EM PM, Ecstrat

Emad Mostaque

EM PM

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Thematic (Sector/Industry)

Yesterday's high court ruling stating that parliament must have a say before any triggering of Article 50 to start the process for Britain to leave the EU puts us at point 7 in my <a href="https://www.smartkarma.com/insights/the-path-to-no-brexit" target="_blank">path to no Brexit</a>.The reaction from the pro-Brexit press and prominent individuals has been sharp, from declaring the judges in question as enemies of the nation (The Daily Mail) to saying this is the darkest day for the UK since World War II and for readers to fight, fight, fight (The Daily Express).Coming five months…

Yesterday's high court ruling stating that parliament must have a say before any triggering of Article 50 to start the process for Britain to leave the EU puts us at point 7 in my path to no Brexit.The reaction from the pro-Brexit press and prominent individuals has been sharp, from declaring the judges in question as enemies of the nation (The Daily Mail) to saying this is the darkest day for the UK since World War II and for readers to fight, fight, fight (The Daily Express).Coming five months…

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

The Bank of Japan has just released its semiannual assessment on the financial system with an explicit focus on the negative interest rate environment. We view positively that the bank has acknowledged increasing side effects even after the bank has recalibrated its policy with a new focus on yield curve control.The hurdle of implementing the NIRP has been high for Japanese banks due to a higher proportion of funding is  derived from deposits at 72% against 43% for eurozone banks and 31% for Swedish banks. An inability to reprice  its deposit below zero negatively impacts bank earnings, encumbered with low pricing power due to low market concentration. An aging demographic is also adding pressure to regional banks. Half of regional banks fail to earn operating profits from lending, even assuming minimal credit charges, as they remain unable to cope with greater structural challenges. Per the central bank estimate on NIM compression, about 50% is attributed to lower market rates, about 30% to unfavorable demographics and about 20% to weak loan demand at regional banks.Analyst: Mari Kumagai

The Bank of Japan has just released its semiannual assessment on the financial system with an explicit focus on the negative interest rate environment. We view positively that the bank has acknowledged increasing side effects even after the bank has recalibrated its policy with a new focus on yield curve control.The hurdle of implementing the NIRP has been high for Japanese banks due to a higher proportion of funding is  derived from deposits at 72% against 43% for eurozone banks and 31% for Swedish banks. An inability to reprice  its deposit below zero negatively impacts bank earnings, encumbered with low pricing power due to low market concentration. An aging demographic is also adding pressure to regional banks. Half of regional banks fail to earn operating profits from lending, even assuming minimal credit charges, as they remain unable to cope with greater structural challenges. Per the central bank estimate on NIM compression, about 50% is attributed to lower market rates, about 30% to unfavorable demographics and about 20% to weak loan demand at regional banks.Analyst: Mari Kumagai

Lack of Term Premium Continues to Cost Japanese Banks with Limited Financial Flexibility

Founder and CEO, Europacifica Consulting

Naomi Fink

Founder and CEO

Europacifica Consulting

Macroeconomics

Recent large government privatisations (Japan Post and JR Kyushu) have brought with it a positive tendency, as we pointed out in <a href="https://www.smartkarma.com/insights/the-reflationary-role-of-ipo-s" target="_blank">The Reflationary Role of IPO’s</a>. Very closely related to the reflationary aspects of large privatisations is the Holy Grail of reflation, the diversification of household balance sheets from cash (a risk-averse strategy) to risk assets.Inflation expectations are highly autoregressive – that is to say, deflationary consumption and saving behaviour tends to get…

Recent large government privatisations (Japan Post and JR Kyushu) have brought with it a positive tendency, as we pointed out in The Reflationary Role of IPO’s. Very closely related to the reflationary aspects of large privatisations is the Holy Grail of reflation, the diversification of household balance sheets from cash (a risk-averse strategy) to risk assets.Inflation expectations are highly autoregressive – that is to say, deflationary consumption and saving behaviour tends to get…

The Holy Grail of Reflation: "from Savings to Investment"

