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    • Turkey stocks lower at close of trade; BIST 100 down 1.47%

      Turkey stocks were lower after the close on Friday, as losses in the Textile & Leather, Banking and Food & Beverages sectors led shares lower. At the close in Istanbul, the BIST 100 lost 1.47% to hit a new 6-months low. The best performers of the session on the BIST 100 were Ipek Dogal Enerji Kaynaklari Arastirma ve Uretim AS (IS:IPEKE), which rose 4.18% or 0.280 points to trade at 6.980 at the close. Meanwhile, Dogan Sirketler Grubu Holding AS (IS:DOHOL) added 3.19% or 0.030 points to end at 0.970 and Anadolu Cam Sanayi AS (IS:ANACM) was up 3.13% or 0.080 points to 2.640 in late trade. The worst performers of the session were Yatas Yatak ve Yorgan Sanayi Ticaret AS (IS:YATAS), which fell 6.06% or 1.520 points to trade at 23.560 at the close. Aygaz AS (IS:AYGAZ) declined 5.86% or 0.71 points to end at 11.40 and Anadolu Efes Biracilik ve Malt Sanayi AS (IS:AEFES) was down 5.71% or 1.44 points to 23.76. Falling stocks outnumbered advancing ones on the Istanbul Stock Exchange by 282 to 88 and 34 ended unchanged. Shares in Aygaz AS (IS:AYGAZ) fell to 52-week lows; falling 5.86% or 0.71 to 11.40. Gold Futures for June delivery was down 0.24% or 3.10 to $1297.00 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in July fell 0.63% or 0.42 to hit $66.62 a barrel, while the August Brent oil contract fell 1.22% or 0.95 to trade at $76.61 a barrel. USD/TRY was up 1.64% to 4.6000, while EUR/TRY rose 1.45% to 5.3741. The US Dollar Index Futures was up 0.12% at 94.06.

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    • Norway stocks higher at close of trade; Oslo OBX up 0.58%

      Norway stocks were higher after the close on Friday, as gains in the Media, Insurance and Capital Goods sectors led shares higher. At the close in Oslo, the Oslo OBX gained 0.58%. The best performers of the session on the Oslo OBX were Gjensidige Forsikring ASA (OL:GJFS), which rose 3.33% or 4.2 points to trade at 130.5 at the close. Meanwhile, Schibsted ASA A (OL:SBSTA) added 3.20% or 7.4 points to end at 238.4 and Petroleum Geo - Services ASA (OL:PGS) was up 2.57% or 1.01 points to 40.38 in late trade. The worst performers of the session were Grieg Seafood (OL:GSFO), which fell 4.63% or 4.25 points to trade at 87.45 at the close. Leroy Seafood Group ASA (OL:LSG) declined 2.95% or 1.6 points to end at 52.6 and SalMar ASA (OL:SALM) was down 1.90% or 6.80 points to 350.20. Rising stocks outnumbered declining ones on the Oslo Stock Exchange by 97 to 71 and 34 ended unchanged. Crude oil for July delivery was down 0.64% or 0.43 to $66.61 a barrel. Elsewhere in commodities trading, Brent oil for delivery in August fell 1.24% or 0.96 to hit $76.60 a barrel, while the June Gold Futures contract fell 0.24% or 3.10 to trade at $1297.00 a troy ounce. EUR/NOK was down 0.31% to 9.5349, while USD/NOK fell 0.18% to 8.1649. The US Dollar Index Futures was up 0.12% at 94.06.

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    • Asia stocks recover from earlier losses, Europe seen firm

