Showing posts with label global finance. Show all posts
Showing posts with label global finance. Show all posts

Saturday, January 24, 2015

Mining Stocks take a Toll Due To Plunge in Copper Prices


Copper
The concerns over the slowing global economy complimented with the excess supply saw a major slide in the prices of copper. The shares of coppers miners dipped low in the morning trade and future prices of the copper saw a major upheaval wherein tumbled down to a 5 year low. Wednesday drop is incidentally the sixth consecutive decline the copper prices and currently the copper are trading at $5,560 per ton. The sudden and steep decline in prices is causing a significant pain to major mining companies like FCX, Glencore and others whose stocks has taken a beat down by recording a massive low.

The Major Copper Producers Take A Hit

Freeport McMoRan Inc known as FCX which is the largest copper producer listed on stock exchange saw a massive decline of 9.5%. Freeport shares are now at trading at $19.05 which is its lowest registered price since April 2009. Even the other suppliers of the metals shared the same fate and fell considerably low. Glencore Plc (GLEN) which is the third largest producer saw a drop of 12% in London while the First Quantum Minerals fell by 27% in Toronto.

A Kazakhstan copper producer Kaz Minerals Plc (KAZ) also registered a fall by 23% in London while Vedanta Resources Plc (VED) which a giant producer of copper in Indian and Zambia fell by 20% followed by Antofagasta Plc (ANTO) registered a drop of 13%.

Drop In Copper Prices Raises Concern

Investors are keeping a keen interest in the fate of the copper prices which doesn’t seem to have any silver lining for the moment. This precious metal is characteristically referred as ‘Dr. Copper’ due to wide spread usage in various industries. Copper is the recent entrant in the club of commodities market which had registered a sharp plunge in its rates globally after the fall in the prices of the oil. Just like the oil, copper tend to have deep impact upon the world economy as it is key element for the phone lines, cables and other infrastructures. The world largest copper producers are in order of their production ability are Chile, Chiba, Peru, US and Australia.

The sudden and deliberate fall in copper price is a major concern and it is seen as a domino effect rising due to considerable rout in oil prices. It is now spreading to other commodities which include copper as well. This is also perplexing and points towards the imminent slowdown in global economy which is deeper than thought and certainly it wouldn’t be limited to energy market.

World Bank Shows A Slow Global Economic Forecast

Owing to the steep drop in prices of various commodities the World Bank has cut down its global economic growth forecast to just 3% from the 3.4%. The data of Wednesday even pointed out that the December retail sales had declined much more than expected earlier. The price fall in crude oil had made investors quite uneasy about holding on to the energy stocks and their shedding of those would inevitably lead to more losses in various commodities which includes coppers as well.

Friday, December 14, 2012

Sovereign Wealth Funds And Global Finance

Since the early 2000s, SWFs from emerging countries like Kuwait, Abu Dhabi, Singapore, China have stopped communicating with the financial sector and the general public with the aim to build an good image among investor and be reliable. Indeed, their rise was alternately seen as a form of threat to the national sovereignty of the host country, due to the lack of transparency and their alleged ambitions to invest in strategic sectors, and as a favorable element international financial stability and an important financing industrialized economies. In total, a consensus seemed to exist to recognize the positive role of these funds.

Until recently when an unexpected event came to trouble: the fund of Abu Dhabi International Petroleum Investment Company (IPIC) has withdrawn capital Barclays Bank selling on June 2 about 11% of the capital of the 16.3% stake. This operation was a surprising, since it was only made seven months before and the fund became the largest shareholder of the British bank, has allowed him to realize a profit of 1.7 billion Euros. At the same time, the action Barclays lost up to 16% during the session. Trying to get some height and to understand the implication of this new element of sovereign wealth funds and global finance as a whole. Few years back. Before the start of the subprime crisis, SWFs have managed to forge an image of stable investors, favoring a long-term horizon and supports conventional investments such as stocks, bonds or hybrid (i.e. convertible bonds). They also seemed to have no requirement to return excess capital.


