Fast growth will support Central European asset prices

2018 ◽  
Keyword(s):  
Emerging Markets ◽  
Financial Markets ◽  
Euro Area ◽  
Asset Prices ◽  
Bond Market ◽  
Bond Markets ◽  
Monetary Policies ◽  
Content Type ◽  
Central European

Subject The muted impact on Central Europe’s financial markets of this month’s sharp declines in asset prices in Russia and Turkey. Significance Much harsher US sanctions on Russia, together with Turkey’s continued loss of policy credibility, have led Russian and Turkish stocks to plunge by nearly 12.0% and 7.5%, respectively, in dollar terms since the start of April. This contrasts with rises in Polish (5.5%), Czech (3.3%) and Hungarian (2.0%) equities, and a slight decline for the MSCI Emerging Markets (EM) index. Central Europe’s vulnerability is rather to the recent slowdown in growth in the euro-area; the ECB’s ultra-loose monetary policies are providing support to the region’s bond markets. Impacts The VIX Index ‘fear gauge’ is back below its long-term average and is at its lowest level since the outbreak of volatility in late January. The latest reading from Germany’s ZEW Index shows a majority of investors now expecting the country’s economic prospects to deteriorate. Turkey’s high-yielding local bond market has managed to attract nearly 900 million dollars of foreign inflows so far this year.

scholarly journals Which News Moves the Euro Area Bond Market?

2009 ◽  
Vol 10 (1) ◽  
pp. 1-31 ◽  
Author(s):  
Magnus Andersson ◽  
Szabolcs Sebestyén ◽  
Lars Jul Overby
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Bond Market ◽  
Bond Markets ◽  
Market Responses ◽  
Macroeconomic Announcements ◽  
Bond Futures

AbstractThis paper explores a long dataset (1999-2005) of intraday prices on German long-term bond futures and examines market responses to major macroeconomic announcements and ECB monetary policy releases. German bond markets tend to react more strongly to the surprise component in US macro releases compared with aggregated and national euro area and UK releases, and the strength of those reactions to US releases has increased over the period considered. We also document that the numbers of German unemployed workers consistently have been known to investors before official releases.

The stimulus schemes will stress the financial system

2020 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Federal Reserve ◽  
Financial Stability ◽  
Asset Prices ◽  
Yield Curve ◽  
Corporate Debt ◽  
Content Type ◽  
Negative Interest Rates

Significance While the Federal Reserve (Fed) rejects negative interest rates, and instead considers yield-curve control, even the prospect of negative US rates is accentuating distortions in asset prices and fuelling concerns about global financial stability after the pandemic. Impacts The Fed’s decision to start buying corporate debt has led to a surge in bond issuance; many firms may struggle as the stimulus is unwound. Beyond Japan, the euro-area is nearest deflation; the ECB chief economist warns that demand will be low for some time. The VIX Index, a measure of upcoming US equities volatility, remains above its long-term average, but will be prone to spikes.

COVID-19 crisis will raise EU-Central European tension

2020 ◽  
Keyword(s):  
Financial Markets ◽  
Economic Impact ◽  
Central Europe ◽  
Euro Area ◽  
Local Governments ◽  
Central Government ◽  
Crisis Response ◽  
Content Type ◽  
Central European ◽  
Containment Measures

Subject The economic impact of COVID-19 on Central Europe. Significance The economic sudden stop which the COVID-19 pandemic has caused in the three non-euro-area states of Central Europe (CE-3) is unprecedented and profound. It is due to the confluence of aggressive containment measures to halt the spread of the disease, the collapse in trade with the euro-area (especially Germany) and the rush to safety in financial markets. The pandemic is further straining ties between CE-3 and Brussels, a relationship already frayed by battles over the EU’s trillion-euro budget and marked differences in responses to the crisis. Impacts The region’s auto industry is slowly reopening, Toyota’s Polish plant following Audi’s Hungarian engine factory and Hyundai’s Czech works. Governments will closely watch the phased lifting of restrictions elsewhere to assess the effectiveness and sustainability of strategies. In Hungary, the central government is suspected of discriminating against opposition-held local governments in its crisis response.

scholarly journals South African bonds as an alternative diversification asset for developed bond markets

2021 ◽  
Vol 21 (1) ◽  
Author(s):  
Rogan Pietersen ◽  
Ilse Botha
Keyword(s):  
Financial Markets ◽  
South African ◽  
Quantitative Research ◽  
Bond Market ◽  
Bond Markets ◽  
The South ◽  
Quasi Experimental ◽  
Short Run ◽  
Managerial Implications

