CEINEX Quarterly No. 4: China Capital Markets Access

Despite the global geopolitical tensions as well as the global Covid-19 pandemic China’s integration in global economy is continuing as before or even more. Especially the integration in the global capital markets is picking up speed. This goes both ways, with more and more barriers being put aside by the Chinese regulators for international financial services firms to enter its market as well as an increasing number of Chinese firms opening offices and branches in Europe and the US. This is a strong signal that the challenges in other terrains can also be solved by cooperation and that all sides involved eventually are still looking to do so.

In the run-up to the China-Europe Financial Summit on Tuesday (20 October 2020), CEINEX has recruited some outstanding authors to present their views on topics of the Chinese capital markets for the CEINEX Quarterly Newsletter: for example, the rapid changes in the Chinese asset management industry.

Further highlights are:

  • Convergence in China: Opportunities for institutional investors by Peter Reynolds, Managing Partner, Head of Greater China, Oliver Wyman, Hong Kong; Kai Keller, Initiative Lead, World Economic Forum, Beijing; Adrian Low, Engagement Manager, Oliver Wyman, Hong Kong
  • M&A Investing in China – Five things to be aware of by Frank Niu, Dentons China
  • Towards a Mutual Beneficial Investment Agreement between the EU and China by Horst Löchel, Professor of Economics and Co-Chairman of the Sino-German Center at Frankfurt School of Finance & Management
  • North Asia leads the recovery in Emerging Markets by Sean Taylor, APAC Chief Investment Officer, DWS, Hong Kong
  • Fintech in China by Thomas Heck, Partner PwC, Head of China Business Group in Germany and Europe & Sebastian Sohn, Senior Manager Financial Services (Singapore) at PwC South East Asia Consulting

Download the Newsletter as a PDF here.


About CEINEX

China Europe International Exchange AG (CEINEX) is a joint venture established by Shanghai Stock Exchange (SSE), Deutsche Börse Group (DBAG), and China Financial Futures Exchange (CFFEX). It is the first dedicated trading venue for China- and RMB-related investment products outside of mainland China and considered a strategic project between China and Germany.

 

Text and Image: © CEINEX 2020

Reading Books during Covid-19

BCG: Books to read during the COVID-19 Pandemic

BCG created a reading list that has been greatly influenced by the personal implications of the unfolding global COVID-19 pandemic and profound unrest. The reviewers are a diverse group of BCGers, you can see this undercurrent reflected in almost every suggestion:

  • Purpose & Creativity
  • Diversity and Inclusion
  • Leading in the new Reality
  • Personal Wellbeing
  • International Relations

It does not matter whether you’re a CEO or a student. You will find something to teach or inspire you, or simply to enjoy.

Purpose & Creativity

Creative BCGers have found that equally creative business leaders often write the most readable books. These books on creativity and purpose may spark your creative fire and get you moving in a new direction.

The Songs of Trees
In The Songs of Trees, BrightHouse luminary and Pulitzer-prize nominated author, David Haskell explores the roots of connection; how our biology has shaped our relationships; and the complexity of networks that shape culture, awareness, and being.”

– Ashley Grice
CEO, Brighthouse

A Business and Its Beliefs: The Ideas That Helped Build IBM
“Written in the early 1960s—well before purpose was a business topic—the former CEO of IBM tells the story of IBM’s values and how its refusal to compromise those values became IBM’s primary strength. It is also one of the first books by a major CEO to discuss a corporation’s responsibilities in society, and how firms can meet expanding social expectations while still turning a profit.”

– Brad White
Managing Director & President, Europe & Middle East, BrightHouse

Diversity and Inclusion

BCGers, like many others, are thinking a lot about diversity and inclusion in the workplace, and beyond. These books on diversity and inclusion run the gamut from history to parenting to real advice on how to make a difference professionally and personally.

Jayber Crow
“Berry depicts the benefits and challenges of small-town America beautifully through a series of books centered on the fictional town of Port Meadow, of which Jayber Crow is my favorite. Far from naively idealistic, it is a raw and real portrayal of a vastly different life from the fast-paced, extravagant one in which we consultants live, which I find a compelling challenge.”

– Anna Gibson
Consultant

97 Things White People Can Do for Racial Justice
“I can’t even begin to imagine how the Black community is feeling after the continued murder and violence against Black people in America these past few weeks: Breonna Taylor, Ahmaud Arbery, George Floyd, and Chris Cooper. This resource has given me actionable steps I can take to be a more compassionate citizen and ally.”

– Beth Viner
New York Center Lead, Managing Director & Partner, BCGDV

More books to read during the Covid-19 pandemic can be found here.


Text by Boston Consulting Group
Photo by Engin Akyurt / Pixabay

Now read

Never waste a good crisis

AFME Market Update: Impact of COVID-19 on European Capital Markets

 

Never waste a good crisis

EU and UK are still in negotiation mode. In absence of an extension of the transition period, a no-deal Brexit has once again become a plausible scenario. The advice “hope for the best and prepare for the worst” is as valid as ever in this saga.