Traditionally, they carefully avoided all equity investors and majority remained "passive", i.e. the investor not claiming a seat on the board and do not exercise their voting rights. Their public mandate was simply to pay the financial markets of resources from surplus reserves of oil and gas revenues, and even fiscal surpluses. Their assets under management in 2007 were estimated at more than 3000 billion, which are double the financial assets held by hedge funds or hedge funds. The combination of this long-term horizon, these financial ambitions measured, and the passivity of this important financial capacity tended to SWFs investors 'ideal' for the proper functioning of the financial sector. With the onset of the financial crisis, SWFs action took on a new dimension. Their stakes in Western banks have been hailed as rescue actions the global financial system, allowing some observers assert that "sovereign wealth funds play a fundamentally stabilizer in the international financial system and this fact is clearly verified in the current liquidity crisis ".

In total, between summer 2007 and end of 2008, the amount of equity in banks was about a hundred billion. For comparison, the amounts incurred by SWFs in Western financial institutions were valued at about two billion dollars in 2006. It was so relevant and legitimate to ask whether these new commitments, which differed widely patterns found previously, were more an expression of opportunistic strategies that will contribute to saving the international banking system. The episode Barclays has given a strong argument to critics of SWFs. Should this mean to generalize and draw a vitriolic portrait of all these funds, whatever they are? It is simply to make the obvious, funds, sovereign or not, is first of all investors. And like many traditional investors in times of crisis, some have high risks in search of high returns in the short term. Note, however, that the investments of SWFs, like the pronouncements of Warren Buffet or Albert Frère, are perceived as a buy signal from the other operators on the market, automatically assigning goodwill significant target values. By these new practices, SWFs could encourage other players in the market looking for a short-term profitability to do the same and thus unwittingly contribute to the volatility of stock prices.


Since the early 2000s, SWFs from emerging countries like Kuwait, Abu Dhabi, Singapore, China have stopped communicating with the financial sector and the general public with the aim to build an good image among investor and  be reliable.

Indeed, their rise was alternately seen as a form of threat to the national sovereignty of the host country, due to the lack of transparency and their alleged ambitions to invest in strategic sectors, and as a favorable element international financial stability and an important financing industrialized economies. In total, a consensus seemed to exist to recognize the positive role of these funds ... Until recently when an unexpected event came to trouble: the fund of Abu Dhabi International Petroleum Investment Company (IPIC) has withdrawn capital Barclays Bank selling on June 2 about 11% of the capital of the 16.3% stake. This operation was a surprising, since it was only made seven months before and the fund became the largest shareholder of the British bank, has allowed him to realize a profit of 1.7 billion Euros. At the same time, the action Barclays lost up to 16% during the session. Trying to get some height and to understand the implication of this new element of sovereign wealth funds and global finance as a whole.

Few years back. Before the start of the subprime crisis, SWFs have managed to forge an image of stable investors, favoring a long-term horizon and supports conventional investments such as stocks, bonds or hybrid (i.e. convertible bonds). They also seemed to have no requirement to return excess capital. Traditionally, they carefully avoided all equity investors and majority remained "passive", i.e. the investor not claiming a seat on the board and do not exercise their voting rights. Their public mandate was simply to pay the financial markets of resources from surplus reserves of oil and gas revenues, and even fiscal surpluses. Their assets under management in 2007 were estimated at more than 3000 billion, which are double the financial assets held by hedge funds or hedge funds. The combination of this long-term horizon, these financial ambitions measured, and the passivity of this important financial capacity tended to SWFs investors 'ideal' for the proper functioning of the financial sector.

With the onset of the financial crisis, SWFs action took on a new dimension. Their stakes in Western banks have been hailed as rescue actions the global financial system, allowing some observers assert that "sovereign wealth funds play a fundamentally stabilizer in the international financial system and this fact is clearly verified in the current liquidity crisis ". In total, between summer 2007 and end of 2008, the amount of equity in banks was about a hundred billion. For comparison, the amounts incurred by SWFs in Western financial institutions were valued at about two billion dollars in 2006.
It was so relevant and legitimate to ask whether these new commitments, which differed widely patterns found previously, were more an expression of opportunistic strategies that will contribute to saving the international banking system.

The episode Barclays has given a strong argument to critics of SWFs. Should this mean to generalize and draw a vitriolic portrait of all these funds, whatever they are? It is simply to make the obvious, funds, sovereign or not, is first of all investors. And like many traditional investors in times of crisis, some have high risks in search of high returns in the short term.
Note, however, that the investments of SWFs, like the pronouncements of Warren Buffet or Albert Frère, are perceived as a buy signal from the other operators on the market, automatically assigning goodwill significant target values. By these new practices, SWFs could encourage other players in the market looking for a short-term profitability to do the same and thus unwittingly contribute to the volatility of stock prices.