The Star Online: Business
The Star Online: Business |
- Treasury pulse
- Biological aspects of boom and bust
- 5%-10% increase in Khazanah CR initiative funding seen
| Posted: 05 Apr 2013 10:37 PM PDT Global forex market MONTHS of speculation over the Bank of Japan's (BoJ) stimulus path has built up into this specific policy meeting that governor Kuroda pledged to do "whatever it takes" to end deflation, and return inflation to 2% within two years. A 25% advance from US dollar/yen in less than six months carries a very clear fundamental drive outside of the normal bounds of risk trends or relative economic performance and that is the hallmark of excessive stimulus expectation, and markets are now expecting more than pledges and something beyond the anti-deflation credentials of BoJ. The April 3-4 BoJ meeting turned out to be a surprise as markets expressed their support with the yen depreciated to trade above 96 compared to 93.32 in the early part of the week. Added to this was the announcement by Prime Minister Shinzo Abe to give every citizen the ability to print currency using a desktop computer application. The reopening of European markets after the Easter holiday has brought fresh risk appetite, with European indices enjoying healthy gains. Markets didn't set to high expectations on the European Central Bank (ECB) given that its own policy bearings have been held broadly steadfast for some time (with a few words of concern about the euro and downgrade on growth forecasts). No talk of further easing has been offered by the ECB and with some kind of stability seen in Cyprus and region-wide austerity drive. Euro rebounded from recent low and kept above the 200MA of 1.2893. The ECB president Draghi appeared to leave the door open for a cut in official interest rates if forthcoming data in the weeks ahead show extended weakness in activity. In response to these developments and weaker US data, the benchmark S&P 500 posted its biggest daily drop in five weeks and moved the market up to the lower boundary of this year's persistent bullish trend channel. The tension is high, but this has not yet upgraded to a truly serious risk aversion situation. The ADP national employment gauge showed that 158,000 private sector jobs were created in March, the weakest growth in five months and below expectations for a gain of 200,000 positions. Also, the ISM services index eased from 56.0 to a seven month low of 54.4 in March. Australia was the best-performing major, after a better-than-expected trade balance emboldened the Australian dollar bulls, with the currency sitting just below a two-month high at 1.05. The Australian dollar was stronger also due to an upbeat central bank report, which cited a reduction in downside risk for the domestic economy. This left rates unchanged. The ringgit ended the week on bullish tone with 1.1% appreciation against the US dollar following from Prime Minister Najib's announcement to dissolve Parliament in preparation for the 13th General Elections. Barisan Nasional currently controls 137 seats in Malaysia's 222 member parliament and Najib's popularity rating stands at 61% based on survey conducted from Jan 23 to Feb 6 by the Merdeka Centre for Opinion Research. US Treasuries (UST) Market US Treasuries advanced this week, with yields easing lower on the back of softer economic prints. Employment data for the month of March is expected to come in softer than the previous month. Yields on 2-, 5- and 10-year note seen easing to settle at 0.23%, 0.70% and 1.77% respectively at time of writing. Malaysian bond market This week saw the re-issuance of the seven-year Malaysian Government Securities (MGS) benchmark. The issue size of RM3.5bil was within market expectations. The tender attracted a bid to cover of 1.64 times with an average yield of 3.417%. Trading in the MGS/GII was thin at the beginning of the week following the announcement of the tender. Market players were also on the sideline waiting for details of the upcoming election. Sentiment turned in mid-week following the dissolution of the current Parliament. Local bond activities picked along with the bullish sentiment in the ringgit. The newly re-issued MGS 03/20 saw trading volume reaching RM3.3bil at time of writing. On private debt securities, total trading volume amounted to RM3bil, of which 69% came from the GG/AAA, 29% from the AA segments and the remaining trades from the single A segment. Daily average trade volume rose to RM742mil compared with RM740mil average seen in the prior week. In the GG/AAA segment, active trading was seen on Manjung Island's bonds maturing 2018-2031, last dealt in the range of 3.71% to 4.43% with a collective trading volume of RM291mil. Other notable trades include the bank-guaranteed Boustead's bonds maturing in 2015, which attracted a total trading volume of RM280mil, last dealt in the range of 3.77% to 3.9%. In the AA band, power-related bonds were flavour of the week. Tanjung Bin Power's bonds maturing 2019-2028 were well sought with a collective trading volume of RM165mil, last dealt in the range of 4.02% to 4.72%. Elsewhere, Gamuda 03/18 attracted a volume of RM135mil with yield easing 3bp to 4.02%. MYR IRS market The dissolution of the Parliament had minimal impact on the ringgit (MYR) interest rate swap (IRS) rates and rates only dipped towards the end of the week after US data disappointed and US Treasuries rallied. The IRS curve ended the week 1-3bps lower. ● For enquiries, contact: fx-research@ambankgroup.com or bond-research@ambankgroup.com |
