In just a few weeks, Saudi Arabia will allow qualified institutional investors to invest directly in its USD 570bn equity exchange – an exchange with a market cap larger than that of Russia’s MIECX and Poland’s WIG. Perhaps surprisingly, the index has not only diversified impressively over the past years, but its 169 constituents are not solely oil-related. Average daily trading volume of USD 2.3BN makes the Tadawul All share index the fourth most liquid amongst the emerging markets. Once the exchange opens on 15th June , we would anticipate a further increase in liquidity. Which will contribute to market stability and reduce volatility of the country’s stocks. But the effects are not just on the technical side: longer term investors will be pleased as Saudi Arabian corporations are expected to improve transparency and governance.
Thursday, May 21, 2015
As Greece slips into recession, fears of the country running out of money are mounting. The 11th May Eurogroup meeting was meant to be a key turning point, but progress is slow- moving. Although Greece successfully paid the IMF €750mm last Tuesday, Athens still owes around €25bn through the end of 2015. With ECB support via the Emergency Liquidity Assistant (ELA), a “Grexit” is less likely - - even in the event of a Greek Default.However, the ECB will weight up the political and financial costs of their support and may reconsider if the repayment to the ECB itself is missed. There are a range of possible scenarios if Greece misses its summer repayments, and while there is less contagion risk than in the past, investors could see volatility spread into other European markets.
Tuesday, May 12, 2015
It’s been a tough week for European fixed income investors as long-dated government bonds across Europe were thoroughly shaken. German 10-year bund yields jumped from 0.1% to over 0.6% in just one week. As shown in the chart, the abrupt sell-off in German bunds has disturbed a long-running rally in European sovereign bond market. So what has triggered the rush for the exit? Analysts are touting a series of explanations including a reassessment of inflation risk by investors, liquidity concerns as well as bearish comments made by high profile bond investors, Ultimately, with a list this long, it is likely to be a cocktail of several reasons that have caused such a reversal for European fixed income market.