Historical event: IMF gives China’s currency prized reserve asset status

“The International Monetary Fund on Monday admitted China’s yuan into its benchmark currency basket in a victory for Beijing’s campaign for recognition as a global economic power. The IMF executive board’s decision to add the yuan, also known as the renminbi, to the Special Drawing Rights (SDR) basket alongside the dollar, euro, pound sterling and yen, is an important milestone in China’s integration into the global financial system and a nod to the progress it has made with reforms.

To meet the IMF’s criteria, Beijing has undertaken a flurry of reforms in recent months, including better access for foreigners to Chinese currency markets, more frequent debt issuance and expanded yuan trading hours. The currency will have a 10.92 percent share, in line with expectations, after a review of the weightings formula for the SDR, which determines which currencies countries can receive as part of IMF loans.

The yuan’s inclusion is a largely symbolic move, with few immediate implications for financial markets. But it is the first time an additional currency has been added to the SDR basket and the biggest change in its composition in 35 years. Last set in 2010, the basket is currently 41.9 percent dollar, 37.4 percent euro, 11.3 percent sterling and 9.4 percent yen.

The yuan СNH=CNY would not join until October 2016, allowing reserve managers time to prepare. Under the new formula, the euro’s share will drop to 30.93 percent. Sterling and yen will also have lower weights while the dollar remains about the same.

To be included in the SDR basket, the yuan had to meet the criteria to be “freely usable,” or widely used to make international payments and widely traded in foreign exchange markets – a yardstick it missed at the last review in 2010. The addition is likely to fuel demand for China’s currency and for renminbi-denominated assets as central banks and foreign fund managers adjust their portfolios to reflect the yuan’s new status. Currency analysts estimate the IMF seal of approval could fuel demand worth more than $500 billion in coming years and take the yuan’s share of global reserve holdings to around 5 percent, overtaking the Canadian and Australian dollars.

In a factsheet accompanying the decision, the IMF said that since Chinese interest rates were higher than those of other currencies, it was likely that the SDR interest rate would rise as a result of the yuan’s inclusion. Read more »


Predictions for the stock market in 2016…

“Uncertainty about how markets respond to the first interest rate hike in nine years, commodity price weakness, and slow global growth are some of the things strategists have identified as potential headwinds for stocks and earnings. We’ve rounded up the calls from the top firms on Wall Street that we have so far.

We also included their original 2015 targets, so you can see where the strategists stood a year ago compared to where the market is now. Many of these were revised as the year unfolded.


Goldman Sachs

Goldman Sachs

2016 year-end target: 2,100

2016 EPS forecast: $120

2015 year-end target: 2,100

Comment: “We forecast the S&P 500 index will tread water for a second consecutive year in 2016,” wrote David Kostin. “Our year-end 2016 target of 2100 represents a 1% price gain from the current index level (2089), which itself is just 1% above the year-end 2014 level of 2059.”

Source: Goldman Sachs

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The Path of the Chinese Currency Devaluation

“There was a frenzy of speculation about Chinese currency devaluation earlier this year after a series of surrise moves that weakened the yuan (also called the renminbi) against the dollar. For all the discussion, the yuan has fallen by only about 3% in value against the dollar in 2015.

McKinsey estimated that Chinese debt has quadrupled since 2007 and its debt to GDP ratio has risen above that of the US. The question is, given the semi USD/RMB peg and China’s increasing open capital account (which come at the expense of China’s monetary independence), whether China can live with higher US interest rates and a higher US dollar. A weaker currency generally would boost China’s export potential and might help to prop up its flagging growth figures.

The yuan has actually strengthened in general over the past decade. It is still up by about 6.5% against the greenback since the middle of 2010 and up by 22.8% in the past 10 years, since the currency was unpegged from the dollar in 2005.

But before that period of pegging, you can see how massively the currency was devalued over a 15-year period, rising from less than two to the dollar in the early 1980s to over eight to the dollar by 1994“.


USDCNY long term

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Can you avoid all the physiological biases when it comes to investing?

The investment decision making process is a difficult one, and we are all only human. Sometimes our mind plays tricks on us, which often causes us to make mistakes. However, this does not have to be the case: play the game and find out whether you can avoid the most frequent investment mistakes!




CFA: золотой стандарт в мире инвестиций

Инвестиционная индустрия была одной из самых динамично развивающихся отраслей в 20 веке. Это требовало постоянного совершенствования и обновления знаний, разработки этических стандартов в свете периодически возникающих скандалов. В США для этих целей создавались общества аналитиков для обмена опытом и обучения их участников. Позднее к задачам обществ добавилась разработка и следование высоким этическим стандартам, продвигающих идеалы этики и профессионализма, способствовавшим росту доверия к инвестиционной индустрии и особенно актуальных сегодня. Среди всех обществ самым популярным стала национальная ассоциация финансовых аналитиков, позднее переименованная в Институт Дипломированных Финансовых Аналитиков с созданием собственного стандарта образования и кодекса этики.

После появления в 1963 году квалификация Chartered Financial Analyst® (CFA или Дипломированный Финансовый Аналитик) стала наиболее уважаемой и признаваемой в инвестиционном мире. По мнению Financial Times, «среди бесчисленного количества степеней Chartered Financial Analyst является золотым стандартом».

Программа обучения в Институте Дипломированных Финансовых Аналитиков (CFA Institute) признана во всем мире и дает сильнейший фундамент в изучении и практике инвестиционного анализа и портфельного управления. Особое внимание уделяется самым высоким этическим и профессиональным стандартам. Кодекс этики Института CFA является одним из самых жестких для соблюдения в инвестиционном мире.


CFA: что для этого нужно?
Путь к квалификации СFA не является простым. Для этого необходимо закончить трехуровневую программу Института (в среднем занимает 4 года без отрыва от работы), иметь минимум 4 года опыта в инвестиционно-финансовой сфере, следовать кодексу этики и профессиональных стандартов, и стать постоянным членом Института.

Вступить в программу Института могут кандидаты, имеющие степень бакалавра (НЕ обязательно в инвестиционной или финансовой сфере!) Read more »


US statistics in real time














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Shifting to a Services Economy: How the Employment in the US changed?

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The official list of banks that are too big to fail

As a response to the great reсession, the G20 countries set up the Financial Stability Board, a global watchdog for financial institutions. One of its responsibilities is to identify the banks that can’t go bust without causing a domino effect. The FSB calls such institutions global systemically important banks, or GSIBs.

The banks are split into buckets, with each corresponding to higher loss absorbency requirements based on how important to the global financial system the bank is. The higher the number, the more important the bank and the more capital it will be required to hold. Here’s the full list updated on Nov. 3, 2015:

too big to fail GSIBs

There’s only one change this year — the Spanish lender BBVA is out, and the China Construction Bank is in, reflecting the way that the world economy is changing. Other than that, all the groups stay the same — bucket Nos. 2, 3, and 4 are still precisely where they were.

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