      By Shinichi Saoshiro TOKYO (Reuters) - Asian equities recovered from early weakness on Friday as a lower yen supported Japanese stocks and firm exports boosted South Korean markets. Still, rekindled concerns about U.S. trade policies limited regional gains. Spreadbetters expect European stocks to follow Asia's firmer tone and have marked in a modest rise of 0.15 percent for Britain's FTSE (FTSE) and gains of 0.5 percent for Germany's DAX (GDAXI) and France's CAC (FCHI). MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 0.1 percent but the index was still down roughly 0.6 percent for the week, during which it hit a six-week low on concerns about Italy's struggle to form a government. A fall on Wall Street on Thursday after the United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union, set the initial tone in Asia. Fears of a global trade conflict, which had partially receded in past weeks, were reignited as Washington's allies retaliated against the U.S. measures. However, regional sentiment recovered somewhat with South Korea's KOSPI (KS11) rising 0.7 percent on upbeat export data and Japan's Nikkei (N225) advancing 0.2 percent off the back of yen weakness against the dollar. Still, equity markets are likely to be weighed down, said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, "as the United States has opened up a new point of contention on the trade front by getting involved with the European Union." "President Trump has not accomplished very much in terms of trade issues and is likely to remain vocal with the U.S. midterm elections coming up," he said. The Shanghai Composite Index (SSEC) fell 0.5 percent and the blue-chip CSI300 index (CSI300) dropped 0.75 percent. Traders said Chinese stocks were volatile as the long-awaited inclusion of large-cap shares from the country in MSCI's emerging markets index had failed to buoy the market or attract any immediate flows of foreign money. (SS) On Friday, about 230 yuan-denominated mainland A-shares were included in MSCI index for the first time. Bank of America Merrill Lynch (NYSE:BAC) estimates China's A-shares could account for some 30 percent of MSCI's emerging market index once they are fully included. "It took Korea and Taiwan some six to nine years to gain full weighting. It may take (China's) A-shares longer in our view due to size, access and capital mobility constraints," wrote equity strategists at Bank of America Merrill Lynch. The Canadian dollar and the Mexican peso were on the defensive, weighed down by the U.S. decision to impose tariffs. The euro was little changed at $1.1679 (EUR=), holding onto modest gains made on relief overnight as Italy's anti-establishment parties reached a deal to resurrect their proposed coalition government. The deal averted the prospect of a snap election, which had rattled global markets earlier this week and sent the euro to a 10-month low of $1.1510 on Tuesday. The dollar climbed 0.3 percent to 109.150 yen , supported by U.S. yields reversing their overnight declines. The 10-year Treasury yield (US10YT=RR) was at 2.867 percent after brushing a 1-1/2-month low of 2.759 percent on Tuesday. Brent crude (LCOc1) dipped 0.1 percent to $77.49 a barrel. U.S. crude was down 0.25 percent at $66.87 a barrel . Prices have swerved between a three-week low of $$74.49 and $78.75 this week on speculation about output by major oil-producing nations. Brent's premium over U.S. crude reached its widest since March 2015 this week. [O/R]

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Financial News

6/1/2018 6:09:42 PM

Turkey stocks lower at close of trade; BIST 100 down 1.47%

Turkey stocks were lower after the close on Friday, as losses in the Textile & Leather, Banking and Food & Beverages sectors led shares lower. At the close in Istanbul, the BIST 100 lost 1.47% to hit a new 6-months low. The best performers of the session on the BIST 100 were Ipek Dogal Enerji Kaynaklari Arastirma ve Uretim AS (IS:IPEKE), which rose 4.18% or 0.280 points to trade at 6.980 at the close. Meanwhile, Dogan Sirketler Grubu Holding AS (IS:DOHOL) added 3.19% or 0.030 points to end at 0.970 and Anadolu Cam Sanayi AS (IS:ANACM) was up 3.13% or 0.080 points to 2.640 in late trade. The worst performers of the session were Yatas Yatak ve Yorgan Sanayi Ticaret AS (IS:YATAS), which fell 6.06% or 1.520 points to trade at 23.560 at the close. Aygaz AS (IS:AYGAZ) declined 5.86% or 0.71 points to end at 11.40 and Anadolu Efes Biracilik ve Malt Sanayi AS (IS:AEFES) was down 5.71% or 1.44 points to 23.76. Falling stocks outnumbered advancing ones on the Istanbul Stock Exchange by 282 to 88 and 34 ended unchanged. Shares in Aygaz AS (IS:AYGAZ) fell to 52-week lows; falling 5.86% or 0.71 to 11.40. Gold Futures for June delivery was down 0.24% or 3.10 to $1297.00 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in July fell 0.63% or 0.42 to hit $66.62 a barrel, while the August Brent oil contract fell 1.22% or 0.95 to trade at $76.61 a barrel. USD/TRY was up 1.64% to 4.6000, while EUR/TRY rose 1.45% to 5.3741. The US Dollar Index Futures was up 0.12% at 94.06.

