Categoria: Finanza e Sistema Bancario
Bankitalia. Una tetra relazione sul primo semestre 2020.
Giuseppe Sandro Mela.
2021-01-22.
In estrema sintesi:
– la Banca d’Italia e il sistema bancario hanno svolto un importante ruolo nella intermediazione finanziaria, registrando una notevole espansione dei bilanci
– Il settore finanziario, impiegando la maggiore raccolta di depositi bancari prevalentemente per la sottoscrizione di titoli pubblici, ha inoltre consentito il finanziamento indiretto delle amministrazioni pubbliche
– il calo dei consumi nella prima metà dell’anno è stato eccezionalmente ampio (-9,8 per cento)
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Il nodo è il debito pubblico che stenta a trovare acquirenti nel mercato. In pratica quasi nessuno.
Banca di Italia si è trasformata in grande acquirente del debito pubblico e le banche hanno consumato in questa operazione gran parte delle liquidità raccolte. Obbligate con la pistola alla tempia.
Poco o nulla resta per finanziare il comparto produttivo.
Stiamo assistendo ad un grandioso schema Ponzi, di cui ben conosciamo la fine. Quando Banca di Italia e banche non potranno più acquistare il debito pubblico, allora sarà la fine.
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La Banca di Italia ha pubblicato il Report I conti economici e finanziari durante la crisi sanitaria del Covid-19.
Il documento è lungo e complesso, per cui ne rimandiamo al link i Lettori che vogliano approfondire, mentre qui esporremo solo degli excerpta.
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Nel primo semestre del 2020 i redditi primari dei settori privati non finanziari hanno registrato la contrazione più forte degli ultimi venti anni, che è stata solo in parte contrastata dalle misure adottate dalle amministrazioni pubbliche a sostegno del reddito disponibile. La ricostruzione della rete delle transazioni finanziarie tra i settori istituzionali mostra che la Banca d’Italia e il sistema bancario hanno svolto un importante ruolo nella intermediazione finanziaria, registrando una notevole espansione dei bilanci. Il settore finanziario, impiegando la maggiore raccolta di depositi bancari prevalentemente per la sottoscrizione di titoli pubblici, ha inoltre consentito il finanziamento indiretto delle amministrazioni pubbliche da parte dei settori in avanzo finanziario. Tra la fine del 2019 e la fine di giugno 2020, la variazione semestrale del debito pubblico in percentuale del PIL ha raggiunto i valori più alti negli ultimi venti anni considerati. ….
L’attività di intermediazione finanziaria ha pertanto indirettamente facilitato il finanziamento delle amministrazioni pubbliche da parte dei settori in avanzo finanziario, prevalentemente attraverso l’impiego della maggiore raccolta di depositi bancari nella sottoscrizione di titoli pubblici. ….
In un contesto di forte contrazione della spesa per consumi e investimenti, le famiglie e le imprese hanno nel complesso indirettamente trasferito risorse alle amministrazioni pubbliche, soprattutto attraverso l’impiego della liquidità accantonata presso il sistema bancario…..
I conti delle famiglie italiane.
Nel primo semestre del 2020 i redditi primari pro capite a valori correnti delle famiglie si sono ridotti dell’8,8 per cento rispetto al primo semestre del 2019, una contrazione decisamente più ampia di quelle registrate nelle fasi più acute della crisi finanziaria (-5,2 per cento) e di quella dei debiti sovrani (-3,4 per cento) riflettendo l’andamento delle poste principali6. I redditi da lavoro dipendente sono scesi dell’8,7 per cento per effetto del calo dei redditi unitari (-7,0 per cento) e dell’occupazione alle dipendenze (-1,7 per cento), mentre i redditi da lavoro e i profitti delle famiglie produttrici (il risultato netto di gestione e il reddito misto netto) sono diminuiti del 7,4 per cento. …..
Nonostante il forte sostegno pubblico alla capacità di spesa delle famiglie, il calo dei consumi nella prima metà dell’anno è stato eccezionalmente ampio (-9,8 per cento). Ne è derivato un risparmio netto pari a 51,6 miliardi; il tasso di risparmio è più che triplicato rispetto alla fine del 2019, (dal 2,8 al 9,2 per cento), contrariamente a quanto era accaduto durante le due precedenti crisi. ….
Nel primo semestre del 2020 le famiglie hanno accresciuto la loro ricchezza finanziaria netta grazie a un accreditamento netto pari a 58,8 miliardi. ….
La crescita dei depositi compresi tra 12,5 e 50 mila euro è stata significativa, mentre si è registrato un lieve calo tra i depositi superiori ai 500 mila euro, suggerendo una differente preferenza per la liquidità tra le classi durante la pandemia. ….
Gli acquisti di titoli pubblici si sono concentrati nel secondo trimestre, quando le famiglie hanno assorbito titoli per 9,9 miliardi, pari a circa il 9 per cento delle emissioni nette, più che compensando le vendite per 4,8 miliardi registrate nel primo trimestre. Sempre sulla base delle statistiche bancarie, oltre la metà degli acquisti del semestre è riconducibile a conti di deposito titoli con valori mobiliari a custodia compresi tra i 50 e i 250 mila euro; al contrario, i conti con valori mobiliari superiori ai 500 mila euro, a cui era riconducibile alla fine del 2019 oltre la metà dei titoli pubblici di proprietà delle famiglie, non hanno registrato acquisti significativi. ….
Ulteriori 17,7 miliardi sono stati investiti in strumenti del risparmio gestito (di cui 9,3 miliardi in quote di fondi comuni e 6 miliardi in polizze del ramo vita), mentre i crediti commerciali e le altre attività si sono ridotti per 24,9 miliardi. ….
Tali perdite, calcolate come differenza tra la variazione delle consistenze (a valore di mercato) e i flussi, sono stimabili in oltre 90 miliardi, pari al 2,7 per cento della ricchezza finanziaria netta alla fine del 2019. ….
I conti delle società non finanziarie
Nel primo semestre del 2020 il valore aggiunto delle imprese italiane è diminuito del 15 per cento rispetto allo stesso periodo del 2019, un calo quasi doppio rispetto a quello, già eccezionale, registrato nel primo semestre del 2009 (-7,8 per cento), al culmine della crisi finanziaria. ….
Nello stesso semestre i profitti delle imprese si sono ridotti del 18 per cento; a fronte di una contrazione più marcata della spesa per investimenti lordi (-25 per cento), il settore ha registrato, similmente alle famiglie, un accumulo di risparmio finanziario. ….
L’andamento complessivo delle passività e attività dei conti finanziari (in particolare la crescita dei depositi delle imprese) mostra che la difficoltà nel far confluire i fondi delle famiglie nell’economia reale non è riconducibile né a difficoltà di canalizzazione del risparmio, né a limitazioni nella raccolta di finanziamenti.
