FX INDUSTRY ROUNDUP: HSBC, Nomura, Offshore Yuan And More

April 12, 2012, 10:21 a.m. ET

Article from The Wall Street Journal

By Alexandra Fletcher

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Here's our weekly rundown of the buzz inside the foreign-exchange industry:

PEOPLE:

- Lisa Danino-Lewis, HSBC's (HBC) head of e-commerce sales for foreign exchange, left the bank last week, said people familiar with the situation. She joined HSBC in 2005.

- Paul Houston, head of foreign-exchange prime services based in London, has left Credit Suisse AG (CS), a spokesman for the bank confirmed.

- Tim Owens has joined Nomura Holdings Inc. (NMR) as global head of foreign-exchange structuring, the bank said. Owens joins after 18 years at JP Morgan Chase & Co. (JPM). Based in London, he will report to Giancarlo Saronne, global head of structuring.

- Societe Generale SA (SCGLY) has merged its fixed-income, currencies, treasury, interest rates and foreign-exchange derivatives into one business called fixed-income and currencies. The bank says it is to "strengthen the synergies" in its fixed-income businesses. Danielle Sindzingre, who was formerly global head of treasury and repo at the bank, is now global head of the newly created business line.

- Investment manager Man Group PLC (EMG.LN) has appointed Ravi Chari as co-head of foreign exchange for its futures business AHL. Chari joins from asset manager IKOS Management where he headed the group's futures and foreign-exchange funds, Man said in a statement.

INDUSTRY:

- London is poised to take its bid to become an offshore yuan center one step further next week with the launch of a report into the city's capabilities as a hub for this business, confirmed the City of London Corporation, which commissioned the report. Some of the biggest banks in foreign exchange have been building up their renminbi business in London in anticipation of future growth. HSBC and Royal Bank of Scotland PLC (RBS) both beefed up their London-based yuan teams in February.

- And it seems the Spanish are trying to get in on the yuan action too. The Shanghai branch of Banco Santander SA (STD) has been granted a license to deal in the renminbi by the Chinese Banking Regulatory Commission.

NEW PRODUCTS/SERVICES:

- Electronic trading platform MarketAxess Holdings Inc. (MKTX) is extending its reach into emerging markets by opening a up an office in Sao Paulo. Investors will be able to electronically trade local-currency debt with the new office.

-By Alexandra Fletcher, Dow Jones Newswires; 44-20-7842-9462; alexandra.fletcher@dowjones.com; @djfxtrader

(Jessica Mead contributed to this article.)

Article from The Wall Street Journal

The pros and cons of Exchange-Traded Funds

DAVE MEYER and GREG HEBERLEIN

Article from npr.org

April 10, 2012

Exchange-Traded Funds (ETFs) are a popular alternative to mutual funds.

Are they right for you? 

On this week's Money Matters, financial commentator Greg Heberlein tells KPLU's Dave Meyer that a well diversified ETF can be a great investment.

Exchanged-traded funds, known as ETFs, were launched in 1992 to track the Standard & Poor’s 500 stock-index. They were nicknamed Spiders. The investor advantage was that although they mimicked mutual funds, they could be traded during market hours, not after the markets closed.

In 2008, ETFs were approved for wider uses than a broad index. So today, although mutual funds still have 10 times more assets than ETFs, the ETF market has grown to more than a thousand choices and more than $1 trillion in assets.

What does Greg think?

Broadly diversified ETFs, ones investing in hundreds or thousands of stocks, look safe. Bill Schultheis, author of The Coffehouse Investor and a huge fan of buying stock index funds, says broadly diversified ETFs are sound instruments for the individual.

But Schultheis and the legendary John Bogle, who invented the index fund decades ago, agree that buying specialty ETFs can be a dangerous proposition. Investing in a narrow purpose mutual fund (for example, a fund that only invests in coal companies) is the reverse of diversification. The same is true for ETFs.

