capital markets

Recent political and economic developments have done little to make the case for investing in Brazil. A gargantuan corruption scandal involving Petrobras, the state-controlled oil company, has ensnared politicians and CEOs alike, ravaging confidence and investment in an economy already reeling from low commodity prices.

The economy is contracting at a 4.5 per cent annual rate, twice that seen during the global financial crisis. Unemployment has leapt to 7.5 per cent and inflation has surpassed 10 per cent. President Dilma Rousseff’s popularity rating has plummeted to 12 per cent, barely a year after a narrow re-election victory. Read more

The Republic of Turkey is going through one of its most challenging periods since its foundation in 1923, directly exposed to severe regional crises that are spiralling into serious geopolitical tensions.

Inevitably, this is not helping the economy. The new government’s commitment to reform has been welcomed; the key test will be to transform intentions into concrete measures. This is now more urgent than ever, and acting quickly will be as important as acting decisively. Read more

The Hungarian central bank recently announced that it had purchased the Budapest Stock Exchange from its previous owner, the Vienna Stock Exchange. This peculiar transaction was not widely reported in the international press. But it is important for FT readers to be informed about this strange move, because it is absolutely unprecedented for a central bank to own and manage a recognised securities exchange.

The stock exchange is the most visible institution of the capital market in any country. In most cases it is owned and controlled either by its members or by profit-seeking private investors. The latter are not identical to the members, who participate in trading and execute individual transactions. Members of the stock exchange constitute a special and privileged bunch: they represent the most influential stakeholders who decide on securities listing, information dissemination on individual companies and transactions, price formation, trading systems, clearing and settlement, depository and safekeeping, etc. As a consequence, members often form a self-regulating body, which is expected to work together with the regulatory and supervisory authorities of the government. Read more

And so the fall in emerging market currencies continues. Over the past month, the third episode of taper tantrum has pushed exchange rates down almost across the board against the dollar, bringing with it the now familiar round of hand-wringing about the vulnerability of emerging economies.

Once again, however, at least as far as currencies are concerned, the latest bout of weakness falls somewhat short of full taper tantrum catastrophe. The depreciation of emerging market exchange rates looks a lot like a subset of the sharp appreciation of the dollar, which has also shot higher against the yen and the euro, than it does a weakness of the entire asset class. Read more

The US dollar surged again on Wednesday against a basket of emerging market (EM) currencies, adding urgency to the question of which EM countries are most vulnerable to a receding “carry trade”, the multitrillion dollar flow that has swollen domestic debt markets since 2009.

A soaring dollar piles pressure onto EM carry trade investors, who typically borrow dollars at low interest rates in order to buy high yielding EM domestic debt. When the dollar surges, they suffer currency losses that offset their interest rate gains, prompting them to sell. Read more

If you want something done, do it yourself. That’s the approach taken by the Nairobi Securities Exchange, which, despite such appeal that it attracts 60 per cent of its value from foreigners, managed not a single IPO last year. That hardly fits with ambitious growth plans for the bourse of 60 or so stocks.

But, at last, the first listing of this year is nigh. And who should it be? The NSE itself. Read more

Can it really be true that liquidity on EM secondary markets is more constrained today than it was in the crisis of 2008-09? That’s what beyondbrics reported recently, to the surprise of some readers.

Our report was based on anecdotal and empirical evidence, mostly concerning local currency bond markets. We’ve had another look and found not only that liquidity on those markets is indeed tighter than it was, but also that tight conditions on EM bond markets pose a serious threat to stability on currency and other markets if – or in the view of many, when – investors start to rush for a very crowded exit. Read more

By Márcio Garcia of PUC-Rio and Tony Volpon of Nomura

Since the “taper tantrum” of May 2013, emerging markets have been under pressure. While not configuring a 1990’s style “sudden stop”, with most EM FX markets doing better since the beginning of this year, the prospects for eventual monetary normalization by the US Federal Reserve nevertheless pose challenges for EM economies. Brazil has had specific problems during this period, showing a marked deterioration in macro fundamentals, with falling growth and rising current account deficits. For many investors, this has earned it an unfortunate place among so-called “fragile” countries.

