An Interview published in Hankook Ilbo I have just returned from speaking at The Third China Forum in Seoul, an event hosted by the Korean conglomerate Hankook Ilbo. The theme of the conference was “The Shift In China’s Paradigm”. Much of the discussion focused on the outlook for the Yuan. I came away with the impression that a further devaluation of the Yuan is increasingly likely. As part of this event, the Hankook Ilbo newspaper interviewed me. The interview was published in Korean on November 3rd. Please find the interview below:
  • Weekend Reads from China: The RMB in the SDR — What It Means for China

    Source: Janet Zhang
    Date Submitted: 27 Jun 2016
    Views: 351
    Downloads: 0
    This blog appeared on CFA Institute's website on 3 December 2015.
  • RMB joins the elite club

    Source: Larry Cao, CFA
    Date Submitted: 27 Jun 2016
    Views: 390
    Downloads: 0
    This article appeared on Asia Asset Management on 3 December 2015.
  • 我们面对的是一场货币战争

    Source: 梁慧芝, CFA
    Date Submitted: 15 Jun 2016
    Views: 328
    Downloads: 5
    This article appears on CFA Institute hedge fund journal 2013 issue, season 2. The original article appears on Investment Risk and Performance Feature Articles.
  • 货币增益:外汇市场是不是机构投资者追逐ALPHA的处女地?

    Source: Nathan Jaye, CFA
    Date Submitted: 07 Jun 2016
    Views: 309
    Downloads: 6
    This article appears on CFA Institute hedge fund journal 2014 issue, season 1. The original article appears on CFA Institute Magazine, November/December 2013, Vol. 24, No. 6: 20–23
  • “Dim Sum” on the Financial Menu

    Source: Bob Dannhauser
    Date Submitted: 06 Jun 2016
    Views: 252
    Downloads: 1
    This is a blog posted on CFA Institute's website on 23 September 2011
  • Board of Director Effectiveness and Earnings Conservatism: Preliminary Australian Analysis

    Source: Nigar Sultana, J-L-W. Mitchell Van der Zahn, Inderpal Singh
    Date Submitted: 24 Feb 2016
    Views: 280
    Downloads: 11
    Overarching objective is to examine influence of board of director effectiveness on the extent of earnings conservatism among Australian listed firms.