Posts tagged 'Capital Flows'

Let’s wait for a fall in stocks before declaring a great rotation

Masa joined the FT in 2009 and has worked on a number of desks across the paper, including Companies, Markets and Comment. She spent much of 2010 in New York covering the US equity markets. But earlier this year she finally saw the light and moved to Alphaville.

She started her career in the investment banking division at Lehman Brothers in the summer of 2007, timing it perfectly with the beginning of the credit crunch.

She studied philosophy, politics and economics at Oxford University.

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| Feb 07 16:49 | Comment |

With all the excitement about ‘the great rotation’, it often feels that the debate focuses too much on analysing the recent flows, and less about the greed/fear dynamics driving them.

It’s been well documented that bond holders are increasingly frustrated by the miserable yields on offer in the fixed income markets, and are apparently flocking into the ‘cheap’ equity markets. We’ve already voiced our scepticism about the scale of this flocking. Yet what’s potentially also underestimated is the degree of skittishness by bond holders when the stock markets show signs of a wobble. After all, a lot of capital in fixed income got there after investors were burnt in the early 2000s. This loss aversion shouldn’t be underestimated. Read more

China’s two-way liquidity risk: shadow banking

Kate is FT AV’s Asia Correspondent. She joined FT Alphaville in mid-2011 after carrying out various roles in the FT’s London office since 2005: interactive editor, companies reporter, and founding editor of the FT’s Energy Source blog.

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| Aug 01 2012 12:30 | Comment |

Meanwhile, in the domestic banking scene… [See part 1 on capital outflows here.]

China’s financial system stability is increasingly intertwined with its shadow banking system — which is big, according to various tallies. Bank of America Merrill Lynch says it accounts for a quarter of all bank loans, with the biggest segments being wealth management products or WMPs (8 per cent) and trust companies (8.9 per cent). Fitch Ratings says that WMPs now account for about 16 per cent of all commercial bank deposits; KPMG says trust companies will overtake insurance to become the second-biggest component of the financial sector. Read more

A G20 “victory”, part 2

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| Apr 14 2011 20:07 | Comment |

Crossing the Reuters tape a little while ago, it seems members of the G20 have learned to play nice(r) since their last meeting in November:

G20 CONSENSUS REACHED ON CAPITAL CONTROLS AND EXPANSION OF IMF CURRENCY BASKET FOR SPECIAL DRAWING RIGHTS Read more

More on uncertainty and capital controls

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| Mar 28 2011 20:15 | Comment |

In a previous post about the efficacy of capital controls, we interpreted a passage from Reinhart & Rogoff’s epic This Time is Different by saying “there remains an awful lot we simply don’t know about the consequences of capital flows, capital controls, or, more generally, about the appropriate pace and nature of financial liberalisation in developing economies.”

Well, the crisis-expert duo is back, joined by Nicolas Magud of the IMF, with a new paper summarised at VoxEU that explains why such a prominent economic topic brings so much confusion — though their conclusions include more questions than answers about the ability of capital controls to successfully manage flows. Read more

From imbalances to imploding banks

Tracy Alloway used to be deputy editor of FT Alphaville. Here she learned the details of derivatives, the absurdities of accounting and the various structures of ... erm ... structured finance. She now covers big US banks for the FT paper, including Goldman Sachs and Morgan Stanley. She pops up on FT Alphaville every once in a while.

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| Feb 21 2011 09:00 | Comment |

Here’s a chart to ponder as regulators continue their forensics of the financial crisis:

 Read more

China plays down levels of ‘hot money’

| Feb 17 2011 21:32 | Comment |

China has not seen a surge in “hot money” coming into the country, the country’s foreign exchange regulator said on Thursday, despite the loose monetary policy in the US that Beijing has sometimes blamed for causing destablising capital inflows, reports the FT. A net $35.5bn of hot money, illegal speculative capital, entered the country last year, which was “ant-like” in comparison to the size of the economy, the State Administration of Foreign Exchange said. Read more

IMF: QE2 is not overheating the EMs

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| Jan 25 2011 16:45 | Comment |

From the IMF’s latest World Economic Outlook (emphasis ours):

At the same time, monetary accommodation needs to continue in the advanced economies. As long as inflation expectations remain anchored and unemployment stays high, this is the right policy from a domestic perspective. Furthermore, it seems to have had an effect: following the news in August that a second round of quantitative easing was imminent, long-term rates fell to new lows in the United States. Although U.S. Treasury yields have since increased, particularly in the last quarter of 2010, this seems primarily attributable to the improving outlook for the U.S. economy, a fact corroborated by the strong performance of equity markets. From an external perspective, however, there is concern that quantitative easing in the United States could result in a flood of capital outflows toward emerging markets. The recent slowdown in capital inflows to emerging markets suggests that such effects may be limited so far. Read more

Uncertainty and capital controls

Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

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| Jan 20 2011 18:45 | Comment |

Worries about capital flows and the potential side effects of poorly designed capital controls (trade wars, market inefficiencies and distortions) are all the rage these days.

But some economists are sceptical (here’s one) as to whether capital controls even work, or if the market — in the form of investors using fancy bank-contrived derivatives — will simply find a way around them. Perhaps they’re inconvenient but ineffective? Read more

Cross-border loans dry up in second quarter

| Dec 13 2010 21:36 | Comment |

Growth in cross-border lending by banks came to an abrupt halt in the second quarter of 2010, reports the FT, driven particularly by a contraction of roughly $100bn in lending to banks in the eurozone, according to the latest quarterly report from the Bank for International Settlements. The latest report, released on Monday, highlights the vulnerability of countries dependent on cross-border flows for lending and underscores the rapidity with which lending to weaker eurozone nations dried up as anxiety about their finances gained force in the three months to June 2010. The BIS said that cross-border lending, which grew in the first quarter of 2010 for the first time since the collapse of Lehman Brothers in September 2008, continued to tilt markedly towards banks and non-financial companies in the faster-growing emerging economies in the Asia Pacific and Latin America-Caribbean regions and away from mature economies in Europe. Read more

China’s dollar problems mount

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| Nov 22 2010 20:35 | Comment |

There’s a lot of focus in the market on China possibly implementing more rate hikes — but this process isn’t a simple for the People’s Bank of China as many might imagine, especially as capital flows increasingly catch up with trade flows, says FT Alphaville. The problem with the dollar peg is that it’s less about the US trade deficit than huge backed-up demand in China’s own economy. Which, FT Alphaville adds, makes Fed chairman Ben Bernanke’s recent speech on structural flaws in the world economy very interesting — while recognising the existence of a dollar standard, the speech suggests that Bernanke now sees his task as coordinating a multilateral monetary policy. Which rather puts the lack of coordination so far in context. Read more

Capital flooding into China

Joseph joined FT Alphaville way back in March 2010. He likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)

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| May 14 2010 10:23 | Comment |

Official data show that capital inflows into the Chinese economy acclerated in April, the WSJ reports, reflecting the country’s robust recovery and an anticipated rise in the renminbi. A spokeswoman said that low US interest rates may have encouraged the inflow. perhaps through investors borrowing in the US and investing in China. Read more