I conti del resto del mondo e del settore finanziario.
Il settore estero è rimasto in sostanziale equilibrio.
Meno neutrale, nel quadro dei conti integrati, è stato il ruolo svolto dal settore delle società finanziarie residenti, il cui bilancio si è notevolmente ampliato operando anche una significativa trasformazione per scadenze, che ha indirettamente facilitato il finanziamento delle amministrazioni pubbliche da parte degli altri settori. ….
L’espansione dell’attivo delle società finanziarie è stata guidata dagli ingenti acquisti di titoli di Stato italiani. ….
La Banca d’Italia ne ha acquistati quasi 90 miliardi, un ammontare più elevato del precedente massimo raggiunto nel biennio 2015-16, quando si avviò il Public Sector Purchase Programme (PSPP), arrivando a detenere circa un quinto delle passività finanziarie delle AAPP.
Il sistema bancario ne ha acquistati quasi 60 miliardi (Fig. 8), impegnando sostanzialmente per intero le maggiori passività (4,7 per cento rispetto a giugno 2019, Fig. 9) derivanti dalla raccolta di depositi (6,5 per cento) soprattutto da famiglie e società non finanziarie. ….
Lo stock di titoli di Stato italiani in portafoglio ha raggiunto l’11 per cento del totale delle attività finanziarie del sistema bancario, il valore più elevato degli ultimi venti anni.
Le amministrazioni pubbliche.
Tra la fine del 2019 e la fine di giugno 2020, la variazione semestrale del debito pubblico in percentuale del PIL ha raggiunto i valori più alti negli ultimi venti anni. Nel confronto internazionale, tale aumento, in percentuale del PIL, è stato simile a quello registrato in Spagna e inferiore a quello della Francia, mentre l’aumento è stato superiore a quello del Regno Unito e della Germania. ….
Al fine di riconciliare l’indebitamento netto semestrale (78 miliardi di euro) e la corrispondente variazione del debito (121 miliardi), occorre tener presente che, a fronte delle maggiori passività, i flussi di attività del conto finanziario sono stati pari a 31 miliardi.
Occidente. Banche Centrali. Si oppongono a ulteriori danni alla crescita. – Bloomberg.
Giuseppe Sandro Mela.
2021-01-21.
Fed. Banca per i Regolamenti Internazionali. I Treasury non sono più titoli di riserva.
Cina. Rcep. Non enfatizzato, il vero obiettivo è il controllo del mondo.
«a group of countries for free trade, i.e. some 2.2 billion people, commanding some 30% of the world’s GDP»
«The RCEP is a massive instrument for dedollarizing, primarily the Asia-Pacific Region, and gradually the rest of the world»
«Much of the BRI infrastructure investments, or New Silk Road, may be funded by other currencies than the US dollar»
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I liberal democratici si sono accorti che esiste la Cina, che esistono i paesi del sud – est asiatico, e che loro sono solo una parte oramai trascurabile del mondo: una enclave autoreferenziale.
Fa davvero specie che alla fine persino un bastione liberal come Bloomberg inizi a prenderne atto.
Nel corso di un breve articolo, cita il trionfo cinese per ben tre volte consecutive.
«Vexed Central Banks Brace for More Damage to Growth»
«China GDP set to show economic strength at end of 2020»
«Resurgent coronavirus outbreaks will vex central bankers on five continents this week as they weigh the threat of more damage to growth against the hope that mass vaccinations will reopen economies»
«Institutions meeting from Tokyo to Frankfurt to Ottawa are pondering the prospect of another lost quarter amid renewed lockdowns to contain the pandemic»
«But with rates of infection spiraling higher, and new restrictions on activity being imposed throughout the world, Lagarde and her colleagues at global monetary authorities can only hope that the tantalizingly slow pace of global immunizations will pick up and finally start to dent the impact of the coronavirus»
«That sentiment is likely to be shared throughout the plethora of central banks due to meet in the coming days …. Aside from the ECB, they include institutions in Brazil, Canada, Indonesia, Japan, Malaysia, Norway, South Africa, Sri Lanka, Turkey and Ukraine»
«Yellen …. she’ll also be tasked with helping to sell President-elect Joe Biden’s $1.9 trillion stimulus package»
«While the Bank of Canada isn’t likely to make any major changes to policy this week, the economy’s weak start to 2021 may be tempting officials to add some more stimulus to the mix»
«With much of Europe now in the grip of lockdowns as tough as the initial restrictions imposed at the onset of the coronavirus crisis, the ECB’s first meeting of 2021 on Thursday will allow policy makers to assess the impact of their new round of stimulus unveiled in December»
«The reports due for manufacturing and services in January are predicted by economists to show another round of deterioration»
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«Millions of Mexicans are jobless, underemployed or out of the labor force»
«GDP data on Monday for the fourth quarter and full year are set to confirm China as the only major world economy to have expanded last year»
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Il 2021 si profila come un anno ben duro. Sia il primo sia il secondo trimestre saranno verosimilmente trimestri di lockdown, con severe ripercussioni sui sistemi economici occidentali.
Ma i 1,900 miliardi di stimoli promessi dal’Amministrazione Biden metteranno sotto pressione la Fed. Aumenteranno la quota di bond detenuti dalla Fed, incoraggeranno gli altri paesi a dimettere i pochi dollari ancora detenuti com riserva.
Per l’intanto, si prenda atto che
Fed. Banca per i Regolamenti Internazionali. I Treasury non sono più titoli di riserva.
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Vexed Central Banks Brace for More Damage to Growth: Eco Week.
China GDP set to show economic strength at end of 2020
Weekly take on events in the world economy and their fallout
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Resurgent coronavirus outbreaks will vex central bankers on five continents this week as they weigh the threat of more damage to growth against the hope that mass vaccinations will reopen economies.
Institutions meeting from Tokyo to Frankfurt to Ottawa are pondering the prospect of another lost quarter amid renewed lockdowns to contain the pandemic. Most are likely to maintain current ultra-loose policy settings without committing to more easing as they keep a wary eye on the path of the disease, while crossing fingers on its eventual eradication.
Like many of her counterparts, European Central Bank President Christine Lagarde put a brave face on the outlook last week, insisting that forecasts released in December are still “plausible.” She emphasized how previous uncertainties, such as the U.S. elections, the Brexit trade deal and the start of vaccinations, have eased.
But with rates of infection spiraling higher, and new restrictions on activity being imposed throughout the world, Lagarde and her colleagues at global monetary authorities can only hope that the tantalizingly slow pace of global immunizations will pick up and finally start to dent the impact of the coronavirus.
