2016 Elections: Signal Disturbed

American elections, the strangest and harshest in recent history, are coming to an end in just few days when American electorate will decide who will be the next US president. Nonetheless, the election process seems having not reached its peak in terms of “external perturbation”. Firstly, the leaked tape with Trump’s comment on women, then the massive Russian (according to US agencies) cyber-attack and Assange’s WikiLeaks, and lastly the “unprecedented” interference of the FBI in a critical moment for the candidates and their campaigns.

James Comey, appointed Director of the FBI under the Obama administration, over-ruled a precise order from the Department of Justice to avoid any communication with the Congress regarding Clinton’s mail investigation. The FBI Director sent on Friday a letter to the Congress in which he communicated that the investigations will be reopened on the basis of new findings. Hillary Clinton called this move: “unprecedented” and very recently, Republican Senator Charles E. Grassley from Iowa expressed serious concerns about the foundation and the significance of Comey’s findings: “Unfortunately, your letter failed to give Congress and the American People enough context to evaluate the significance or full meaning of this development”. Nonetheless, the campaign had already been deeply influenced. New polls suggest that the distance between the two candidates has dramatically decreased.

Financial markets do not like uncertainty and on Friday, during the second part of the trading session when European markets were already closed, Comey’s declarations, offset gains and optimism triggered by GDP results above expectations: 2.9% YoY. Yesterday, all major European indexes reported losses and the DJI closed at 18142, -0.1%. One thing is sure, we should brace for much more volatility and downward pressures.

By

Tancredi Viale

Advertisements

On the Rollercoaster – Yearly Recap

From ESCP Europe Finance Society
By
Tancredi Viale

Escp Europe Finance Society

The 2015 has been a very turbulent year for financial markets globally. Greece, the unpredictable oil rout and weak growth perspective in China repeatedly triggered waves of sell-offs during the last year. Here a closer look at the main characters or events that set the trends this year.

S&P 500 Yearly PerformanceSP500

Oil

The oil rout has started in the middle of last year, when it collapsed from the range $110/100 a barrel to levels close to the post Financial Crisis lows, $35/45 a barrel. Since the beginning of 2015, Oil has been very volatile, trading in a range between $35 and $65 a barrel. Its unpredictable trend affected financial markets on a global scale. The high-yield bond market is under strict observation after the low prices of oil have been pushing a large number of shale gas companies on the verge of bankruptcy. On December 10, Third Avenue Focused Credit…

View original post 600 more words

Shadows at the horizon – Breaking through Shadow Banking

From ESCP Europe Finance Society,
By
Soukaina Bouzri, Master Student

Escp Europe Finance Society

Shadow banking refers to the whole range of intermediaries that intermediate credit through complex funding techniques. Unlike the traditional banking system, which is shielded from runs because of insurance guarantees, the shadow banking system entails a very high level of risk. This very risk gathers momentum regarding the size of the system. Arguably, it is estimated in the US to be around 20 trillion $ whereas the bank credit running barely represents the half.

Thus, how do shadow banks serve a critical role in our financial system and how far should they come under regulators scrutiny?

First of all, let’s have a look at the process of credit intermediation in the shadow banking system. Credit intermediation can be divided in three parts: credit, maturity and liquidity transformation.

  • Credit transformation basically consists in lending to AA borrowers while issuing AAA liabilities
  • Maturity transformation is the use of short term deposits to…

View original post 470 more words

Islamic Finance: The Way Forward

From ESCP Europe Finance Society,

By

Ludovico Buffo, Master Student

Escp Europe Finance Society

In 2008, while western governments were claiming for a more sustainable and regulated financial system, their counterparts in the Middle East were working towards a long-term global expansion plan for their ancient but efficient model of capital distribution: Islamic Finance.

How is Islamic Finance doing better than capitalism? The answer lies in the sukuk-based financial model that prefers real economy over complex derivatives solutions. Sukuk refers to the most common Islamic form of debt, roughly comparable to a bond instrument that, however, does not provide a fixed interest rate of remuneration. In fact, the concept of interest rate is forbidden by the Shariah law (Riba principle), thus the capital raised through sukuk is remunerated with a floating rate based on the return of the underlying real asset.

