Monthly Archives: June 2015

A bubble about to burst? – APAC Overview

From ESCP Finance Society.
Roberto Vacca, Master Student

ESCP Finance Society

The monetary expansion policy of the People’s Bank of China fueled the Shanghai, Shenzhen, and ChiNext indices of 95%, 198%, and 383%, respectively, since January 2013. Chinese stock-market capitalization grew from 44% of GDP at the end 2012 to 94% of GDP earlier this month[1], but at the same time the Chinese GDP growth, equal to 7,4%, has slightly slowed at the lowest level since the 1990 and the average ratio price to earnings is 26.

It seems clear that there are enough evidences that prove the presence of financial factors that are threatening the economical rebalance of Chinese economy: from export oriented economy to consumptions. This is the issue. At the beginning of financial crisis, the Chinese political establishment chose to fuel the economy by increasing the public spending and making easier to borrow money.

Therefore, the private debt raised from 100% in 2002 to 200% in…

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An insight into the CAC40 – Index Expert

From ESCP Finance Society
Soukaïna Bouziri, Master Student

ESCP Finance Society

The « CAC40 » (cotation assistée en continu) is the French stock market index. The market open at 9.00am till 17.35, following the pre-market hours from 7.15-9.00am. The CAC40 is undoubtedly and by a long chalk, the most followed up index of Paris Stock market.  So, let’s analyze what’s behind all this financial boiling and give a critical vision of this thermometer of the French economy as a whole.

As a matter of fact, the CAC40 progression reverberates investors’ expectations about the global performance of the French economy. The explanation is pretty simple: the CAC40 tracks the 40 listed French enterprises with the highest market capitalization. Some of the CAC40 companies are listed also in other stock exchanges like Amsterdam, or Italy (LVMH). Every companies’ stocks influence the Index proportionally to their weight over the market capitalization.

This principle enhances the height of the « BIG VALUES » of the CAC40…

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Federal Reserve Press Conference

Today, almost one hour ago, Fed Chairman Janet Yellen spoke about the Federal Open Market Committee’s decision to leave Federal Funds rates unchanged. The status of the American economy is not sound enough to justify a unanimous rates hike at this specific moment. Labor conditions have improved but not to a satisfactory level. Consumer spending has been sluggish, Retail Sales reported modest improvements. Inflation has not reached yet the target of 2%, although Oil price decline boosted consumer’s purchasing power. Fed Chairman sees in the forthcoming months moderate growth, and a modest but stable recovery. If the US economy will meet the Committee’s targets, the hike will come. The Financial Community warned against a premature rates increase, notably Christine Lagarde from IMF. Federal Reserve representatives see the second half of 2015 as most likely for a change in Monetary Policy. Bond prices have already started to adjust to possible inflation spikes, both in Continental Europe and US. American Equities have digested relatively well the news, reporting moderate daily gains.

Let’s see what the next Fed statement will tell us.

Is Japan economy really catching up? – APAC Overview

From ESCP Finance Society
Ludovico Buffo, Master Student

ESCP Finance Society

While Europe is still at the center of the financial news as Grexit slowly becomes more probable, many strong positive signals are coming from the third biggest world economy, Japan.  Following the great crisis, Japanese economy did face a period of deflation due to steady prices and shortage of investments.

In order to improve the economic outlook, Shinzo Abe, Japan’s Prime Minister, elaborated an economic plan to face deflation. The so-called “Abenomics” is based upon three arrows: fiscal stimulus, monetary easing and structural reforms. An increase in taxation along with a massive monetary QE followed by important reforms are the way in which Japan is trying to comes out from the internal economic crisis. While there is a consensus for the modus operandi chosen for the first two “arrows”, very few information are known about how Abe would like to proceed with the structural reforms.