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/015/017/original/IRF_NewsShocks.png?1476919557" class="editor-image img-responsive" data-smartkarma-image-id="15017"></figure><div class="content-caption">"News Shocks" to the Japanese Economy (Source: Europacifica)</div><h2>Room for small hope amid bleak Japanese policy reform record</h2>Until now, our analysis of Japanese structural reform, centred upon raising Japanese productivity, has revealed few tendencies that might give us hope of an imminent and conclusive end to Japan's deflationary "lost decades" dynamic.  In <a href="https://www.smartkarma.com/insights/structural-reform-i-the-japanese-financial-sector" target="_blank" data-smartkarma-citation="insights:6375">Structural Reform I: The Japanese Financial Sector</a> we examined some of the structural characteristics within the financial sector that were…

"News Shocks" to the Japanese Economy (Source: Europacifica)Room for small hope amid bleak Japanese policy reform recordUntil now, our analysis of Japanese structural reform, centred upon raising Japanese productivity, has revealed few tendencies that might give us hope of an imminent and conclusive end to Japan's deflationary "lost decades" dynamic.  In Structural Reform I: The Japanese Financial Sector we examined some of the structural characteristics within the financial sector that were…

Structural Reform III: Evidence of Bad Luck over Poor Policy

Amareos

Ryan Shea

As any parent will confirm, teenagers know one thing. Unfortunately, it is “every”-thing. The rest of the population, by contrast, recognizes and appreciates the complexity of the world in which we inhabit, all the uncertainty that this necessarily generates, and the associated risks.Borrowing the lexicon of Donald Rumsfeld, there are two types of risk that we regularly encounter: unknown-unknowns and known-unknowns. As investors we can’t do much about the former, but we can do something about the latter. Indeed, this is the bread and butter of risk managers around the world.Crowd-sourced sentiment indicators provide a new additional tool for investors to monitor and assess a wide variety of financial market risks.  In this note, we demonstrate their applicability before going on to assess the short-run and long-run risks for US equities; particularly pertinent given two substantial known-unknowns looming on the near-horizon, namely the US Presidential election campaign and the upcoming FOMC meetings.

As any parent will confirm, teenagers know one thing. Unfortunately, it is “every”-thing. The rest of the population, by contrast, recognizes and appreciates the complexity of the world in which we inhabit, all the uncertainty that this necessarily generates, and the associated risks.Borrowing the lexicon of Donald Rumsfeld, there are two types of risk that we regularly encounter: unknown-unknowns and known-unknowns. As investors we can’t do much about the former, but we can do something about the latter. Indeed, this is the bread and butter of risk managers around the world.Crowd-sourced sentiment indicators provide a new additional tool for investors to monitor and assess a wide variety of financial market risks.  In this note, we demonstrate their applicability before going on to assess the short-run and long-run risks for US equities; particularly pertinent given two substantial known-unknowns looming on the near-horizon, namely the US Presidential election campaign and the upcoming FOMC meetings.

Japan

Tokio Marine Holdings, Inc., through subsidiaries, offers property, casualty and life insurance, and asset management services.

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Tokio Marine Holdings (8766 JP)

Brexit: Judgement Versus Obedience

Yesterday's high court ruling stating that parliament must have a say before any triggering of Article 50 to start the process for Britain to leave...

Emad Mostaque

Lack of Term Premium Continues to Cost Japanese Banks with Limited Financial Flexibility

The Bank of Japan has just released its semiannual assessment on the financial system with an explicit focus on the negative interest rate...

Morningstar, Inc.

The Holy Grail of Reflation: "from Savings to Investment"

Recent large government privatisations (Japan Post and JR Kyushu) have brought with it a positive tendency, as we pointed out in The Reflationary...

Naomi Fink

Structural Reform III: Evidence of Bad Luck over Poor Policy

Room for small hope amid bleak Japanese policy reform recordUntil now, our analysis of Japanese structural reform, centred upon raising Japanese...

Naomi Fink

Risk: Dealing With Known-Unknowns

As any parent will confirm, teenagers know one thing. Unfortunately, it is “every”-thing. The rest of the population, by contrast, recognizes and...

Amareos

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