That sentiment is likely to be shared throughout the plethora of central banks due to meet in the coming days. Aside from the ECB, they include institutions in Brazil, Canada, Indonesia, Japan, Malaysia, Norway, South Africa, Sri Lanka, Turkey and Ukraine.
Elsewhere in the world economy, Chinese GDP will show the economy’s strength at the end of 2020, and Janet Yellen is set to move a step closer to becoming the U.S.’s first female Treasury secretary.
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
U.S. and Canada
The holiday-shortened week in the U.S. will kick off Tuesday with Yellen’s confirmation hearing as Treasury secretary before the Senate Finance Committee, where she’ll also be tasked with helping to sell President-elect Joe Biden’s $1.9 trillion stimulus package.
The week will feature three reports on the state of the housing market in an otherwise light economic calendar. U.S. homebuilder confidence is forecast to remain near a record level on Wednesday, while housing starts on Thursday may climb to a fresh high and Friday’s existing home sales report also is projected to show a robust reading.
While the Bank of Canada isn’t likely to make any major changes to policy this week, the economy’s weak start to 2021 may be tempting officials to add some more stimulus to the mix.
Europe, Middle East, Africa
With much of Europe now in the grip of lockdowns as tough as the initial restrictions imposed at the onset of the coronavirus crisis, the ECB’s first meeting of 2021 on Thursday will allow policy makers to assess the impact of their new round of stimulus unveiled in December.
Officials are trying to gauge if another economic contraction is imminent, and purchasing manager indexes due the day after their meeting will give them an initial clue. The reports due for manufacturing and services in January are predicted by economists to show another round of deterioration.
The U.K.’s PMIs will reveal the impact of post-Brexit trade disruptions on sentiment and activity since the country left the European Union’s customs arrangements at the start of this month, as well as the effects of continuing lockdowns. Other British reports due include inflation, retail sales and public-finance data.
Central bankers in Norway and Ukraine are forecast to keep rates unchanged, as are their colleagues in South Africa, though some analysts project more easing to support the economy after the government announced stricter Covid-19 lockdown measures.
Turkey’s central bank Governor Naci Agbal is expected to keep the nation’s benchmark interest rate at 17%, after a cumulative 675 basis points in increases since he took office in November. The hikes have stabilized the lira, but it remains to be seen whether they’ll be sufficient to contain inflation.
Asia
GDP data on Monday for the fourth quarter and full year are set to confirm China as the only major world economy to have expanded last year. Economists will zero in on December statistics for a pulse check on the recovery, with retail sales growth expected to quicken.
Early trade data from South Korea will offer a glimpse of how record virus cases are affecting global demand at the start of the year.
While the Bank of Japan is expected to keep its main policy on hold, Governor Haruhiko Kuroda could provide hints on what’s in store in a planned policy review. Japan’s consumer prices — already falling at the fastest pace in a decade — are expected to drop further in figures out Friday.
Latin America
Colombia on Monday reports retail sales, manufacturing and economic activity for November, which taken as a whole should be consistent with a gradual recovery from a record recession.
Next up, Brazil posts its December economic activity figures along with a January reading on inflation after an acceleration last year. Against this backdrop, the country’s central bankers will likely keep the key rate at a record low, while sounding ever more hawkish in their post-decision statement.
Initial Recovery
Millions of Mexicans are jobless, underemployed or out of the labor force
Sources: Instituto Nacional de Estadística y Geografía.
Rounding out the week, Mexico unemployment data for December will see the jobless rate still well above the 2020 low even as millions of working-age Mexicans have fallen out of the labor force. On Friday, the mid-month reading of inflation will put it near the 3% target, probably a bit too fast for Banxico to consider policy easing just yet.
Nigeria. 2020. La borsa più performante del mondo. Da 20,651.59 a 40,279.29 in un anno.
Giuseppe Sandro Mela.
2021-01-07.
«The economy likely remained under marked stress in Q3, following the steep GDP contraction in Q2 due to the pandemic-induced lockdowns and collapse in oil prices. According to secondary sources, crude oil output was down by over a fifth in Q3 from last year as the country increasingly stuck to OPEC+ cut commitments. Together with oil prices stagnating at weak levels in the quarter, the all-important energy sector likely continued to reel. Moreover, accelerating double-digit inflation and tight FX liquidity should have weighed on household purchasing power and general business operations. Meanwhile, leading data points to some improvement in conditions at the outset of Q4: The private sector PMI edged up on robust output and new orders growth, while firms turned markedly less pessimistic in October. That said, the outbreak of widespread violent protests that same month could have weighed on activity to some extent.
On the heels of the worst downturn in recent history this year owing to the pandemic and oil price shock, the economy is seen emerging back to growth in 2021 as demand at home and abroad recover. However, the outlook remains fragile, clouded by uncertainty regarding the oil price trajectory, rising inflation, elevated unemployment, security challenges and social tensions. FocusEconomics panelists see GDP growth at 1.9% in 2021, which is down 0.2 percentage points from last month’s estimate, before picking up to 2.9% in 2022.» [Focus-Economics]
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La Nigeria ha un rapporto debito estero / pil del 5.8%.
La borsa in un anno solare è salita da 20,651.59 a 40,279.29.
Questa è stata la migliore performance a livello mondiale.
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Nigeria Stocks Index Ends Year as World-Best With 50% Gain.
Nigerian benchmark stock index rose 1.9% at close on Thursday, moving the year-to-date gain to the most in 17 years.
The Lagos bourse closed with 50% gain at 40,270.7 points, most since December 2007. The equity index is the world leader among the 93 stock indexes tracked by Bloomberg.
Some of the companies that posted the most positive return for the year include Equity Assurance Plc at 400%, Neimeth International Pharmaceuticals 260% and FTN Cocoa Processors, which climbed 230%.
Dangote Cement’s share buy-back, which commenced on Wednesday and ended Thursday, boosted market performance, adding to the positive trading close for the year, United Capital said in a note to clients.
Finanza occidente alla disperata ricerca di bond che rendano qualcosa.
Giuseppe Sandro Mela.
2020-12-28.
«Desperate need for yield pushes investors into frontier debt»
«Frontier-market bonds erase 2020 losses amid juicier yields»
«It says a lot about the state of global financial markets when countries such as Ghana, Senegal and even Belarus are being touted as the best places for investors to pick up returns in 2021»
«But, with the latest signal from the Federal Reserve that U.S. rates will stay lower for longer, the highest-yielding — and riskiest — corners of the world’s bond markets are being tipped as a top investment choice for the coming year. And this, after likely clocking up their smallest annual gain in five years»
«The willingness of bond-buyers to move up the risk ladder would underscore how rising U.S. Treasury rates will do little to dim the appeal of developing-nation debt as long as an $18 trillion pile of negative-yielding debt hangs over markets and central banks remain accommodative»
«spreads on bonds from lower-risk borrowers have narrowed so much that investors are being forced to go further into junk territory for better returns»
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I paesi occidentali od occidentalizzati sono oberati dai debiti pubblici e da essi dipende grosso modo un buon terzo dei loro sistemi economici. Hanno tutti adottato interessi negativi, mettendo in campo bond per diciotto trilioni di Usd.