This piece of information ought…

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Europe: A Turbulent Snatch? – European Citizen

From ESCP Finance Society
By Me

ESCP Finance Society

In recent days, Europe has been a very dramatic battlefield. Talks between Greece and European officials are still going on, with Greek Ministers firmly stuck on their requests and European Officials unhappy and unsatisfied with Greece’s request. Tsipras does not want to change the pension system, contribution-based, still plenty of “baby retired”. Yesterday, Angela Merkel appeared as a Deus Ex Machina willing of peacefully solving the Greek Crisis. The main goal in Europe by now is to avoid the Euro Area break up, who can lead us into periods of unprecedented uncertainty and volatility, and can wreak havoc the entire Europe. Standard and Poor’s downgraded Greece Debt to triple CCC, following the postponement of the repayment to the IMF and the higher risk of default. Jeroen Dijsselbloem, the President of the Eurogroup, warned against the running out of time, and urged Athens and Europe to a peaceful resolution.

Many venerable European…

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Earthquake in German Finance – Banking Insider

From ESCP Finance Society
By Me

ESCP Finance Society

The Annual General Meeting of Deutsche Bank AG, which took place on the 20th May 2015, shook up the top Management. Angry shareholders have appointed the CO-CEOs Anshu Jain and Jürgen Fitschen as the main responsible of the Bank’s underperformance. In the past years, the bank has suffered plunges in profitability largely due to the vast amount of money expensed in fines and litigation after the mortgage crisis, and linked to Libor and Forex manipulations. During the meeting, Anshu Jain, a former trader and investment banker, emerged as the man who was going to be in charge of the new restructuring plan. The main driver of the plan was a strong cost-cutting campaign, which could boost profitability in all areas of business. In the last three years, Deutsche Bank’s stock has been one of the worst performing in the Banking sector. The plan, indeed, which is supposed to add billions to the…

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On the verge of a collapse? – Weekly Market Update

An article that I wrote for the ESCP Europe Finance Society.

ESCP Finance Society

Today, Greece was supposed to pay back $335m to IMF. Unfortunately, due to apparent impasses in the discussions between Greece and creditors, the repayment had to be postponed to the end of the month. Only Zambia in the 80s postponed an IMF payment. Tsipras said that it will be attached to other three tranches, totaling approximately €1.6bn. The stalemate is caused by disagreement on the reforms to be backed to the financing line. Alexis Tsipras cannot disrupt his political line to seal the deal. Syriza, his political party, is looking grudgingly at its leader, scared that he could accept unfavorable conditions to secure the loan, which would undermine the party’s coherence with electorate. Markets are nervous in this moment, with tornados taking place in the bond market. ECB’s President, Mario Draghi warned about volatility yet to come.

Today, another important data will be the job report in USA. Job Market…

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Where are we headed?

Markets are still looking at the term of the debt repayment between Greece and its creditors on 5 June. Market observers see a deal reachable and a default unlikely to happen. Greek debt resolution will drive all major European Markets up. The week opened under the light of volatility, everything that comes out of the discussions between Bruxelles and Athens may invert any secured daily trend. TWO WORDS: BE CAREFUL. Today, the Finance Minister of Spain Luis de Gundos showed confidence in the reach of a deal and categorically denied any possible GREXIT. Having in mind the peculiarities of European Politics, it is my opinion that surprise can come up at the last moment. Be prepared. Macro indicators were also on the spotlight yesterday. CPI started to increase again in the Euro Area, and Euro strengthened against all currencies. EUR/JPY reached multi-month high, and is trading around 1:138.

German DAX approached yesterday the support line in area 11170, settling a minimum intraday at 11271. Today, the index is performing an interesting pullback, which, in my opinion, can ignite a new bullish break up, if the Greek debt deal would be sealed. I have long positions in DAX through a BNP Paribas Turbo Certificate. For me, Germany is the place to bet in the short term, and Italy in the long run. The problem with German Equities is that they are already pricy. I do not feel comfortable in making long-term predictions on Germany. What I see is DAX at 12000 if Greece may move on from the 5 June repayment. Italy, instead, is still undervalued. Italian Equities are down more than 50% from 2000 levels, and new structural reforms are taking place. Italian Banks are the preferred industry to bet one. I would wait a correction to enter in the FTSEMIB.


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