Brazil’s central bank (BCB) has adopted a unique intervention strategy to face these pressures, which we analyse in a recent working paperRead more

“Emerging markets are where we can measure the deterioration of trading conditions. They are the warning for the rest of the market.”

So says Hung Tran, executive managing director of the Institute of International Finance. He has powerful data to back up his assertion. According to four key metrics, trading conditions have tightened dramatically over recent years, with especially sharp moves in recent months. Where emerging markets have led, the fear is, other global markets may follow. Read more

Nobody ever said trading in emerging market assets was easy. But over the past few months, conditions have changed in ways that suggest trading could soon become very hard indeed.

Here, beyondbrics looks at the influences that have made investing in EM a riskier proposition than usual and asks, will things ever be the same again? Read more

With a restrained grin, Mihaly Varga, Hungary’s economy minister, pressed the button to open trading at the Budapest Stock Exchange (BSE) on Friday – simultaneously inaugurating the Xetra trading system for the first time in the Hungarian capital. Read more

It has been a dramatic year of structural reforms for Russian markets. Joseph Dayan, head of markets at BCS Financial Group, the largest broker on the Moscow exchange, explains to FT Trading Room editor Philip Stafford the impact for international investors of changes in clearing and settlement.

Chinese government bond futures are back, ending an 18-year halt after an investment scandal shuttered the market. The move is part of efforts to encourage development of the government bond market and offers a hedge against market volatility.

The China Securities Regulatory Commission (CSRC) said on Friday that a proposal to issue government bond futures had been approved by the State Council and that the futures would be publicly traded on the China Financial Futures Exchange (CFFEX) in two months’ time. Read more

Southeast Asian equity markets are on a tear. Ripped on the Fed’s easy money, the markets keep rising and the cash keeps coming in.

Thailand and the Philippines – the two best performing stock markets in the world last year – have continued their rise more or less uninterrupted with the former up 15 per cent so far this year and the latter up an eye-brow raising 24 per cent! And this is in spite of some concerns bubbling up about regional growth ratesRead more

Rain washed out the inaugural anniversary celebration for Taiwan’s president Ma Ying-jeou; forecasts for full-year economic growth are being cut; and two of the country’s fighter jets have crashed during training exercises in the last week.

But there could soon be at least one bright spot in the gloom for Taiwan. Legislators are trying to lighten an unpopular transaction tax that has weighed on the local market since it first passed last year. Read more

By Chiara Francavilla of This is Africa

Morocco is finalising a new securitisation law that will allow the state and companies to issue sukuk, the Islamic equivalent of bonds. Preparations for a corporate and a sovereign sukuk are already underway, according to Islamic finance experts. Read more

When Xiao Gang, the new boss of the China Securities Regulatory Commission, used ‘China dream’ as the theme of his first public speech following his appointment back in March, he was making an obvious echo of president Xi Jinping’s evoctaion of a ‘China dream’. Xiao’s speech was published on CSRC’s website to just before China’s May 4th Youth Day.

However, whether Xiao really is a reformist remains to be seen. He certainly seems willing to continue the reforms started by his predecessor, Guo Shuqing. But progress will require something more practical than dreams. Read more

In the pantheon of financial news, China’s decision to open its interbank bond market to foreign investors may seem a small item. But the announcement, made on Wednesday, is a big one for two reasons.

First, it gives foreign institutions access to a major asset class. Second, its timing signifies that China’s financial reform train is still very much in motion just a few days after the dust finally settled on the country’s leadership reshuffle. Read more

Peru is typically grouped with Mexico, Panama, Colombia and Chile as one of Latin America’s high-growth economies, a darling of international investors. But how easy is it to invest in? Not easy at all, says Luis Miguel Castilla, Peru’s finance minister.

“Our diagnosis is that our own capital market is poorly developed; not deep; scarcely liquid,” he tells beyondbrics. Read more

Argentina has a problem: people save too much.

That, at least, is how the national stock market regulatory body sees things. Argentina is awash with pesos – some 380bn in bank deposits, for example – yet only 8 per cent of even the most educated social classes has ever invested in a market instrument. Read more