Se questi bond non fossero assorbiti dalle loro banche centrali sarebbero acquistati soltanto dalle banche e dalle istituzioni che loro possono governare.
In questo frangente, le risorse finanziarie occidentali stanno “disperatamente” cercando un qualcosa che possa rendere.
Lo sbocco sui mercati cinesi diventa così una via obbligatoria.
Cina. Novembre. Macrodati di una crescita impetuosa.
Istat. Italia. Ottobre. Export -8.4%, Import -8.2%, anno su anno. Indonesia +9.4%, South Korea +4.1%, Cina +21.1%.
Cina. Piano Verde. Costruirà 80 milioni di motori a combustione l’anno per almeno un lustro.
Cina. Il caso del LU1997244873. Crescita +30% anno su anno.
Cina apre il suo mercato dei bond agli stranieri. Un mercato da 15 trilioni Usd.
Cina. Rcep. Non enfatizzato, il vero obiettivo è il controllo del mondo.
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Tuttavia, in questo frangente, anche i bond emessi da stati quali Ghana, Senegal e Belarus stanno diventando appetibili.
A seguito, un esame di queste situazioni.
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Desperate Need for Yield Pushes Investors Into Frontier Debt
– Frontier-market bonds erase 2020 losses amid juicier yields
– Asset class may offer double-digit returns, NN Investment says
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It says a lot about the state of global financial markets when countries such as Ghana, Senegal and even Belarus are being touted as the best places for investors to pick up returns in 2021.
But, with the latest signal from the Federal Reserve that U.S. rates will stay lower for longer, the highest-yielding — and riskiest — corners of the world’s bond markets are being tipped as a top investment choice for the coming year. And this, after likely clocking up their smallest annual gain in five years.
The willingness of bond-buyers to move up the risk ladder would underscore how rising U.S. Treasury rates will do little to dim the appeal of developing-nation debt as long as an $18 trillion pile of negative-yielding debt hangs over markets and central banks remain accommodative. Even among developing economies, spreads on bonds from lower-risk borrowers have narrowed so much that investors are being forced to go further into junk territory for better returns.
“It’s a matter of time before investment-grade markets run out of spread,” said Leo Hu, lead fund manager for frontier-market debt at NN Investment Partners in Singapore. “The next one they can look at is indeed frontier markets. There is nowhere they can invest to get decent yields.”
Listen to a podcast on the topic, here.
The recovery may already be under way. JPMorgan Chase & Co.’s Next Generation Markets Index, which tracks the sovereign dollar debt of countries seen as emerging economies of the future, has rebounded to pre-Covid levels. The gauge, which includes the likes of Belize and Angola, is near the highest price since March relative to the mainstream emerging-market index, which is already at a record.
By removing the prospect that massive easing will be wound back anytime soon, U.S. policy makers meeting last week gave developing nations the breathing space to cut interest rates, or at least keep them lower for longer, at a time when Treasury yields are rising at their fastest pace in four years.
The external environment is turning conducive for frontier-market debt, too. Joe Biden’s U.S. presidential win has reduced risks to global trade, while the roll-out of vaccines has brought a global economic recovery nearer. That makes bond buyers confident enough to embrace next-generation markets where yields average about 7%, compared with the 4.4% average rates from emerging markets.
For NN Investment’s Hu, the combination of yield and market gains will hand investors in frontier-market bond returns of about 13% in 2021. The average frontier risk spread — currently 600 basis points — may tighten by about 100 basis points in the first half alone, he said.
The hunt for yield means investors putting money in some of the remotest corners of the world’s bond markets. Investors are touting Belarus, which was this year slapped with sanctions by the European Union as a result of President Alexander Lukashenko’s crackdown on protesters following the country’s disputed election in August. Senegal, among the low-income nations in Africa that got a waiver on bilateral debt payments, is also being touted by Aberdeen Standard Investments among others. Ghana, the world’s second-largest cocoa producer, also has its backers despite political turmoil after the Dec. 7 elections.
Belarus’s 2030 dollar bonds yield about 6%, Senegal’s 2033 bonds at about 5%, while Ghana’s 2032 notes is at 7.3%, according to data compiled by Bloomberg.
Below are some money managers’ trend-spotting and best picks for 2021:
Bryan Carter, head of global emerging markets debt at HSBC Global Asset Management in London:
– “2021 will likely be an inequitable year for emerging markets, with the rollout of the vaccine spurring strong economic recovery in many regions, but a large portion of the world could still be living with challenges we’ve seen in 2020.”
– “Secondary to the health care crisis is a debt crisis. Many frontier markets required some financing to fund their 2020 fiscal deficits. It is not yet clear how this level of financing can be repeated in another large deficit year. We could expect many debt restructurings to happen again in 2021.”
– HSBC Global prefers those frontier markets on the path to a ratings upgrade and is overweight on Ukraine, Egypt and Dominican Republic in both hard and local currencies.
– “We generally found the frontier markets unattractive entering this year, due to a combination of fundamentals and valuations. Post Covid, we see much more interesting valuations.”
Kevin Daly, investment director for emerging-market debt at Aberdeen Standard in London:
– “We are expecting to see continued inflows into emerging markets amid a low global yield environment, which should bode well for the high-yield component of the asset class.“
– “While there’s a risk of further frontier defaults in 2021, most low-income countries now have access to the Eurobond market, which will reduce default risk over the next year.”
– Good value is seen in African hard currency debt such as Kenya, Nigeria, Ivory Coast and Senegal.
– He sees default risk in Angola over the next several years lower than what the ratings imply because the nation has been given some breathing room with the debt relief from China.
– Ghana also offers an attractive return potential albeit with a higher risk profile than Kenya and Nigeria.
– He’s also been adding Belarus in his portfolio amid the election noise given its moderate debt level and manageable financing needs in 2021.
Jean-Charles Sambor, head of emerging markets debt at BNP Paribas Asset Management in London:
– “2021 will be a year of bottom-up alpha opportunities while 2020 was a beta year on the way down and on the way up. Many frontier markets have high public debt and external debt levels. Some of them might have to restructure their debt. The G-20 initiative might not be enough in itself. Deep dives on debt sustainability will be key.”
– “We are reasonably constructive on Sri Lanka. We think that policy makers are willing to keep good relations with bondholders and willingness to pay is strong.”