6/1/2018 6:09:04 PM

Norway stocks higher at close of trade; Oslo OBX up 0.58%

Norway stocks were higher after the close on Friday, as gains in the Media, Insurance and Capital Goods sectors led shares higher. At the close in Oslo, the Oslo OBX gained 0.58%. The best performers of the session on the Oslo OBX were Gjensidige Forsikring ASA (OL:GJFS), which rose 3.33% or 4.2 points to trade at 130.5 at the close. Meanwhile, Schibsted ASA A (OL:SBSTA) added 3.20% or 7.4 points to end at 238.4 and Petroleum Geo - Services ASA (OL:PGS) was up 2.57% or 1.01 points to 40.38 in late trade. The worst performers of the session were Grieg Seafood (OL:GSFO), which fell 4.63% or 4.25 points to trade at 87.45 at the close. Leroy Seafood Group ASA (OL:LSG) declined 2.95% or 1.6 points to end at 52.6 and SalMar ASA (OL:SALM) was down 1.90% or 6.80 points to 350.20. Rising stocks outnumbered declining ones on the Oslo Stock Exchange by 97 to 71 and 34 ended unchanged. Crude oil for July delivery was down 0.64% or 0.43 to $66.61 a barrel. Elsewhere in commodities trading, Brent oil for delivery in August fell 1.24% or 0.96 to hit $76.60 a barrel, while the June Gold Futures contract fell 0.24% or 3.10 to trade at $1297.00 a troy ounce. EUR/NOK was down 0.31% to 9.5349, while USD/NOK fell 0.18% to 8.1649. The US Dollar Index Futures was up 0.12% at 94.06.

6/1/2018 10:11:24 AM

Asia stocks recover from earlier losses, Europe seen firm

By Shinichi Saoshiro TOKYO (Reuters) - Asian equities recovered from early weakness on Friday as a lower yen supported Japanese stocks and firm exports boosted South Korean markets. Still, rekindled concerns about U.S. trade policies limited regional gains. Spreadbetters expect European stocks to follow Asia's firmer tone and have marked in a modest rise of 0.15 percent for Britain's FTSE (FTSE) and gains of 0.5 percent for Germany's DAX (GDAXI) and France's CAC (FCHI). MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 0.1 percent but the index was still down roughly 0.6 percent for the week, during which it hit a six-week low on concerns about Italy's struggle to form a government. A fall on Wall Street on Thursday after the United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union, set the initial tone in Asia. Fears of a global trade conflict, which had partially receded in past weeks, were reignited as Washington's allies retaliated against the U.S. measures. However, regional sentiment recovered somewhat with South Korea's KOSPI (KS11) rising 0.7 percent on upbeat export data and Japan's Nikkei (N225) advancing 0.2 percent off the back of yen weakness against the dollar. Still, equity markets are likely to be weighed down, said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, "as the United States has opened up a new point of contention on the trade front by getting involved with the European Union." "President Trump has not accomplished very much in terms of trade issues and is likely to remain vocal with the U.S. midterm elections coming up," he said. The Shanghai Composite Index (SSEC) fell 0.5 percent and the blue-chip CSI300 index (CSI300) dropped 0.75 percent. Traders said Chinese stocks were volatile as the long-awaited inclusion of large-cap shares from the country in MSCI's emerging markets index had failed to buoy the market or attract any immediate flows of foreign money. (SS) On Friday, about 230 yuan-denominated mainland A-shares were included in MSCI index for the first time. Bank of America Merrill Lynch (NYSE:BAC) estimates China's A-shares could account for some 30 percent of MSCI's emerging market index once they are fully included. "It took Korea and Taiwan some six to nine years to gain full weighting. It may take (China's) A-shares longer in our view due to size, access and capital mobility constraints," wrote equity strategists at Bank of America Merrill Lynch. The Canadian dollar and the Mexican peso were on the defensive, weighed down by the U.S. decision to impose tariffs. The euro was little changed at $1.1679 (EUR=), holding onto modest gains made on relief overnight as Italy's anti-establishment parties reached a deal to resurrect their proposed coalition government. The deal averted the prospect of a snap election, which had rattled global markets earlier this week and sent the euro to a 10-month low of $1.1510 on Tuesday. The dollar climbed 0.3 percent to 109.150 yen , supported by U.S. yields reversing their overnight declines. The 10-year Treasury yield (US10YT=RR) was at 2.867 percent after brushing a 1-1/2-month low of 2.759 percent on Tuesday. Brent crude (LCOc1) dipped 0.1 percent to $77.49 a barrel. U.S. crude was down 0.25 percent at $66.87 a barrel . Prices have swerved between a three-week low of $$74.49 and $78.75 this week on speculation about output by major oil-producing nations. Brent's premium over U.S. crude reached its widest since March 2015 this week. [O/R]