We advise financial institution to not plan based on equivalence. Even in the best of cases, equivalence doesn’t cover all relevant areas. What’s more, neither the very rational of the Brexit – taking back control – nor the way negotiations are going, point to equivalence as a solution.

Market participants acted accordingly. The loss of passporting rights will lead to a shift of roughly 50 percent of EU business on UK based bank balance sheets to the continent. We have seen bookings move into Frankfurt of about €300 billion so far. We expect another €100 billion before the end of the year and we know of another €400 billion ready to move.

Will all that lead to more inefficiencies? Not necessarily. Fragmentation may, but does not necessarily, lead to higher costs. Notto forget that costs occur not only on banks profit and loss accounts, but eventually also in state-budgets. Given the impact on financial stability, standing on your own two feet is better than standing on one, especially if that one is beyond your control.

It was a key project of the G20 under the stewardship of Japan fighting global fragmentation of financial markets and rightly so. At the very same time Japan continued on its endeavour in bringing the Yen clearing back to Tokyo, at least to a sufficient degree.

Take Eurex as an example: We are nearing 20 percent of Euro denominated interest rates swaps, were clearing moved from London to Frankfurt, and growing. This was achieved with costs and spreads on par for market participants. Social risks could be reduced and at the same time costs for market participants been avoided. If it sounds like the holy grail, it probably is. Let’s remember the scaremongering numbers of up to €100 billion additional costs European banks would have to bear once clearing would have to move. So clearly there can be a good fragmentation, leading to a healthy competition and more financial stability – at no additional costs for the industry. Fragmentation can, but doesn’t have to be bad and may even be good.

The train of shifting business is in motion. In a world ever more polarized and global powers increasingly self serving, Europe can ill afford to loose control of it’s financial ecosystem, given the geopolitically relevance of the industry. Naturally the UK will always be invited to be the EU’s preferred partner.

The corona virus created a push towards digitalization and solidarity in Europe, at a spead, that was surprising even for optimists.

The corona virus created a push towards digitalization and solidarity in Europe, at a spead, that was surprising even for optimists. As a result, we need to ask ourselves: Do we witness the early days of a new European safe asset class?

And if so, could it accelerate the creation of the common EU capital market. Europe’s ability to move under stress has repeatedly been underestimated. I’m bullish on Europe living up to its challenges, not wasting this crisis.

 

Source: Hubertus Väth, Managing Director of Frankfurt Main Finance in Views – The EUROFI Magazine (Berlin, September 2020)

Image: Pete Linforth/Pixabay

Back in Business – CRIFBÜRGEL’s new online portal ensures financial transparency in the crisis

Well-founded information about business partners or suppliers is even more important in times of crisis than in good economic times. With this in mind, CRIFBÜRGEL has developed Back in Business, an online portal that enables companies in Germany to let the market know that they are back in business. Companies that rebuild and strengthen their business relationships with customers, suppliers, dealers and importers are thus supported in showing financial transparency.

Companies benefit from the Back in Business initiative on several levels. First of all, the portal offers them a simple and free opportunity to provide their business partners and suppliers with an up-to-date picture of their economic performance and thus to document their activities with regard to future-oriented entrepreneurship.

As part of the Back in Business network, companies also benefit from exclusive access to webinars and services.

Further information can be found here.


Text by CRIFBÜRGEL

KfW Business Survey 2020: Lending climate – Businesses are well-equipped for the crisis

In cooperation with 19 trade associations, KfW Group has conducted a business survey on banking behaviour and financing for the 19th time.

The survey was carried out between mid-December 2019 and the end of March 2020, overlapping with the outbreak of the coronavirus pandemic and the containment measures introduced in the second half of March. The survey revealed that the financing situation of enterprises in Germany was good until the outbreak of the coronavirus crisis. Enterprises’ robust self-financing capacity, low interest rates and German banks’ relaxed lending criteria were major contributors.

The most important results are:

  • The financing situation remained good until the outbreak of the coronavirus crisis.
  • The proportion of enterprises reporting difficulties in accessing credit was 13.4%.
  • As before, however, small businesses are still much more likely to face difficulties in accessing credit.
  • The positive development of businesses’ equity ratio and credit rating continued up until the beginning of 2020.
  • Bank loans remain an important source of funding for businesses. Internal funding, however, continues to play by far the most important role in business financing.

Please find a summary at: KfW Business Survey 2020: Access to finance

 

Text: KfW

Photo: ArtCoreStudios/Pixabay

AFME Market Update: Impact of COVID-19 on European Capital Markets

The Association for Financial Markets in Europe (AFME) has published a new research note on the “Impact of COVID-19 on European Capital Markets: Market Update”.


The purpose of this report is to provide an update on how European capital markets have performed during the COVID-19 outbreak. This report follows a first publication launched in mid-April which assessed the initial impact of COVID-19 on Europe’s capital markets.