– In Africa, we are still constructive on Ghana, Senegal and Ivory Coast. Fiscal stance is relatively weak but likely to improve next year.
– The company also see some opportunities in small central American countries. Dominican Republic should benefit from the tourism recovery and Suriname is attractive at this level.
NN Investment’s Leo Hu:
– “We have seen decent interest since especially the vaccine news” on the company’s dedicated frontier fund.
– Within the frontier market, we normally like the credits with a reform story, or the credit with an IMF program. For example, we like Egypt and Ukraine.
UK ed EU. Derivati. 364 trilioni Usd. Alla fine qualcuno dovrà ben pagarli. Voi, tanto per capirci.
Giuseppe Sandro Mela.
2020-12-24.
È consolidata norma diplomatica e politica quella di sottacere le vere questioni importanti, accennandole al massimo nella discussione di faccende marginali. Tanto, il vasto pubblico non le capirebbe. Si illude che tutto andrà bene.
«A $364 trillion game».
364 trilioni sono 364,000 miliardi.
In un mondo dove c’è gente disposta a compiere un omicidio per cinquanta euro, immaginiamoci cosa non si farebbe per tale cifra.
‘Lui è libero di fare ciò che vuole, e loro sono liberi di farlo assassinare.’
Queste sono le parole grosse che stanno volando nei consessi e conciliaboli riservati con sempre maggiore frequenza.
«rather than what’s best for investors»
Attenzione!
I pasti gratis sonno serviti solo ai tacchini negli allevamenti: ma la loro fine è nota a tutti.
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«The U.K. and the European Union are locked in a derivatives standoff driven by politics rather than what’s best for investors»
«Now frustration has hit the once dull world of financial regulation, where the City of London and EU are locked in a staring contest over a big chunk of the $364 trillion interest-rate swap market»
«Both the U.K. Financial Conduct Authority and Paris-based European Securities Markets Authority want more oversight of big derivatives contracts after the Brexit transition period ends on New Year’s Eve»
«That seems simple enough when counterparties are located in the same jurisdiction»
«When both sides are British, contracts that fall within the scope of the rules will trade on U.K. venues, or those deemed equivalent for regulatory purposes. Those involving EU counterparties will have to stick to the EU»
«The problems will start when EU and U.K. counterparties want to trade with each other: In British eyes the trade needs to be on British soil, while for the Europeans it should be on the continent»
«This isn’t stuff that can be traded in two places at once»
«The average investor will wonder how carving up liquidity between the City, the EU and Wall Street will help markets work better»
«It’s bad news for any hope of future regulatory harmony»
«The EU has options. It could grant the U.K. a temporary reprieve, which it has done in some areas like clearing, or it could tweak the rules. It could even deem the U.K. an equivalent market for regulatory purposes, the financial industry’s preferred solution»
«Regardless of who wins short-term, Brexit looks like a lose-lose proposition for the end investor. There was never much in it for the City, whose banks and brokers have lost frictionless access to a single market they helped build.»
* * * * * * *
A $364 Trillion Game of Brexit Chicken Gets Ugly .
The U.K. and the European Union are locked in a derivatives standoff driven by politics rather than what’s best for investors.
Politicians in the European Union are fretting about how little time is left to strike a Brexit trade deal, with French Foreign Minister Jean-Yves Le Drian publicly bemoaning British foot-dragging this week. Now frustration has hit the once dull world of financial regulation, where the City of London and EU are locked in a staring contest over a big chunk of the $364 trillion interest-rate swap market.
One side should blink eventually, but it’s likely to get messy along the way.
Both the U.K. Financial Conduct Authority and Paris-based European Securities Markets Authority want more oversight of big derivatives contracts after the Brexit transition period ends on New Year’s Eve. That seems simple enough when counterparties are located in the same jurisdiction. When both sides are British, contracts that fall within the scope of the rules will trade on U.K. venues, or those deemed equivalent for regulatory purposes. Those involving EU counterparties will have to stick to the EU.
The problems will start when EU and U.K. counterparties want to trade with each other: In British eyes the trade needs to be on British soil, while for the Europeans it should be on the continent. The conflict was confirmed this week when ESMA said it would impose locational derivatives rules in much the same way as the FCA. This isn’t stuff that can be traded in two places at once.
Ironically, the simplest way financial entities could satisfy the conflicting demands here would be by trading derivatives on U.S. venues, viewed as equivalent for regulatory purposes by both the Brits and Europeans. The Americans aren’t stealing Europe’s lunch, they’re being served it.
The average investor will wonder how carving up liquidity between the City, the EU and Wall Street will help markets work better. It’s bad news for any hope of future regulatory harmony. That U.S. venues could become the most secure way, in terms of compliance, to meet post-Brexit rules underscores the lack of cooperation and communication on both sides, according to Allan Yip, a partner at Simmons & Simmons. The unintended consequences here are too obvious to ignore.
The hope — and indeed the likelihood — is that one side will blink before long. Lobbyists are pushing hard for a large-scale truce, but the way Brexit negotiations are hardening regulators’ mindsets makes that complicated.
The EU has options. It could grant the U.K. a temporary reprieve, which it has done in some areas like clearing, or it could tweak the rules. It could even deem the U.K. an equivalent market for regulatory purposes, the financial industry’s preferred solution. But European officials are in no mood to create temporary loopholes that could turn permanent, especially given the temptation for national member states to bend the rules to attract business. And keeping U.K. equivalence off the table until the last minute provides potent leverage in touchy trade negotiations where so much remains to be agreed.
This all puts pressure on the Brits to climb down, either by temporarily waiving the rules or biting the bullet and granting equivalence to EU venues first. It may seem odd to imagine that London, the No. 1 financial center in Europe and a magnet for derivatives, would be beggar and not chooser in this instance. But the City knows its only real competitive edge is in attracting business from abroad. This is why the FCA has granted EU exemptions in other areas like share trading. Compromising on this issue would hardly be a stretch.
Regardless of who wins short-term, Brexit looks like a lose-lose proposition for the end investor. There was never much in it for the City, whose banks and brokers have lost frictionless access to a single market they helped build. The fear in Brussels that a U.K. bent on deregulation will undermine Europe’s ambition to boost continental finance hubs has prompted regulators to keep building ever-higher barriers to trade. An unintended consequence of restrictions on stock trading, for example, is that traders based in the U.K. will have more flexibility to trade cross-border than those inside the EU, according to Ergo Consultancy’s David Berney.
Somewhere lost along the way are the principles laid down in the wake of the financial crisis, when world leaders promised to set rules for derivatives markets hand-in-hand while fighting protectionism. Today, it appears the opposite is happening: Regulation is helping the likes of Le Drian turn the screw on the City.