Sukuk

The adoption of Shariah-complaint financial instruments might represent a tremendous opportunity for western countries to attract foreign investments. In fact, Sovereign Wealth Funds…

View original post 139 more words

Turmoil and Hope -APAC, Japan & ASEAN Trends – Sept. 20th 2015

From ESCP Europe Finance Society,

By

Ludovico Buffo, Master Student

Escp Europe Finance Society

While the Asian financial storm is far from being over, the FED recently decided not to hike up the interest rates as the conditions in the global economy have changed dramatically since the last Federal Open Market Committee meeting.

 Rates

The Shanghai Stock Exchange Index (SSE) keeps maintaining its downward trend, losing up to 15% in the last 30 days, reaching the lowest value of 2927.25 in Aug 26. Following the strong financial measures adopted from the Chinese government along with a positive response from the US regarding the interest rates, analysts would have expected a slight upward change in the Chinese stock market that, however, did not happen, highlighting investors’ concerns about China slowdown and Yellen’s warnings about weaker global growth perspectives. A Fed interest rate hike would increase the attractiveness of US dollar denominated assets and thus generate capital outflows from the China and Emerging Markets towards Wall…

View original post 322 more words

FIG Coverage – Americas

From ESCP Europe Finance Society,

By

Tancredi Viale, Master Student

Escp Europe Finance Society

With the quarterly earnings season already passed away, Financial Services companies have demonstrated to be the real winners in these turbulent times. The majority of the big banks, with some “excellent” exceptions, have outpaced analysts’ estimates. Cost-cutting and business optimization have been the main drivers for the rump-up in profitability.

Starting from Goldman Sachs, this bank is the main exception in the positive momentum banks earnings are experiencing. While major business lines have reported a solid growth pace, expenses have increased dramatically. Goldman Sachs earnings were deeply affected by litigation costs that the Company accounted in legal provisions, which amounted up to $2.77 per share, or $1.48bn. The Bank is in talks with authorities to settle the misconduct in the mortgage crisis. All the major business lines have shown solid growth. Investment Banking grew 13.4% YoY, with the Bank ranking in the top positions in all major Financial Advisors League…

View original post 885 more words

RoboAdvisors or Private Bankers? How will Wealth Management change in the near future

From FutureBanks,

New Insights on Automated Wealth Management

By
Lorenzo Merlino, Master Student

FutureBanks

Virtual financial advisors gaining momentum

The term RoboAdvisors defines a wide array of online platforms that provide savers pre-set investing solutions, specific portfolios (more or less customized), whose management is entirely conducted by automated risk management algorithms. The purchase of these services can be performed, most of the times, directly online and end up straight to the client’s portfolio without the need of any human intervention.

A RoboAdvisor is thus a “virtual financial advisor”, who is able to provide advisory services in an efficient and in a cost-competitive way, leveraging on its ease of usage and on the online browsing experience for the consumer. Due to the centrality of the technological component, RoboAdvisors belong to the FinTech sector: the market where technology meets finance.

Investor assets run by RoboAdvisors are expected to soar to $2.2 trillion in 2020 from $135 billion this year, according to management consulting firm A.T. Kearney

View original post 422 more words

The Chinese Turmoil: Intervention or Resurrection?

From ESCP Finance Society

By:

Ludovico Buffo, Master Student

Escp Europe Finance Society

China, the leading country of the BRICS , seems to be experiencing a slowdown.  Despite many experts claim that China’s GDP will rise by $7 trillion in the next decade (the equivalent of “two more Chinas”), Chinese manufacturing was dragged down by a weaker demand for Chinese exports down to the 12 months lowest level of 49.2 in April 2015. However, the main questions remains: how does this correlate with the recent Chinese stock market crash? Economists say it does not.

Shanghai and Shenzhen, the two Chinese stock markets, strongly differs from their global counterparts in terms of investors. In fact, Individual investors account for the 80% of the stock markets, as there is a weak presence of institutional investors. The rising Chinese middle class preferred to invest its savings into the bullish Chinese stock markets as stocks prices have constantly appreciated in the last years. (CSI 300 Index +…

View original post 345 more words

A bubble about to burst? – APAC Overview

From ESCP Finance Society.
By
Roberto Vacca, Master Student

Escp Europe 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…

View original post 255 more words

An insight into the CAC40 – Index Expert

From ESCP Finance Society
By
Soukaïna Bouziri, Master Student

Escp Europe 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…

View original post 237 more words

%d bloggers like this: