FT Confidential Research will be hosting an intimate ‘up, close and personal’ China session at the FT’s Festival of Finance this coming Friday at 2pm. It will take place in the M&G Coffee House area and be hosted by FT Confidential Research’s principal for China David Wilder, their chief economist Xiao Qi and head of research Sun Yu. This will be a chance to put your questions directly to the experts and benefit from their unique on the ground, regional perspective. Here follows their analysis of whats’ been going on in China’s shadow banking sector whilst we’ve all been distracted by Brexit. In some respects, Brexit has been a gift for Beijing. The chaos in world markets unleashed by the UK’s vote to leave the European Union means a Chinese hard landing has slipped down the list of potential threats to global stability. Not that Li Keqiang appeared particularly gleeful at this newfound loss of status when he gave his annual address this week to the World Economic Forum in Tianjin. Instead, the premier rolled out his government’s now-familiar tropes about the resilience of Chinese growth and the relative health of the labour market, again dismissing talk of an economic hard landing.
We all know how subprime lending triggered the Global Financial Crisis of 2008. We also know how faced with only two options — financial meltdown or the transfer of state wealth to the banking sector — governments felt they had no choice but to save the system at a cost to the taxpayer. But could something as innocuous as shoddy password management or a data breach lead to a very similar set of circumstances in the not too distant future? A group of experts gathered at the World Economic Forum at Davos to talk about cyber-resilience seemed to think that, yes, yes it could.
This guest post is from Lutfey Siddiqi, managing director at UBS Investment Bank, and Simon Smiles, chief investment officer for ultra high net worth at UBS Wealth Management. It’s on the back of a UBS white paper for Davos, which you can read here. __________
Some bullet points from JP Morgan’s Flows & Liquidity team to start the week. Signs of capitulation, as they put it, in the face of a slowing China, the CNY and its “depaluation”, the Fed, a liquidity vacuum etc: Retail investors were heavy sellers of equity funds for two consecutive weeks on extreme pessimism.
This ontological inequality will separate those who adapt from those who resist – the material winners and losers in all senses of the word. The winners may even benefit from some form of radical human improvement generated by certain segments of the fourth industrial revolution (such as genetic engineering) from which the losers will be deprived. This risks creating class conflicts and other clashes unlike anything we have seen before. An excerpt from The Fourth Industrial Revolution by Klaus Schwab, executive chairman of the World Economic Forum.
- Lee Buchheit and Mitu Gulati on Venezuela’s debt
- Gabriel Zucman on tax evasion and inequality
- Michael Pettis on the mechanics of trade and the Chinese economy
- Angus Deaton on his Nobel prize-winning career (encore)
- Tim Harford on the lessons of new technologies in economic history
- Encore episode — Heidi Williams on gene sequencing, patent design, and innovation incentives
- Retail hype vs retail facts
- Michael Mandel on the case for productivity optimism
- Is Ireland an austerity poster child or a “beautiful freak”?
- Richard Ocejo on old jobs in new urban economies
A reminder that you’ll have a chance to win a Kindle by recommending ways to improve Alphachat at www.ft.com/alphasurvey. Help us out!
About time we familiarise ourselves with a new three-letter acronym: NIM. It’s bank parlance for “net interest margin”. And all you need to know about NIM is that once you strip out all the other stuff banks do after lending, it’s probably the best measure we have of how profitable a bank’s core business is. The problem these days is that a negative carry universe doesn’t sit well with NIM. Not only are you having to pay people to borrow from you, unless you’re particularly well funded or in the banking elite, you’re probably having to borrow at more than zero. So, unless you’re a bank that has a habit of err, creating false markets or artificial scarcities — which we know has been severely constrained in the new post-crisis regulatory climate — NIM compression is a bit of a big deal. And small surprise, bankers are beginning to worry, especially now that negative rates are a Eurozone-wide thing. (FWIW FT Alphaville’s “negative carry” tag takes that concern back as far as 2012.)
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.
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.
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)
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.
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)
You can sign up here to receive the email each morning. China’s economy grew at the slowest pace in nearly a quarter of a century last year, even as it overtook the US to become the world’s largest in purchasing power terms. The annual expansion of 7.4 per cent was the slowest since 1990.That slowdown is expected to continue in the coming years, partly as a result of its far larger size, but also as its credit-fuelled, investment-led growth model, reliant on low wages and polluting industries, runs out of steam. (FT)
Sterling nears 5-year high after Carney speech || BoE widens lending access to shadow banking sector || Bob Diamond African venture misses $400m investment target || South Africa outlook downgraded by Fitch || Tesla Motors opens door to electric vehicles’ technology secrets || Markets
From Tomas Hirst, editorial director of Pieria, commissioning editor at the World Economic Forum and sometime playwright… Governor Mark Carney, author and champion of the Bank of England’s Forward Guidance policy, appeared to depart from the usual script in his speech at the Mansion House yesterday. Having downplayed the likelihood of a rate rise any time soon at the launch of the Inflation Report in May many were surprised to hear him caution: There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect. The Monetary Policy Committee last voted to move the Base Rate in March 2009 when they agreed on a drop to 0.5 per cent. In the months that followed, however, inflation remained above the Bank’s 2 per cent target for 48 consecutive months:
From Tomas Hirst, editorial director of Pieria, commissioning editor at the World Economic Forum and sometime playwright… Commentators have been huffing and puffing themselves breathless with warnings of an imminent market correction in Britain’s property market. Even the European Commission has got in on the act warning policymakers of the risk of “excessive house price rises and increases in mortgage indebtedness”. What there is no disagreement over is that prices have been rising strongly. According to the Nationwide House Price Index the average UK house price sold for a record £186,512 in May pushing annual pace of price growth up to 11.1 per cent:
BoE’s Mark Carney signals scrapping of forward guidance || Royal Mail revenues rise on back of internet shopping boom || Emerging markets sell-off spreads || Google chief warns of IT threat: || Lew and Dimon warn of Bitcoin dangers || Samsung warns of weak earnings growth this quarter || Markets
According to a white paper released by UBS for this week’s World Economic Forum in Davos, the world economy remains as unbalanced today as it has been over the past quarter century – with big implications for the global economic recovery. The authors argue that the adjustment of current account imbalances in the world economy was mostly a function of recession, not shifts in competitiveness. Large current account deficit countries restored external equilibrium at the cost of domestic disequilibrium, so output plummeted and unemployment soared.
Mark Carney, Bank of England governor, has signalled that his policy of linking interest rates to the unemployment rate will be buried less than six months after its birth. He said the British economy was “in a different place” from last summer. Mr Carney flagged the U-turn at the World Economic Forum in Davos, letting the news emerge in a series of television interviews where he said that unemployment alone would no longer guide policy. Although his big idea for monetary policy bit the dust, Mr Carney said the BoE had no plans to raise interest rates “immediately”. He will outline his views fully in a speech on Friday. (Financial Times)
Gazprom net income falls 10% || Rouhani outlines plan for Iran’s growth for next decade || Pearson warns of rising restructuring costs and US slowdown || Strong South Korean won and weak demand at home hit Hyundai revenues || JPMorgan raises alarm over rising euroscepticism in Britain || Markets
According to a white paper released by UBS for this week’s World Economic Forum in Davos, one of the surprising factors ‘reshaping the world’ – the Davos theme this year – is an aggregate absence of austerity among governments globally. Viewing the global economy as a single unit, the authors see a very different picture to the post-crisis world of austerity. Indeed, the two largest components of global GDP, namely private consumption and fixed investment, both hit multi-year peaks in the first quarter of 2008. The ensuing recession was arguably made less severe by the ongoing rise in government consumption.