The hope is that despite the frosty tone, such standoffs will end the foot-dragging and clinch a Brexit trade deal acceptable to both sides. If that happens, maybe French fishing fleets will have more reason to cheer ESMA than bankers on either side of the English Channel.
Finanza Araba. Proiettata a 3.69 trilioni Usd per il 2024.
Giuseppe Sandro Mela.
2020-12-21.
Refinitiv. Islamic Finance Development Report 2020.
*
«Global Islamic finance assets set to hit $3.69 trillion by 2024»
«The top five developed countries in Islamic finance are Malaysia, Indonesia, Bahrain, UAE and Saudi Arabia»
«It stated that global Islamic finance assets increased in value by 14 percent year-on-year to $2.88 trillion in 2019, the highest recorded growth for the industry since the global financial crisis»
«The Islamic finance assets of the Gulf Cooperation Council (GCC) reached $1.2 trillion last year, followed by the Middle East and North Africa (MENA), excluding the GCC, which was valued at $755 billion, and Southeast Asia at $685 billion»
«The Islamic banking sector contributes the bulk of global Islamic finance assets. The sector grew 14 percent in 2019 to $1.99 trillion in global assets»
«the top five developed countries in Islamic finance are Malaysia, Indonesia, Bahrain, UAE and Saudi Arabia»
* * * * * * *
Il pil procapite, espresso come Purchasing Power Parity (PPP), era: Malaysia 28,991, Indonesia 12,483, Bahrain 51,892, UEA 63,590, Saudi Arabia 49,216 Usd.
La finanziaria islamica detiene e/o mobilizza un asset globale di tutto rispetto, che ammontava a circa 2.88 trilioni di dollari a tutto il 2019, essendo proiettato a 3.69 trilioni per il 2024.
Il suo problema maggiore è costituito dal fatto che i diversi stati hanno realtà economiche e finanziarie talora divergenti, fatto questo che si ripercuote in modo negativo su di una conduzione strategica globale unitaria di tutto il complesso finanziario.
*
Global Islamic finance assets set to hit $3.69 trillion by 2024.
The top five developed countries in Islamic finance are Malaysia, Indonesia, Bahrain, UAE and Saudi Arabia.
*
Global Islamic finance assets are forecast to reach $3.69 trillion by 2024, according to a report released by the Jeddah-based Islamic Development Bank.
The Islamic Finance Development Report 2020 was released by global financial data provider Refinitiv and the Islamic Corporation for the Development of the Private Sector (ICD), the private-sector development arm of the IDB.
It stated that global Islamic finance assets increased in value by 14 percent year-on-year to $2.88 trillion in 2019, the highest recorded growth for the industry since the global financial crisis.
The Islamic finance assets of the Gulf Cooperation Council (GCC) reached $1.2 trillion last year, followed by the Middle East and North Africa (MENA), excluding the GCC, which was valued at $755 billion, and Southeast Asia at $685 billion, the report said.
The Islamic banking sector contributes the bulk of global Islamic finance assets. The sector grew 14 percent in 2019 to $1.99 trillion in global assets. This compares with just 1 percent growth in 2018 and an average annual growth of 5 percent over the years 2015 to 2018.
According to the report, the top five developed countries in Islamic finance are Malaysia, Indonesia, Bahrain, UAE and Saudi Arabia.
Commenting on the report, Ayman Sejiny, the CEO of ICD, said: “We believe that the analysis and information provided in this year’s report will serve as a vital reference point for the state of the Islamic finance industry during these difficult times and we remain convinced that Islamic finance can play a major role in alleviating the social and economic consequences of the COVID-19 pandemic.”
Cina. Il caso del LU1997244873. Crescita +30% anno su anno.
Giuseppe Sandro Mela.
2020-12-03.
Questo, riportato a titolo di esempio, il LU1997244873, è solo uno dei tanti fondi di investimento che operano sul mercato azionario cinese, e nemmeno quello andato meglio.
È molto oneroso nell’ingresso, 5%, e come quota annuale del 2.30%, ma con crescita media del +30% anno su anno sono onorari sopportabili, così come la tassazione maggiore rispetto ai bond di emissione statale, ovviamente negli stati che la prevedono.
Degna di nota è la minima quota di azioni di società ‘ambientaliste‘ in portafoglio.
Come tutti gli investimenti azionari è ovviamente esposto alla suscettibilità dei mercati borsistici e, diciamolo pure senza perifrasi, della politica.
*
Questo esempio dovrebbe chiarire in modo evidente una delle principali motivazioni per cui le liquidità tendono a defluire dall’Unione Europea verso i mercati cinesi. Conservare il potere di acquisto del proprio denaro sottraendolo agli attuali governi occidentali sta diventando una opera meritoria.
Cina apre il suo mercato dei bond agli stranieri. Un mercato da 15 trilioni Usd.
Giuseppe Sandro Mela.
2020-11-30.
«The People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange (SAFE) have just issued the draft version of the “PBOC, CSRC and SAFE Public Announcement Concerning Arrangements in Relation to Offshore Institutional Investors Investing in the Chinese Bond Market” (中国人民银行中国证监会国家外汇管理局关于境外机构投资者投资中国债券市场有关事宜的公告（征求意见稿）)»
*
Mentre l’occidente si trastulla con i piani verdi e quelli di budget settennale, peraltro non ancora approvati da oltre un anno e mezzo, per non parlare dei fantomatici human right, con un trafiletto di tre righe la Cina si appresta a distruggere alla radice il sistema economico occidentale.
Sarà una vera e propria guerra mondiale, anche se, almeno per il momento, non ancora combattuta con le armi.
* * * * * * *
«China’s 2001 entry into the World Trade Organization transformed the global economic order»
«Yet even as China became the factory to the world, its financial system remained a closed shop, with strict controls on the flow of money in and out»
«Now the admission of foreign investors into China’s $15 trillion bond market—cemented this year when the country rounded out its inclusion in all three of the top global indexes—may just mark the big bang equivalent to WTO entry»
«Global pension funds, starved for yield in a low-growth world, will now have access to safe government debt that pays more than 3%.»