6/1/2018 10:08:39 AM

China's MSCI Bow Seen High on Symbolism, Low on Immediate Impact

(Bloomberg) -- MSCI Inc.’s inclusion of Chinese-listed stocks, known as A shares, in its global indexes is an important symbolic step, but one that will have limited initial impact, according to analysts and market participants. China’s stocks could account for 17 percent of the MSCI Emerging Markets Index in five years’ time, from less than half a percent now, Goldman Sachs Group Inc (NYSE:GS). strategist Timothy Moe said in a Bloomberg Television interview on Friday. Total inflows associated with MSCI inclusion will be about $22 billion after the second inclusion day later this year, he said, compared with $60 to $70 billion average daily trading value in China. “Clearly, the initial impact right here, right now is modest,” Moe said. “But the symbolism in our view is very, very important.” Market reaction to the inclusion was hardly euphoric on Friday, as the Shanghai Composite Index slid 0.5 percent, heading for its seventh loss in eight sessions. QuickTake: Why China’s First Steps Into MSCI Are Such a Big Deal JPMorgan Chase & Co (NYSE:JPM)., Bank of America Corp (NYSE:BAC). and Bocom International Holdings Co. are among other brokerages expecting that the weighting of Chinese stocks in MSCI indexes will increase. Hao Hong, Bocom International chief strategist: “I think at the moment it’s a baby-step forward. After all, it’s less than half percent initially and three months later we will go up to 0.8 percent” Pension funds have to go in and buy half a percent of the index. We should look at the active international funds A-share market is driven by retail investors, and even institutional investors behave like them as the time frame for their performance measurement is very short Goldman’s Moe: Taking A shares plus the Hong Kong-listed Chinese stocks, known as H shares, currently in the index, China stocks could be more than 50 percent of the MSCI Emerging Markets Index over the next five to eight years “Institutional investors globally will need to take this market very seriously” Likes both A and H shares, but A shares are incrementally more attractive as they trade more cheaply. There are also undiscovered or under-researched stocks in China that offer some alpha opportunities for overseas investors BoAML strategists including head of China equity strategy David Cui: Foreigners own 2 percent of A shares versus 28 percent for India, 30 percent for Japan and 40 percent for Taiwan, which suggests sustained A-share purchases by overseas investors over time They’re likely to initially focus on quality large-caps due to lack of familiarity with the broad market and relatively small A-share weighting To get the yuan accepted globally, China may continue to support foreign purchases of A shares At full inclusion, A shares could account for 30 percent of the MSCI Emerging Markets Index, attracting roughly $900 billion of inflows JPMorgan’s head of China equity strategy Haibin Zhu: Expect around $3.3 billion of inflows to A shares, but the impact on the market will be limited “However, this is a very important step in China’s capital account opening-up process and a symbolic event of the capital market connectivity between China and the world” “China’s equity market now officially enters the global space” Nicholas Yeo, head of China equities at Aberdeen Standard Investments: “We would not be buying just because of MSCI inclusion -- you don’t want to be buying along with many others as well. At least for active funds, those who wanted to be involved have already been involved” Trade war and deleveraging concerns are weighing on domestic investor sentiment, making MSCI a “non-event” given its size The potential for improvement in Chinese companies’ fundamentals and the quality of the stock market is of bigger significance than MSCI inclusion, as long-term, fundamentals-focused foreign fund managers participate UBS Group AG head of China equities Thomas Fang: Investors have accumulated A shares over the past two months Domestic institutional investors are increasingly appreciating the global, long-term valuation and growth approach. Retail investors tend to trade more on news, and more often Mobius Capital Partners LLP co-founder Mark Mobius “With the A-share market coming into the availability of foreign investors, the opportunities are incredible” Look at both China and Hong Kong because very often there are discrepancies in pricing and valuations

6/1/2018 10:07:59 AM

Germany hopes U.S. will rethink tariffs after clear EU response

BERLIN (Reuters) - German Economy Minister Peter Altmaier said on Friday he hopes a decisive response from the European Union to new U.S. tariffs will make President Donald Trump rethink his decision to impose levies on steel and aluminum imports. "We hope that the European response will result in a process of reflection in the USA," Altmaier told German broadcaster ARD, adding the EU may look to work with Mexico and Canada on trade, also hit by the new tariffs.