ETFs have a tax advantage. 

Since gains are reinvested, the account can grow while taxes are deferred. Most ETFs charge individuals less to get in than mutual funds.

But investors need to pay attention here. Besides a low-entrance fee, ETFs can pass along costs for purchasing the stocks or commodities within the ETF. Paying outside managers, an ever more popular technique for ETFs, also can build up the costs. And sometimes, ETFs have a spread between what the holdings cost and what the ETFs charge investors.

One special area of concern is ETFs investing in foreign stock indexes. Studies have shown the largest ETF variance in true price occurs when trying to match foreign indexes.

Greg gets nervous over any investment strategy that hasn’t been tested over a long period of time.

So with ETFs, one at least has to consider the downside. Most ETF owners are short-termers. If they start selling, it can catch the individual investor off guard and accentuate a downturn before they can react.

The safety of ETFs has been questioned on another front. 

Some EFTs targeting overseas stocks and indexes use speculative derivative contracts. The derivative market has exploded to more than $700 trillion. Some believe that if the market moves suddenly, certain derivatives could unravel, accentuating the loss.

John Bogle says ETFs often encourage the bulk of the investment community to chase fads, last week’s or last year’s best gainers. That’s true across the investment industry. But he fears that as publicity of ETFs gets even hotter, less sophisticated participants will abandon the long-term index approach.

So here’s the bottom line:

If you are tantalized by this increasingly popular strategy, go with the ETFs reflecting hundreds or thousands of stocks or bonds. 

Diversification is the key to success.

As John Bogle likes to say, a stock or an investment manager can outperform the general market for a relatively short period of time, but almost never over long periods.

Aricle from npr.org

U.S. to Ease Myanmar Restrictions, Ending Isolation

By Flavia Krause-Jackson and Shamim Adam - Apr 5, 2012 1:41 PM GMT+0800

Article from Bloomberg

Myanmar, once the world’s largest rice exporter, is set to re-engage with the global economy in a boost to Southeast Asian growth as the U.S. prepares to ease some sanctions.

Secretary of State Hillary Clinton said yesterday the U.S. will selectively lift restrictions on investment in Myanmar, after this month’s elections allowed democracy advocate Aung San Suu Kyi to win a seat in parliament. This week, leaders from the Association of Southeast Asian Nations, or Asean, called for the U.S. and Europe to end sanctions.

The opening of Myanmar’s economy, one of Asia’s last untapped frontier markets, may give investors and neighboring countries access to its mineral wealth and a market of 64 million people after decades of military rule. The nation bordering China and India has won support for its efforts to attract investment by holding elections and overhauling its financial system, including a managed float of its currency.

“Myanmar’s opening is the creation of a whole new consumer market and that cannot be but good for the rest of the region,” Rodolfo Severino, former secretary general of Asean, said in Singapore today. “There are opportunities for investment, but we have to see if the measures are sustained. The U.S.’s lifting of sanctions may be followed by other countries and that is important.”

American sanctions banned investment in Myanmar and imports from the country, restrict money transfers, freeze assets and target jewelry with gemstones originating in the nation. The European Union bans weapons sales and mineral imports.

Further Reform

By easing some sanctions, lifting some travel bans and naming an ambassador to the Southeast Asian nation for the first time since 1988, the U.S. seeks to encourage further reform in the country, Clinton said yesterday.

Myanmar’s total land area, second only to Indonesia in Southeast Asia, contains deposits of gold, copper and gemstones. The nation is positioned between India and China, astride maritime trade routes between Europe and East Asia and was in British colonial times the world’s largest rice exporter -- a title now held by neighbor and one-time enemy Thailand.

France’s Total SA, Chevron Corp. of the U.S. and Malaysia’s Petroliam Nasional Bhd (PET). entered the nation years ago to tap offshore energy reserves. Even so, large swathes of its waters sit unexplored, indicating the potential is greater than the proven gas reserves that the BP Statistical Review estimates to amount to one-eighth the size of Malaysia’s.

