Monthly Archives: January 2015

Swiss Franks- Currency traders rattled in wake of Swiss central bank move- The Hindu

Foreign currency traders around the world are coming under pressure following the Swiss central banks surprise decision on Thursday to remove the cap on its currency.

FXCM, an online currency trading service listed in New York, said late on Thursday that it might have breached regulatory capital requirements after its clients’ losses of $225 million.

The company, one of the biggest foreign exchange trading platforms for individual investors in the United States, blamed the losses on unprecedented volatility in the exchange rate of the euro against the Swiss franc, which has surged more than 20 per cent since the Swiss National Bank removed a 3-year-old cap on the currency’s value.

We are actively discussing alternatives to return our capital to levels prior to Friday’s events and discussing the matter with our regulators, FXCM said in a statement on Thursday.

Separately, in New Zealand, another online foreign exchange broker said it was shutting down.

The dramatic move on the Swiss franc fuelled by the Swiss National Banks unexpected policy reversal of capping the Swiss franc against the euro has resulted in rare volatility and illiquidity, David Johnson, the director of the company Global Brokers NZ, said in a statement posted online on Thursday.

As a result of shouldering clients’ heavy trading losses, he said, the company was in breach of its regulatory capital requirement and would be unable to resume business.

News of the impact of this event on companies and traders is just beginning to come to light, Mr. Johnson added in the statement, which was addressed to clients. We would like to offer our sincerest apologies for this devastating turn of events.

Switzerland had effectively capped the value of its currency at 1.20 per euro since 2011, a move targeted to halt the francs rapid appreciation in the middle of a sovereign debt crisis in Europe.

But the euros’ persistent weakness in recent months made continuing with that strategy too risky and expensive, especially with the euro likely to weaken further in the coming weeks if European policymakers push ahead with a new round of stimulus measures, as is widely expected.

The ructions in the foreign exchange markets are likely to continue. Oanda, another large online currency broker, said it was positioned to take advantage of what it predicted would be a shakeout in the industry.

Friday’s events are sure to trigger broker consolidation, which as an extremely well capitalized broker, interests us greatly, the company said in a statement.

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Swiss francs fall 18% in a day.-The Nytimes

These are strange and unnerving times in global financial markets, and if Thursday’s jaw-dropping move in the Swiss currency didn’t prove it, nothing will.

It is not every day that the currency of an advanced, economically important country rises by double-digit percentages against the currencies of other such countries within mere hours. But that is what happened to the Swiss franc on Thursday. It is up 18 percent against the euro as of Thursday morning, and at one point was up 39 percent. Currency strategists were searching for any analogue in modern history for a similarly abrupt move in major Western currency and coming up empty.

The Swiss move offers interesting lessons about the oddly precarious state of the global economy, but first it’s worth working through what exactly the Swiss National Bank has done.

Invisible hand of the state

Again was going through the Ankit’s blog. Hit upon this wonder full entry. This one is by Ajit Balakrishnan in BS.

Internet, touchscreen, GPS all are one way or other the govt sponsered projects.

Even in India the software industry can say thanks to govt for kick-starting by mean of computerisation of Indian banks and Railway system.

Most intresting excerpt:

You need to peer really hard to detect this kind of invisible hand of the state. Mariana Mazzucato, professor of science and technology at the University of Sussex and the author of The Entrepreneurial State – Debunking Public vs. Private Sector Myths, did just that and uncovered the role of the American state behind what is generally seen as the ultimate artifact of entrepreneurial vision, the Apple iPhone. “What actually makes the iPhone a smartphone, instead of a stupid phone?” she asks in a recent TED talk. And answers that it is the internet; the (GPS), which detects your geographic location; the touchscreen display that makes it also a really easy-to-use phone. She points out that “the very smart, revolutionary bits about the iPhone, are … all government-funded … the Internet was funded by the (DARPA) of the United States. The was funded by the [United States] military’s Navstar program … the touchscreen display was funded by two public grants by the CIA [Central Intelligence Agency] and the US National Science Foundation”, and in the American pharmaceutical industry, “a full 75 percent of the new molecular entities with priority rating are actually funded in boring, Kafkian [United States government] public sector labs”.

BS link

Interview of of Ruchir Sharma,Morgan Stanley

Interesting inteview in typical media setting of blue-eyed boy from Investment industry. I really liked it.

Key comments:

Watch out for Feb. 3 events:

1. Budget  2. Intrests Rate Cut

3. Finance Commission proposal to devolve power to states

Oil near its historical average(inflation adjusted)

India grows slightly(1-2% ) above the emerging markets.

China may slow down due to heavy debt.

Why sub-brokers are going down and forign MF exiting India

I was going through on my my favourite blog, when I ran into this article. Wonderfully technology is on creative destruction. So many sub-broker are out of business in spite of Sensex jumping 28% in 2014.

On the MF part:

Given the buoyancy in the capital market and a favorable long-term outlook, what is triggering such exits? At a macro level, experts say the slowdown in the developed market and new capital requirement back home have made foreign entities review their business plans. Besides, the strategies adopted by the latter have failed to click in the Indian market, typically where smaller fund houses have struggled to attain reach and profitability.

Experts believe ‘brand connect’ is important in a trust-business such as fund management. Most large fund houses, such as HDFC MF, ICICI Prudential AMC, Reliance MF, Reliance MF, Birla SunLife MF and SBI MF, have the backing of large banks or financial institutions, giving them reach and understanding, they say.

There are seriously the niche where we as Indian outsmart MNC hands down.