6/1/2018 10:07:59 AM

Germany hopes U.S. will rethink tariffs after clear EU response

BERLIN (Reuters) - German Economy Minister Peter Altmaier said on Friday he hopes a decisive response from the European Union to new U.S. tariffs will make President Donald Trump rethink his decision to impose levies on steel and aluminum imports. "We hope that the European response will result in a process of reflection in the USA," Altmaier told German broadcaster ARD, adding the EU may look to work with Mexico and Canada on trade, also hit by the new tariffs.

6/1/2018 6:09:42 PM

Turkey stocks lower at close of trade; BIST 100 down 1.47%

Turkey stocks were lower after the close on Friday, as losses in the Textile & Leather, Banking and Food & Beverages sectors led shares lower. At the close in Istanbul, the BIST 100 lost 1.47% to hit a new 6-months low. The best performers of the session on the BIST 100 were Ipek Dogal Enerji Kaynaklari Arastirma ve Uretim AS (IS:IPEKE), which rose 4.18% or 0.280 points to trade at 6.980 at the close. Meanwhile, Dogan Sirketler Grubu Holding AS (IS:DOHOL) added 3.19% or 0.030 points to end at 0.970 and Anadolu Cam Sanayi AS (IS:ANACM) was up 3.13% or 0.080 points to 2.640 in late trade. The worst performers of the session were Yatas Yatak ve Yorgan Sanayi Ticaret AS (IS:YATAS), which fell 6.06% or 1.520 points to trade at 23.560 at the close. Aygaz AS (IS:AYGAZ) declined 5.86% or 0.71 points to end at 11.40 and Anadolu Efes Biracilik ve Malt Sanayi AS (IS:AEFES) was down 5.71% or 1.44 points to 23.76. Falling stocks outnumbered advancing ones on the Istanbul Stock Exchange by 282 to 88 and 34 ended unchanged. Shares in Aygaz AS (IS:AYGAZ) fell to 52-week lows; falling 5.86% or 0.71 to 11.40. Gold Futures for June delivery was down 0.24% or 3.10 to $1297.00 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in July fell 0.63% or 0.42 to hit $66.62 a barrel, while the August Brent oil contract fell 1.22% or 0.95 to trade at $76.61 a barrel. USD/TRY was up 1.64% to 4.6000, while EUR/TRY rose 1.45% to 5.3741. The US Dollar Index Futures was up 0.12% at 94.06.

6/1/2018 6:09:04 PM

Norway stocks higher at close of trade; Oslo OBX up 0.58%

Norway stocks were higher after the close on Friday, as gains in the Media, Insurance and Capital Goods sectors led shares higher. At the close in Oslo, the Oslo OBX gained 0.58%. The best performers of the session on the Oslo OBX were Gjensidige Forsikring ASA (OL:GJFS), which rose 3.33% or 4.2 points to trade at 130.5 at the close. Meanwhile, Schibsted ASA A (OL:SBSTA) added 3.20% or 7.4 points to end at 238.4 and Petroleum Geo - Services ASA (OL:PGS) was up 2.57% or 1.01 points to 40.38 in late trade. The worst performers of the session were Grieg Seafood (OL:GSFO), which fell 4.63% or 4.25 points to trade at 87.45 at the close. Leroy Seafood Group ASA (OL:LSG) declined 2.95% or 1.6 points to end at 52.6 and SalMar ASA (OL:SALM) was down 1.90% or 6.80 points to 350.20. Rising stocks outnumbered declining ones on the Oslo Stock Exchange by 97 to 71 and 34 ended unchanged. Crude oil for July delivery was down 0.64% or 0.43 to $66.61 a barrel. Elsewhere in commodities trading, Brent oil for delivery in August fell 1.24% or 0.96 to hit $76.60 a barrel, while the June Gold Futures contract fell 0.24% or 3.10 to trade at $1297.00 a troy ounce. EUR/NOK was down 0.31% to 9.5349, while USD/NOK fell 0.18% to 8.1649. The US Dollar Index Futures was up 0.12% at 94.06.