«The Chinese could join their government, which has long been a major buyer of overseas assets such as Treasuries, as a powerful source of funding»
«China will turn from an exporter of goods to an exporter of capital, with significant consequences, of course, for the world»
«The euro’s 1999 introduction sowed the seeds for the region’s debt crisis a decade later»
«Chinese Savers Go Global»
«Sustained inflows of foreign capital could make Beijing comfortable about loosening the controls that have bottled up domestic money in China for so long»
«That would let loose a wave of Chinese savings on the world—Jen estimates there’s as much as $5 trillion of pent-up Chinese demand for investments outside China»
«global investors generally have had to buy proxy assets such as the Australian dollar, commodities, or a small range of Hong Kong-listed Chinese shares. China’s bond market opening gives them direct exposure»
«Columbia Threadneedle in New York, which had $476 billion under management in October and has been stepping into the China market recently»
«China’s central government bonds are now included, or on a phased path to inclusion, in the three key international bond indexes that investors use as benchmarks compiled by FTSE Russell, JPMorgan Chase, and Bloomberg Barclays (part of Bloomberg LP, the owner of Bloomberg Markets). About $5.3 trillion in assets tracks these indexes»
«China’s bond yields look more like those of emerging markets—in the FTSE World Government Bond Index benchmark they will be second highest after Mexico’s—yet investors will probably view them as developed-market securities»
«China will see about $770 billion more in the next five»
«We have a huge overhang of JGBs and European bonds—and a lot of that is dead weight»
«China and the U.S.—sometimes referred to as the G2—both competing for savings, “either the rest of the world has to step up savings to finance G2’s shortfalls, or G2 will have to adjust themselves»
«Foreign institutions can be a source of fresh blood that can introduce innovative and mature ways of doing business to the local market, which has long been dominated by Chinese banks and brokerages»
«Unintended Consequences»
«Foreign investors stick primarily to buying bonds sold by the central government and three state-owned lenders known as policy banks that are closely associated with government objectives»
«The authorities may end up with domestic investors who are being crowded out of the government bond market»
«By pushing down yields on the risk-free assets, these foreign inflows may be forcing the Chinese investors even further out the credit curve»
«Top-grade corporate bonds yielded about 70 basis points, or 0.70 percentage point, more than China’s government bonds in late October»
«The more open the market is, the more difficult it will be for Chinese policymakers to maintain their grip on interest and exchange rates»
«China wants and needs overseas capital to fund its growth and promote the global use of its currency, which remains a bit player in international transactions»
«Its giant labor force made goods more affordable around the world, improving the lives of millions»
«But it also hollowed out manufacturing towns from Michigan to northern England, imposing social costs with political consequences that are still playing out»
«Similarly, the coming shift of trillions of dollars of capital across borders seems likely to create winners and losers around the globe»
* * * * * * *
In una succinta sintesi.
– La Cina ha aperto agli stranieri il proprio mercato dei bond, stimabile a circa 15 trilioni di Usd
– È un mercato che rende anche il 3.5%, contro i tassi negativi in occidente
– Per la legge di azione di massa, nei tempi necessari, affluiranno dall’occidente in Cina liquidità stimabili tra i cinque ed i sette trilioni di dollari
– Come esito finale, la Cina finanzierà i propri piani egemoni mondiali proprio utilizzando le finanze che l’occidente sta scacciando dalla sua enclave sempre più misera ed ininfluente.
* * * * * * *
China Opens Its Bond Market—With Unknown Consequences for World.
The nation’s entry into the World Trade Organization rocked global commerce. The financial markets could be next.
China’s 2001 entry into the World Trade Organization transformed the global economic order. Yet even as China became the factory to the world, its financial system remained a closed shop, with strict controls on the flow of money in and out. For years there’s been talk of a “two-way opening,” but slow progress. Now the admission of foreign investors into China’s $15 trillion bond market—cemented this year when the country rounded out its inclusion in all three of the top global indexes—may just mark the big bang equivalent to WTO entry.
Global pension funds, starved for yield in a low-growth world, will now have access to safe government debt that pays more than 3%. And if officials deliver on their pledges to open up, reinforced in the Communist leadership’s 2021-25 five-year plan outlined in October, Chinese investors may soon find it a lot easier to snap up shares in Apple, Starbucks, or Tesla—not just their phones, cappuccinos, and cars. The Chinese could join their government, which has long been a major buyer of overseas assets such as Treasuries, as a powerful source of funding.
“China will turn from an exporter of goods to an exporter of capital, with significant consequences, of course, for the world,” says Stephen Jen, who runs Eurizon SLJ Capital, a hedge fund and advisory firm in London.
But what will the consequences be? Major changes to the financial system in the past have produced some unfortunate results. The euro’s 1999 introduction sowed the seeds for the region’s debt crisis a decade later. A wave of overseas savings that poured into the U.S. during the 2000s helped trigger the mortgage boom that catastrophically burst in 2007‑08. Bloomberg Markets gathered views on how the opening might affect the future of global finance in the years ahead. Here are some of the themes that emerged.
Chinese Savers Go Global
Jen, who started his career at Morgan Stanley covering the impact of the Asian financial crisis on the foreign exchange market, sees China’s capital market opening as the biggest structural change to international finance since the launch of the euro.
Sustained inflows of foreign capital could make Beijing comfortable about loosening the controls that have bottled up domestic money in China for so long. Indeed, it would probably have to; otherwise the yuan would strengthen, eroding the country’s export competitiveness. That would let loose a wave of Chinese savings on the world—Jen estimates there’s as much as $5 trillion of pent-up Chinese demand for investments outside China. That could resemble the petrodollars that flowed from oil-exporting countries in the 1970s, which ended up financing a huge, and tragically unsustainable, borrowing spree by Latin American nations.
“Outflows will probably be offset by the inflows for a few more years,” Jen says of China. Petrodollar-like net outflows might take a few more years to materialize, “but that is definitely a scenario we will need to deal with,” he says.
A Slice of the Action
To gain exposure to China’s rapid economic expansion, global investors generally have had to buy proxy assets such as the Australian dollar, commodities, or a small range of Hong Kong-listed Chinese shares. China’s bond market opening gives them direct exposure. It also provides an alternative to Japanese government bonds and other low- or negative-yielding sovereign debt, says Ed Al-Hussainy, a senior analyst for global rates at Columbia Threadneedle in New York, which had $476 billion under management in October and has been stepping into the China market recently.
“The demand is off the charts for anything liquid with a little bit of pickup in yield over Treasuries,” he says. “People are willing to pay up for liquidity, and that’s the key thing that’s improving in the Chinese onshore market. So inevitably we’ll be pushed in that direction.”
China’s central government bonds are now included, or on a phased path to inclusion, in the three key international bond indexes that investors use as benchmarks compiled by FTSE Russell, JPMorgan Chase, and Bloomberg Barclays (part of Bloomberg LP, the owner of Bloomberg Markets). About $5.3 trillion in assets tracks these indexes, according to estimates from Goldman Sachs Group Inc. Passive index-tracking funds will need to buy Chinese bonds to match the benchmarks. Some active managers, concerned about transaction costs, may steer clear; others are likely to overweight China because of the attractive yields.