Orientation: Globalisation of financial markets has made it progressively more difficult for effective diversification to exist, and as a result portfolio managers are in need of alternative diversification opportunities.Research purpose: Developed financial markets are more likely to be integrated with one another, and better diversification opportunities may be found in emerging markets.Research motivation: Limited research focuses on bond market diversification, and most research does not include South Africa as a diversification destination. This research examines whether developed bond market investors could use South African bonds to diversify their portfolios.Research design, approach and method: This article follows a quantitative research design with a causal-comparative or quasi-experimental approach. The econometric method used was primarily co-integration analysis establishing whether diversification opportunities exist between the South African bond market and five developed bond markets.Main findings: Overall, the findings showed that there was no co-integrating relationship between the South African bond market and developed bond markets, indicating that diversification may be possible in the long term. Furthermore, it was found that the South African bonds were less affected by short-term shocks compared with the developed market bonds.Practical/managerial implications: The results of this study indicated that South African bonds can be used to diversify a developed bond market investors portfolio. Developed bond market traders and fund managers should therefore consider holding South African bonds as a means of reducing their portfolio’s overall risk.Contribution/value-add: Holding South African bonds can be used to preserve a portfolio’s long-term wealth. Additionally, the resistance of South African bonds to short-run shocks also provides investors with a cushion against sudden and unexpected crises.

Euro-area risks remain despite Greek breakthrough

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Euro Area ◽  
Bond Markets ◽  
Government Bond ◽  
Fiscal Union ◽  
Content Type ◽  
Government Bond Markets

Significance Impacts Despite a dramatic deterioration in Greece's relations with its creditors, financial markets have remained relatively unconcerned. The sharp sell-off in government bond markets since mid-April stems almost entirely from exaggerated fears about deflation, not Greece. Tensions over Greece reflect broader weaknesses in the euro-area stemming from a lack of support for political and fiscal union.

Mcdonald’s versus Vikram Bakshi

2021 ◽  
Vol 11 (4) ◽  
pp. 1-27
Author(s):  
Nitin Pangarkar ◽  
Neetu Yadav
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Service Industry ◽  
Executive Development ◽  
Content Type ◽  
Academic Level ◽  
Quick Service ◽  
Term Performance ◽  
The Impact

Learning outcomes The case illustrates the challenges of managing JVs in emerging markets. specifically, after going through the case, students should be able to: i.Analyze the contexts in which firms need to form JVs and evaluate this need in the context of emerging markets such as India; ii.Understand how multinational corporations can achieve success in emerging markets, specifically the role of strategic (broader than the product) adaptation in success; iii.Evaluate the impact of conflict between partners on the short-term and long-term performance of a JV; and iv.Create alternatives, evaluate each alternative’s pros and cons, and recommend appropriate decisions to address the situation after a JV unravels and the organization is faced with quality and other challenges. Case overview/synopsis McDonald’s, the global giant in the quick service industry, entered India in 1993 and formed two JVs in 1995 one with Vikram Bakshi (Connaught Plaza Restaurants Ltd or CPRL) to own and operate stores in the northern and eastern zones, and another with Amit Jatia (Hardcastle Restaurants Private Limited or HRPL) to own and operate stores in the western and southern zones. Over the next 12 years, both the JVs made steady progress by opening new stores while also achieving better store-level metrics. Though CPRL was ahead of HRPL in terms of the number of stores and total revenues earned in 2008, the year marked the beginning of a long-running dispute between the two partners in CPRL, Bakshi and McDonald’s. Over the next 11 years, Bakshi and McDonald’s tried to block each other, filed court cases against each other and also exchanged recriminations in media. The feud hurt the performance of CPRL, which fell behind HRPL in terms of growth and other metrics. On May 9, 2019, the feuding partners reached an out-of-court settlement under which McDonald’s would buy out Bakshi’s shares in CPRL, thus making CPRL a subsidiary. Robert Hunghanfoo, who had been appointed head of CPRL after Bakshi’s exit, announced a temporary shutdown of McDonald’s stores to take stock of the current situation. He had to make a number of critical decisions that would impact the company’s performance in the long-term. Complexity academic level MBA, Executive MBA and executive development programs. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 11: Strategy.

The persistent effect of banking crises on investment and the role of financial markets

2014 ◽  
Vol 6 (1) ◽  
pp. 64-77 ◽  
Author(s):  
Felix Rioja ◽  
Fernando Rios-Avila ◽  
Neven Valev
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Banking Crisis ◽  
Banking Crises ◽  
Output Growth ◽  
Long Term Effects ◽  
Content Type ◽  
Negative Effect

Purpose – While the literature studying the effect of banking crises on real output growth rates has found short-lived effects, recent work has focused on the level effects showing that banking crises can reduce output below its trend for several years. This paper aims to investigate the effect of banking crises on investment finding a prolonged negative effect. Design/methodology/approach – The authors test to see whether investment declines after a banking crisis and, if it does, for how long and by how much. The paper uses data for 148 countries from 1963 to 2007. Econometrically, the authors test how banking crises episodes affect investment in future years after controlling for other potential determinants. Findings – The authors find that the investment to GDP ratio is on average about 1.7 percent lower for about eight years following a banking crisis. These results are robust after controlling for credit availability, institutional characteristics, and a host of other factors. Furthermore, the authors find that the size and duration of this adverse effect on investment varies according to the level of financial development of a country. The largest and longer-lasting decrease in investment is found in countries in a middle region of financial development, where finance plays its most important role according to theory. Originality/value – The authors contribute by finding that banking crisis can have long-term effects on investment of up to nine years. Further, the authors contribute by finding that the level of development of the country's financial markets affects the duration of this decrease in investment.

