Shenzhen and the art of balance sheet maintenance

Chinese real estate companies raised $5.3bn in dollar bond markets during the first three weeks of 2013 and $4.9bn over the same period in 2014.

This year, not a single deal has been completed…

“You don’t want to go hat in hand to investors when they feel they’re catching a falling knife,” said the head of debt capital markets at one investment bank.

 Read more

US shale revolution must force Davos energy rethink

This guest post is from the co-authors of UBS’s white paper for the WEF meeting 2015 in Davos, which started on Wednesday.

Note that one of the co-authors, UBS Investment Bank’s chief economist Larry Hatheway, will be fielding questions on the energy chapter on Friday at 11:30am during Markets Live. Read more

Further reading

Elsewhere on Friday,

- “Draghi’s big announcement seems to have raised expected European inflation by one-fifth of a percentage point.”

- But be very careful about extrapolating from past failures of European monetary policy to the near future.

- Of course, the real question is what’s happening with the 5y5y5y5y5y.

- Well, that and whether ECB QE is going to cause the implosion of the European banking system,  Read more

FirstFT (the new 6am Cut)

You can sign up to receive the email here.

Saudi Arabia’s King Abdullah has died, elevating Crown Prince Salman to the helm of the world’s largest oil exporter, a key US ally. Read more

European sovereign debt hypocrisy

Speaking at Davos this morning, Angela Merkel and Alexander Stubb argued that European creditors should not be held responsible for their poor lending decisions.

Well, that’s not exactly how they phrased it: Read more

25 bps in Canada = €1.1 trillion ECB QE?

The Bank of Canada cut rates yesterday and the European Central Bank announced its sovereign bond-buying scheme today. In both cases, there were sharp responses in the currency markets, but they seem to have cancelled each other out:

 Read more

Roubini Vs the so-called “art” industry

Not to be missed in the ECB news fog: John Gapper’s account of an FT Davos lunch with Nouriel Roubini in which the formerly doom-saying NY Stern economist spelled out what polite and civilised society has always known but been keen to turn a blind eye to: the art market is actually a bit of a money laundering scam.

The key quotes not to be missed:

“Whether we like it or not, art is used for tax avoidance and evasion,” said Prof Roubini, himself an art collector. “It can be used for money laundering. You can buy something for half a million, not show a passport, and ship it. Plenty of people are using it for laundering.”

Prof Roubini argued that the art market had a series of characteristics that needed regulation. “While art looks as if it is all about beauty, as a business it is full of shady stuff,” he said. “We should correct it or it will be undermined over time.”

 Read more

A right oil hotchpotch

Just a few developments to update oil watchers on. Plus one conspiracy theory.

First, John Kemp of Reuters observes on Thursday that gasoline demand is now at multi-year seasonal highs:

 Read more

2004 is calling and it wants its dollars back

The dollar euro level to watch is 1.1459, which is the 11 year low hit on Friday.

Draghi and the risk-sharers

The ECB just announced it will increase monthly buying of assets by €60 bn which will continue until September 2016, and will do so on a risk-sharing basis on 20 per cent of the assets purchased rather than on an entirely pooled based. More details: Everywhere.

For now, here’s the first comment in our inbox from Marc Ostwald at ADM Investor Services, who says the risk sharing component is limited: Read more

Markets Live: Thursday, 22nd January, 2015

Live markets commentary from FT.com 

This is nuts. When’s the revolution?

Over in Russia:

This is illegal interference with my personal life, with my information,” Yakunin told state television. “We are a natural monopoly, we live according to decisions taken by the state, so we make as much as the state allows us to make. Read more

Davos must face up to life after ZIRP

This guest post is from the co-authors of UBS’s white paper for the WEF meeting in Davos, which started on Wednesday.

Note that one of the co-authors, UBS Global Asset Management’s head of asset allocation & currency Andreas Koester, will be fielding questions on the financial policy chapter on Thursday at 11am during Markets Live. Read more

The dollar is still our currency and still your problem

For some reason, a lot of people outside the US like to borrow from and lend to each other in dollars.

A new paper from the Bank of International Settlements, which has consistently been producing some of the best research on these flows, describes how the action has shifted from banks to bond investors since 2008. Read more

ECB QE guesswork, cut out and keep edition

Guesswork from Deutsche (click to enlarge):

 Read more

Further reading

Elsewhere on Thursday,

- In which Matt Levine takes swipes at S&P parties. Also, some stuff about blended constants and Herodotus.

- Euroblunders.

- Structuring ECB QE to keep the German taxpayers (and their economists) happy.  Read more

FirstFT (the new 6am Cut)

You can sign up here to receive this email each morning.

The ECB has been debating plans for a one to two year programme to make monthly purchases of EUR50bn in government bonds. No formal decision had been made last night but it looks set to embark on large scale quantitative easing for the first time in its history. Mario Draghi is expected to announce the decision at 1.30pmGMT today. (FT) Read more

Just how big a day was Jan 15 for FX markets?

The first numbers by way of CLS, the continuous link settlement system used by the vast majority of the FX market to settle transactions, are in.