Waiting on Sanctions

Investor Jim Rogers, the chairman of Rogers Holdings who predicted a global commodities rally in 1999, said Feb. 22 he’d put all his money in Myanmar if he could. Standard Chartered Plc, the U.K. bank that earns more than two-thirds of its profit in Asia, has said lenders are waiting for sanctions to be lifted before considering a return.

The Central Bank of Myanmar set a reference foreign exchange rate of 821 kyat per dollar today, according to its website. It adopted a managed float for its currency on April 1, scrapping a 35-year fixed exchange rate.

Myanmar’s emergence comes as its neighbors grapple with slowing growth in China and the European debt crisis.

A Chinese services industry index showed a slower expansion in March, with the purchasing managers’ index for the sector easing to 53.3 last month from 53.9 in February, according to a statement issued by HSBC Holdings Plc and Markit Economics today. A reading above 50 indicates an expansion.

Elsewhere in the region, Taiwan’s consumer prices rose 1.32 percent last month from a year earlier, according to the median forecast in a Bloomberg News survey. The Central Bank of Sri Lanka may keep its reverse repurchase rate at 9 percent and the repurchase rate at 7.5 percent today, according to three of five economists surveyed by Bloomberg.

U.S. Jobs

Initial jobless claims in the U.S. probably fell 4,000 in the week to March 31 to 355,000, according to the median forecast of economists in a Bloomberg News survey ahead of a report today.

The Bank of England is expected to hold its policy interest rate at a record-low 0.5 percent, according to economists surveyed by Bloomberg News. The Monetary Policy Committee will back finishing their 325 billion-pound ($516 billion) stimulus, economists predict.

U.K. manufacturing output probably rose 0.1 percent in February from the previous month, while overall industrial production climbed 0.4 percent, according to Bloomberg surveys. Germany’s industrial production probably decreased 0.5 percent from January, when it gained 1.6 percent, according to the median estimate of economists in a Bloomberg News survey.

Political Dissidents

The reconsideration of U.S. sanctions against Myanmar comes as the country’s lawmakers reach out to political dissidents and lift repressive measures imposed by the former military junta, creating an opening for Western companies in an economically underdeveloped country.

Bans on investing in Burmese timber and gems probably will continue, according to two senior administration officials who briefed reporters on condition of anonymity because they weren’t authorized to be named.

There will be a “targeted easing” of a U.S. ban on the export of U.S. financial services “as part of a broader effort to accelerate economic modernization and political reform,” Clinton said.

Due to European Union and U.S. sanctions, credit cards are rarely accepted in Myanmar, an impediment to commerce.

‘New Era’

The officials declined to put a timeline on the speed with which the changes would be implemented, saying it will be a matter of days in some cases and weeks in others. Invitations to visit the U.S. have been extended to selected Burmese officials, including Foreign Minister Wunna Maung Lwin, they said.

Suu Kyi, who met with Clinton in December, this week called for a “new era” after her National League for Democracy rejoined the political system and claimed victory for 43 of 44 seats it contested in April 1 by-elections. It boycotted a 2010 election won by President Thein Sein’s army-backed party, which along with the military still controls more than 80 percent of parliamentary seats.

Still, restrictions on capital flows, lack of a developed stock exchange, an untested legal environment and rudimentary infrastructure may give investors reasons for holding off putting money in the former dictatorship.

Myanmar is “a difficult market” where people don’t have much disposable income, Luc de Waegh, founder of business- advisory company West Indochina Ltd. who helped set up British American Tobacco Plc’s Myanmar operations in 1993, said before this month’s election. “The future looks very bright, but in the meantime there isn’t much money there.”

To contact the reporters on this story: Flavia Krause-Jackson in United Nations at fjackson@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net; Stephanie Phang at sphang@bloomberg.net

Article from Bloomberg