Flow on Effect
China’s bond yields look more like those of emerging markets—in the FTSE World Government Bond Index benchmark they will be second highest after Mexico’s—yet investors will probably view them as developed-market securities, Goldman analysts say. After pulling in $230 billion from foreign investors to its fixed-income market in the past five years, China will see about $770 billion more in the next five, Goldman analysts including Kenneth Ho estimated in October.
Market players don’t expect the resulting shifts in asset allocation to increase bond yields much elsewhere—but the money will need to come from somewhere. Overseas investors held almost 13% of Japanese government bonds and more than 30% of Treasuries at the end of June. About one-quarter of euro region government bonds are held by investors outside the currency union, according to estimates from Commerzbank AG.
“We have a huge overhang of JGBs and European bonds—and a lot of that is dead weight,” says Columbia Threadneedle’s Al-Hussainy.
Competitor for Capital
Washington, in particular, could find itself competing with Beijing for overseas capital. China’s current account is barely positive relative to the size of its economy, even with its large trade surpluses with the U.S. It runs vast deficits in the trade of services, and some economists predict it will in the future run current-account deficits. If that happens, China would need to pull in money from abroad, just as the U.S. has for decades.
“China could enter structural current-account deficits, which will force it to open the market and import capital from abroad,” says Aidan Yao, a senior economist at AXA Investment Managers in Hong Kong who previously worked for the Hong Kong Monetary Authority. With China and the U.S.—sometimes referred to as the G2—both competing for savings, “either the rest of the world has to step up savings to finance G2’s shortfalls, or G2 will have to adjust themselves,” Yao says.
Competition could be all the fiercer if Washington expands on moves in 2020 to reduce Chinese borrowers’ access to American capital. Lawmakers from the Republican and Democratic parties have both proposed rules that would make it tougher for China’s companies to issue stock in the U.S., for example.
“The harder the U.S. tries to isolate China, the more efforts China should make in opening up,” says Yao Wei, chief China economist at Société Générale SA in Paris. “Allowing in more foreign investments will further deepen China’s integration into global financial markets, which will make decoupling more difficult.”
Better Credit Allocation and Transparency
Chinese regulators hope that opening their bond market will improve how credit gets allocated. The nation’s Communist leadership has sought to transition the economy to a more market-based system in which investors and credit analysts price funding for different borrowers according to their risk. Policymakers hope that will stem the buildup of stressed and defaulting loans, reduce excess capacity, and result in more productive investment.
That helps explain why the People’s Bank of China and other regulators worked so hard to win acceptance into the benchmark bond indexes. That approval required addressing a wide variety of complaints about the local market, such as the excessive paperwork required from foreigners and the slow pace of trade completion. Regulators also provided more hedging options, and the government boosted the size of individual bonds to increase their liquidity. After a messy 2015 yuan devaluation, the PBOC has also tried to reassure overseas investors by conducting exchange rate management with greater transparency and stability.
The Chinese Communist Party’s five-year plan, outlined in October, recommitted to opening up. Han Wenxiu, a senior official involved in drafting the plan, said at a briefing that “China will see the scale of foreign trade, foreign capital utilization, and outbound investment continue to expand.” PBOC Governor Yi Gang has also highlighted the value of financial opening, saying it improves efficiency and aids higher-quality economic development.
“Foreign institutions can be a source of fresh blood that can introduce innovative and mature ways of doing business to the local market, which has long been dominated by Chinese banks and brokerages,” says Becky Liu, head of China macro strategy at Standard Chartered Plc.
Unintended Consequences
There’s always a risk that things won’t go as planned. For instance, what if, instead of disciplining the Chinese fixed-income market, the opening gave China’s riskiest borrowers even cheaper credit?
Here’s how that might happen: Foreign investors stick primarily to buying bonds sold by the central government and three state-owned lenders known as policy banks that are closely associated with government objectives. As of mid-2020, overseas managers held 8.5% of central government bonds, up from just 2.4% in February 2016. By contrast, their share of corporate bonds, at 0.7%, was barely changed from 0.6%, Goldman analysts estimated.
“The authorities may end up with domestic investors who are being crowded out of the government bond market,” says Michael Spencer, chief Asia-Pacific economist at Deutsche Bank AG in Hong Kong. “By pushing down yields on the risk-free assets, these foreign inflows may be forcing the Chinese investors even further out the credit curve. So if you think they are not very good to begin with in pricing credit, then these inflows actually may be making that problem worse.”
Spreads across China’s domestic corporate debt market are less differentiated than in the U.S. bond market. Top-grade corporate bonds yielded about 70 basis points, or 0.70 percentage point, more than China’s government bonds in late October. High-yield securities had rates 329 basis points higher, according to the ChinaBond platform. By contrast, investment-grade U.S. corporate spreads were at 123 basis points over Treasuries and junk bonds had a 488 basis-point premium.
Losing Control
The more open the market is, the more difficult it will be for Chinese policymakers to maintain their grip on interest and exchange rates. Moves that drive up yields—such as monetary tightening to control inflation—could spur a wave of inflows that sends the currency climbing, making exports less competitive. Similarly, measures that undermine the confidence of overseas investors could prompt a destabilizing exodus.
China’s policymakers are cautious and patient. That helps explain why they kept the financial system cordoned off even as they opened the economy in myriad other ways starting in the late 1970s. They welcomed investment in manufacturing, but portfolio inflows were another matter. After all, emerging-market crises in the 1980s and 1990s showcased the danger of “hot money” that can quickly exit a country, causing wrenching financial turmoil.
“With an open financial market with easier inflow and outflow, the Chinese government and central bank will have to be more cautious managing those funding costs and interest rates,” says Lu Ting, chief China economist at Nomura Holdings Inc. in Hong Kong. “And of course, it will make it more challenging to manage the exchange rate.”
China might need to reestablish controls and limits if the financial market opening spurs excessive volatility. Authorities in recent years have managed swings in the currency by introducing or removing curbs on the foreign exchange market. So while China’s policymaking elite seemingly agree on the benefits of opening, the process is likely to be a stop-start one.
Pros Outnumber Cons
China wants and needs overseas capital to fund its growth and promote the global use of its currency, which remains a bit player in international transactions. The country’s growth rate has steadily decelerated in recent years, even before the pandemic, and the era of outsize current-account surpluses is over. With an aging and shrinking labor force, China risks falling into the “middle-income trap”—stagnating before it reaches rich-world levels of development. Improved financial transparency, a diverse funding mix, and more productive investment will be key to ensuring that doesn’t happen.
For the rest of the world, China’s financial integration will bring unpredictable change, just as the country’s entry into the global trading system did. Its giant labor force made goods more affordable around the world, improving the lives of millions. But it also hollowed out manufacturing towns from Michigan to northern England, imposing social costs with political consequences that are still playing out. Similarly, the coming shift of trillions of dollars of capital across borders seems likely to create winners and losers around the globe.