Barriers to bond financing for public-private partnership infrastructure projects in emerging markets

2017 ◽  
Vol 22 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Solomon Olusola Babatunde ◽  
Srinath Perera
Keyword(s):  
Factor Analysis ◽  
Emerging Markets ◽  
Empirical Studies ◽  
Principal Component ◽  
Public Private Partnership ◽  
Bond Markets ◽  
Infrastructure Projects ◽  
Chi Square ◽  
Private Partnership ◽  
Content Type

Purpose The purpose of this study is to identify and critically assess the barriers to bond financing for public–private partnership (PPP) infrastructure projects in Nigeria using an empirical quantitative analysis. Innovative ways to finance long-term infrastructure projects had been documented. However, there is a dearth of empirical studies on the barriers to bond financing for PPP infrastructure projects. Design/methodology/approach A comprehensive literature review was conducted to identify the barriers to bond financing for infrastructure projects, which were employed to design a questionnaire. A questionnaire survey was carried out which targeted financial experts in the Nigerian financial institutions/local banks. Data collected were analysed using descriptive and inferential statistics to include mean score, chi-square (χ2) test and factor analysis (principal component analysis). Findings The analysis of the ranking in terms of the mean score values for the 12 identified barriers indicated that all the identified barriers are considered by respondents as critical barriers to bond financing for PPP infrastructure projects in Nigeria. The study, through factor analysis, grouped the 12 identified barriers into 5 principal factors. These include governance and institutional capacity issues, higher issuance cost and risk, difficulties in getting approval for changes, the small size of bond markets and stringent disclosure requirements. Practical implications This research is significant by providing the empirical evidence of the barriers to bond financing for PPP infrastructure in emerging markets, especially in Nigeria. Originality/value The findings would enable the policymakers to draw some policy recommendations that will positively influence the development of bond markets in Nigeria and emerging markets at large. These study findings are crucial, as not many empirical studies have been conducted in Nigeria.

Emerging markets are now more resilient to US tapering

2021 ◽  
Keyword(s):  
Emerging Markets ◽  
Emerging Market ◽  
Bond Market ◽  
Oil Price ◽  
Inflation Expectations ◽  
Content Type ◽  
Dramatic Decline ◽  
Equity Funds

Significance The rise in yields is stirring memories of the 2013 ‘taper tantrum’, which led to a dramatic decline in emerging market (EM) currencies and local bonds, prompting three years of net outflows from EM debt and equity funds. Investor fears of US tightening have risen with growth and inflation expectations. Impacts If the trade-weighted dollar index rises further, this will threaten EM currencies, especially those with large dollar-denominated debts. The Brent oil price has gained 70% since November to USD68 per barrel but further upside is limited, with no commodities ‘supercycle’ ahead. Recent moves fuel fears of the normally staid US bond market becoming volatile; stable ten-year Chinese yields are being seen as a haven.

Short-term performance of stocks after fraudulent financial reporting announcement

2019 ◽  
Vol 26 (2) ◽  
pp. 464-476 ◽  
Author(s):  
Mehmet Eryigit
Keyword(s):  
Financial Markets ◽  
Stock Returns ◽  
Financial Reporting ◽  
Abnormal Return ◽  
Fraudulent Financial Reporting ◽  
Short Term ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Company Stock

Purpose Availability of accurate and reliable information in financial markets helps investors make well-informed decisions on capital allocations which is beneficial for long-term economic growth. In this regards, the role of auditing firms that inspect the financial statements of the publicly traded companies in sound operation of financial markets has been increasing. The Capital Market Board of Turkey (CMBT) has the task and responsibility of investigating fraudulent information disseminated by the firms whose stocks are traded in Borsa Istanbul. The investigations can lead to monetary penalties if fraud is proven and the results are published by CMBT in its weekly bulletin. The present study aims to examine the effect of announcements of financial irregularities of companies in CMBT Bulletin on the performance of the relevant company stock in the short term. Design/methodology/approach This study uses abnormal return, cumulative abnormal return and cumulative average abnormal return as metrics and parametric, as well as non-parametric tests to ascertain whether the announcements of financial irregularities in company operations have any statistically significant effect on the return of its stock. Findings The results indicate that publication of the financial penalty news by CMBT in its bulletin has almost no statistically significant influence on the performance of the relevant companies’ stock in Borsa Istanbul. The findings indicate that either the investors in this particular markets do not consider such news relevant to long-term success of the firm or the announcement does not provide any new information and penalties have been priced into the stock before the announcement in the bulletin. Originality/value In literature there is no more research about the effect of the announcements of administrative monetary penalties and crime complaints on the stock returns.

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