As Nick Murray-Leslie tells FT Alphaville on Wednesday:

CLS settled a record number of transactions following the decision by the Swiss National Bank to remove a currency ceiling against the euro.

CLS settled 2.26 million transactions on 20 January, totalling USD 9.2 trillion with 99.5% of these transactions were settled within 45 minutes.”

 Read more

Reining in the tech gods

The FT’s Gillian Tett reports from Davos that the Powers that Be may finally have noticed how — while they were busy regulating the banks — the technology companies quietly moved into what was once their unregulated turf.

Via Wednesday’s Davos dispatch:

Large technology companies will experience the same collapse in reputation as banks have endured in recent years unless they rapidly change their policy approach, business leaders cautioned in Davos. Their warning was directed at the influential heads of technology companies, such as the Silicon Valley giants, who were told they needed to recognise that self-regulation will not be sufficient to stave off mounting public alarm about issues such as privacy.

“Self-regulation, no matter what you do, is just not going to be good enough [for tech companies],” said Paul Achleitner, chairman of the supervisory board of Deutsche Bank. He pointed out that a self-regulatory approach had been previously employed by banks — but notably failed to quell a political backlash against their over-reach.

 Read more

Canada cuts

Central banks are just full of surprises these days, from Mumbai to Zurich to Copenhagen. Today, Ottawa:

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent. This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada…The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response… Read more

BoAML: ‘Dividend stocks could double from here’

“Safe” dividend stocks, to be precise.

It’s a straightforward argument: as yields on high-grade government debt increasingly turn negative, so the search for income amongst investors will channel money into quality equities. Read more

Guest post: Was the Swiss National Bank nuts?

Debate still rages about the merits of last week’s Swiss National Bank move. Peter Doyle, economist and former IMF staffer, argues that the SNB in fact kept its exchange-rate cap for too long — and was wrong to have targeted the euro alone.

__________________________ Read more

Re-re-visiting the 1986 oil crash

As already mentioned, this may not be your usual oil-price decline. But it’s also not crude’s first appearance in the 50 per cent club:

Now, in absolute terms the falls aren’t comparable ($100 to $50 versus $30 to $15) but there are similarities. Read more

‘Let 100 think tanks bloom’

The Chinese government seems to have noticed that the country has no policy institutes or think tanks with global clout. So it’s going to get some. Up to a hundred, in fact. But this isn’t Xi Jinping reworking Mao’s famous 100 flowers campaign. Wouldbe think takers are not being invited to think freely…

A new type of think tanks with Chinese characteristics would support development and strengthen soft power, according to a guideline issued Tuesday.

 Read more

FirstFT (Lunch Wrap edition)

Barack Obama’s State of the Union address sought to capitalise on the resurgent economy to win support for his progressive policies, but Republicans were quick to point out that many Americans have yet to feel the benefits. Pointing out that the president’s overview might not be completely objective, the NYT’s Upshot did their own analysis of the State of the Union – stronger than when Mr Obama took office, but still troubled. (FT, NYT)

When a Democratic president talks up “transgender” rights in prime time, you can be sure he does not face re-election. His real game was to set the field for Hillary Clinton’s election victory next year, which is also Mr Obama’s best hope of cementing his legacy, writes Ed Luce. (FT) Read more

EMbarrassing

With apologies for the angelic imagery, here’s BNP Paribas on Wednesday (our emphasis):

In our analysis, six EM sovereigns are at risk of becoming fallen angels this year or next. Three of these we consider ‘high risk’. As much as USD 259bn of sovereign and corporate bonds is at high risk of being cast down into speculative grade perdition. This accounts for 9% of all EM bonds outstanding (USD 2.87trn).

Or:

… it is little surprise that the peak of credit quality for EM appears to be over. After having hit the BBBthreshold in 2013 and improving another 1/6th of a notch over2013 (Figure 2), the credit quality of the EM benchmark has begun to slide downward. Already it has lost 1/6th of a notch and we forecast the index to slide another half notch by the year end.

 Read more

Markets Live: Wednesday, 21st January, 2015

Live markets commentary from FT.com 

Twin sources of tech-related instability

This guest post is from the co-authors of UBS’s white paper for the WEF meeting in Davos, which gets underway today.

Note that one of the co-authors, UBS Wealth Management’s global chief investment officer Mark Haefele, will be fielding questions on the technology chapter during Wednesday’s Markets Live session at 11am. Read more

Further reading

Elsewhere on Wednesday,

- Will Should the ECB load up on euro denominated equities?

- When central bank losses matter.

- QE and central bank insolvency.

- Shane Ferro vs. Diane Coyle… mediated by Brad DeLongRead more

FirstFT (the 6am Cut)

You can sign up here to receive the email.

Barack Obama called on the US to “turn the page” on an era of war and recession in his State of the Union address. He tried to capitalise on the resurgent economy to win support for his progressive policies, but Republicans were quick to remind Americans that many of them are yet to feel the benefits of an economic recovery. (FT) Read more