| Biological aspects of boom and bust Posted: 05 Apr 2013 10:35 PM PDT The Hour between Dog and Wolf: Risk-taking, gut feelings and the biology of boom and bust Author: John Coates Publisher: 4th Estate ON the surface, The Hour between Dog and Wolf seems like a gimmick that cashes in on the most recent financial crisis, the one that turned the world upside down and wreak havoc in the lives of traders and bankers. Given a quirky title, the book looks intriguing, and its premise ground-breaking how biology explains Wall Street's booms and busts. That, coupled with the book's portability and affordability, makes it a book that stopper at first glance. Truly it is. This book is wondrous to read. John Coates, who is a neurologist and a former Wall Street trader, disentangles the dichotomy of economics and biology. He shows how hormones of traders collectively form the physiology foundation of highly volatile financial markets, and that it is our body that affects our brain, not entirely the other way round as commonly understood where our brain commands our bodily actions. According to Coates, our body, through muscles, transmits information back to the brain fast enough to keep up with our emotion as well as to generate it. This theory can best be tested in the highly fluid and intense financial markets as Coates did on four professional traders. With consummate skills, Coates narrates and demonstrates how these traders, when placed in the nerve vortex of world economy, can discern the tiniest clues with their sense and react to market events so quickly that their brains cannot keep up and they have to draw on signals from their bodies to optimise their trades. Following Coates' theory, the traders pass through various cycles of changes both in their bodies and in minds from thrill and excitement to the belief that they are infallible. At their euphoric high points, one trader with impaired judgement places dangerous risk-taking bets, and his positions grow to dangerous sizes. As a result, traders are generally time-bombs having no inkling of their biological workings. But neither did we until Coates tells us so. "Human biology can today help us understand over-confidence and irrational exuberance, and it can contribute to a more scientific understanding of financial market instability," writes Coates, heralding a new movement that explains the tacit knowledge that we subconsciously concede but do not know how to explain it. This tacit knowledge shared between the body and the brain is now completely brought to light by Coates who ploughs deep down into our body like a surgeon. Hormones such as adrenalin, testosterone, cortisol that send instructive messages for us to react come to life under Coates' command. Along the veins as they travel, they fight to subdue each other, affecting rationality and regularity. But Coates obviously is not as wry and dry like a serious surgeon. He is funny, making the process of understanding the unification of body and brain, a process called homeostasis, highly entertaining and enlightening. Our goose bumps rise because our animal instincts have called for us to raise our fur, which we do not have. Our throats turn dry because in the face of challenges, our body conserves water, hence the dry mouth. The amount of bodily signals coming as they do from various tissues, every muscle and organ to be processed by the brain is as voluminous as the fun of reading this book. The entire narrative is awe-inspiring, and Coates himself, unlike most traders in the financial markets, displays cool composure in vindicating his theory. Hormones, brain cells, dollar and sense criss-cross and blink like security prices on traders' screens, but Coates is unfazed. He deals with them one at a time and in an organised manner. In the end, two highly distinctive fields of study coalesce, and the truth is out to our dismay the financial system balances precariously on the mental health of those risk-taking, risk-loving, adrenalin-pumping traders who have way too many of the bad hormones to be trusted. Like athletes, these traders are short-term sighted and they do not make great use of their cognitive abilities because cognitive reactions are too slow for the cut-throat environment. Instead their responses are guided by subconscious fast reactions. In less scientific terminology, they follow instincts rather than methodical reasoning. Coates' compelling narrative questions the grand theory of Efficient Market Hypothesis and wobbles the foundations of one of neo-classical economics' most sacred tenets that human behaviour is volitional we choose our course of actions with a rational mind! This tete-a-tete conversation between biology and economics is a total game changer, as Coates says, "If the walls separating brain from body came down, so too would the barriers between many subjects." There are many ways to better manage fluctuations of financial markets, and defusing the explosive mix of hormones and risk-taking is likely to work if we do as Coates believes financial bubbles are largely a male phenomenon. In that case, we should manage by first changing the biological diversity of markets. Welcome then women (calmer) and older men (wiser) to the testosterone world of trading. |
| 5%-10% increase in Khazanah CR initiative funding seen Posted: 05 Apr 2013 10:31 PM PDT KUALA LUMPUR: Khazanah Nasional Bhd will likely increase funding for its corporate responsibility (CR) initiatives this year by 5% to 10% from the RM62.4mil spent in 2012. The Malaysia's state investment arm said its CR initiatives last year had benefited more than 140,000 individuals across the country. Since 2004, Khazanah's total funding for its CR initiatives stood at RM255mil, and was believed to have touched more than 500,000 lives nationwide. "It is important for us to work with NGOs (non-governmental organisations) to build their capacity and ensure their resilience," Khazanah managing director Tan Sri Azman Mokhtar said after the launch of Khazanah's 2012 CR Report yesterday. "We want organisations to align with our thinking, where we can add value. Not just the money, but also the corporate mindset in terms of achieving efficient delivery." The report, its fourth since 2009, detailed a range of CR initiatives on which Khazanah focused, including responsible investments and value creation; human capital development; social capital development and environmental stewardship. "We hope that the publication of this CR Report will encourage more corporates to help underserved communities and protect the environment," Azman said, after pointing out that Khazanah was more than just about financial and strategic returns. This year, Khazanah collaborated with Wolfson College of Cambridge to sponsor two Malaysian journalists for the inaugural Khazanah-Wolfson Press Fellowship programme for 10 weeks. The first two recipients of the award were Marhaini Kamarudin of Utusan Malaysia and Cecilia Kok of The Star. The annual programme aims to provide Malaysian journalists the opportunity to enhance their expertise and knowledge in the field and contribute towards the further development of journalism in Malaysia. Khazanah's investment portfolio registered a growth of 138.7% from RM50.9bil on May 14, 2004 to RM121.6bil as at Dec 31, 2012. This was accompanied by an increase in value created in excess of RM53bil over the same period. |
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