Key findings include:

  • Issuance levels of investment grade (IG) bonds have reached record weekly, monthly and quarterly volumes.
  • An ESG recovery.
  • European market liquidity has deteriorated over the last few months.
  • Follow on equity offerings have continued to support the recovery.
  • After two months of a virtually inactive IPO market, the European primary equity market reopened in May with EUR 3.6bn in proceeds from 24 deals.
  • European listed SMEs have also benefited from access to equity capital, predominantly from secondary offerings on Junior exchanges.
  • Record volumes of bank lending.

Please find the full research note at: AFME Market Update: Impact of COVID-19 on European Capital Markets


The Association for Financial Markets in Europe (AFME) is the voice of all Europe’s wholesale financial markets, providing expertise across a broad range of regulatory and capital markets issues.

 

Photo: Fernando Zhiminaicela/Pixabay

COVID-19 Scenarios and their Socio-Economic Implications by Prof. Alexander Van de Putte (AIFC)

Z/Yen Group Limited held a private online meeting on 15. July 2020 with representatives of international financial centres from the City of London, Abu Dhabi, Shanghai, Shenzhen, Luxembourg, Tokyo, Hong Kong, Astana, Frankfurt and many more. The main aims were to work closer together and to discuss the impact of COVID-19 on global financial centres, the recovery plans of restarting economies and the future strategic changes in financial centers over the next decade.

Prof. Alexander Van de Putte, Chief Strategy Officer of the Astana International Financial Centre (AIFC), shared some COVID-19 Scenarios and their Socio-Economic Implications until 2022. In his presentation you will find insights into:

– Various Types of Foresight Tools

– The Emergence of Global Pandemic

– Taking Stock of what has happened so far

– The Scenarios and its Socio-Economic Implications

Please find his presentation here: Prof. Alexander Van de Putte (AIFC): Covid-19 Scenarios


The Astana International Financial Centre (AIFC) is a financial hub for Central Asia, the Caucasus, the Eurasian Economic Union (EAEU), the Middle East, West China, Mongolia and Europe.

KPMG ECB Office: Implications of COVID-19 on the European banking sector

Since March 2020, KPMG‘s ECB Office has published a new newsletter dealing with the impact of COVID-19 on the European banking sector. The insights and materials have been created to help you respond to the challenges of the present, and prepare for the future and the new reality.

Read more

European DataWarehouse: Monitoring the impact of COVID-19

European DataWarehouse (EDW) has published a short paper showing that some of the effects of the COVID-19 crisis were already visible in the Loan Level Data (LLD) dated 31st March 2020.


Starting from a few cases in early February 2020, COVID-19 spread throughout Europe, forcing governments to enact severe social distancing measures. It is expected that the crisis will lead to substantial amounts of loan modifications. EDW used the reporting criteria suggested to flag loan modifications due to COVID-19 to see to what extent these are already visible.

Most governmental decisions on social distancing were enacted in March 2020. These measures have severely reduced the income of some borrowers from mid-March onwards. Governmental support, when available, was often delayed and often failed to fully compensate for lost income, leaving some borrowers having to pay more than they could afford. To compensate, some borrowers either withdrew on their savings or asked for a credit or payment holiday. Governments have encouraged lenders to grant forbearance measures to help borrowers and soften the blow to the economy. In several countries, it was reported that measures such as allowing a temporary switch to interest only payments or payment holidays have indeed been granted to a substantial number of borrowers.

In this respect, EDW’s data will make it possible to monitor these changes given that specific reporting guidelines are available to help data providers.

Read the short paper here: European DataWarehouse Report – Monitoring the impact of COVID-19


EDW became operational in 2013 in the wake of the 2008 financial crisis to satisfy the need for more transparency in the securitisation market. Their loan-level data will make it possible to assess the effect of the current crisis on securitised portfolios, in a way that would not be feasible looking only at investor reports.

Oliver Wyman study on the effects of the corona pandemic

Source: www.oliverwymanforum.com

“The coronavirus pandemic strikes at some of the central features of urban living. The disease has taken a heavy toll on major cities like New York City, Madrid, and Sao Paulo, and efforts to stop its spread with lockdowns and social distancing raise questions about the density of human activity and interaction that have long drawn people to cities. Now growing numbers of people in the United States and United Kingdom are looking to move or have already done so, and many have changed their criteria for deciding where to live, according to new research from the Oliver Wyman Forum.

A survey of 1,100 Americans found that two percent of respondents have permanently or temporarily relocated because of COVID-19, while another 14 percent are planning to relocate or leaning toward doing so. Affluent respondents were the most mobile, as three percent of respondents with incomes of more than $120,000 have already relocated. Urban residents, renters, and younger respondents were the most likely to be planning or considering a move.”

A detailed overview and discussion of the study results can be found on the Oliver Wyman Forum website.