6/1/2018 10:11:24 AM

Asia stocks recover from earlier losses, Europe seen firm

By Shinichi Saoshiro TOKYO (Reuters) - Asian equities recovered from early weakness on Friday as a lower yen supported Japanese stocks and firm exports boosted South Korean markets. Still, rekindled concerns about U.S. trade policies limited regional gains. Spreadbetters expect European stocks to follow Asia's firmer tone and have marked in a modest rise of 0.15 percent for Britain's FTSE (FTSE) and gains of 0.5 percent for Germany's DAX (GDAXI) and France's CAC (FCHI). MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) rose 0.1 percent but the index was still down roughly 0.6 percent for the week, during which it hit a six-week low on concerns about Italy's struggle to form a government. A fall on Wall Street on Thursday after the United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union, set the initial tone in Asia. Fears of a global trade conflict, which had partially receded in past weeks, were reignited as Washington's allies retaliated against the U.S. measures. However, regional sentiment recovered somewhat with South Korea's KOSPI (KS11) rising 0.7 percent on upbeat export data and Japan's Nikkei (N225) advancing 0.2 percent off the back of yen weakness against the dollar. Still, equity markets are likely to be weighed down, said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo, "as the United States has opened up a new point of contention on the trade front by getting involved with the European Union." "President Trump has not accomplished very much in terms of trade issues and is likely to remain vocal with the U.S. midterm elections coming up," he said. The Shanghai Composite Index (SSEC) fell 0.5 percent and the blue-chip CSI300 index (CSI300) dropped 0.75 percent. Traders said Chinese stocks were volatile as the long-awaited inclusion of large-cap shares from the country in MSCI's emerging markets index had failed to buoy the market or attract any immediate flows of foreign money. (SS) On Friday, about 230 yuan-denominated mainland A-shares were included in MSCI index for the first time. Bank of America Merrill Lynch (NYSE:BAC) estimates China's A-shares could account for some 30 percent of MSCI's emerging market index once they are fully included. "It took Korea and Taiwan some six to nine years to gain full weighting. It may take (China's) A-shares longer in our view due to size, access and capital mobility constraints," wrote equity strategists at Bank of America Merrill Lynch. The Canadian dollar and the Mexican peso were on the defensive, weighed down by the U.S. decision to impose tariffs. The euro was little changed at $1.1679 (EUR=), holding onto modest gains made on relief overnight as Italy's anti-establishment parties reached a deal to resurrect their proposed coalition government. The deal averted the prospect of a snap election, which had rattled global markets earlier this week and sent the euro to a 10-month low of $1.1510 on Tuesday. The dollar climbed 0.3 percent to 109.150 yen , supported by U.S. yields reversing their overnight declines. The 10-year Treasury yield (US10YT=RR) was at 2.867 percent after brushing a 1-1/2-month low of 2.759 percent on Tuesday. Brent crude (LCOc1) dipped 0.1 percent to $77.49 a barrel. U.S. crude was down 0.25 percent at $66.87 a barrel . Prices have swerved between a three-week low of $$74.49 and $78.75 this week on speculation about output by major oil-producing nations. Brent's premium over U.S. crude reached its widest since March 2015 this week. [O/R]

6/1/2018 10:08:39 AM

China's MSCI Bow Seen High on Symbolism, Low on Immediate Impact

(Bloomberg) -- MSCI Inc.’s inclusion of Chinese-listed stocks, known as A shares, in its global indexes is an important symbolic step, but one that will have limited initial impact, according to analysts and market participants. China’s stocks could account for 17 percent of the MSCI Emerging Markets Index in five years’ time, from less than half a percent now, Goldman Sachs Group Inc (NYSE:GS). strategist Timothy Moe said in a Bloomberg Television interview on Friday. Total inflows associated with MSCI inclusion will be about $22 billion after the second inclusion day later this year, he said, compared with $60 to $70 billion average daily trading value in China. “Clearly, the initial impact right here, right now is modest,” Moe said. “But the symbolism in our view is very, very important.” Market reaction to the inclusion was hardly euphoric on Friday, as the Shanghai Composite Index slid 0.5 percent, heading for its seventh loss in eight sessions. QuickTake: Why China’s First Steps Into MSCI Are Such a Big Deal JPMorgan Chase & Co (NYSE:JPM)., Bank of America Corp (NYSE:BAC). and Bocom International Holdings Co. are among other brokerages expecting that the weighting of Chinese stocks in MSCI indexes will increase. Hao Hong, Bocom International chief strategist: “I think at the moment it’s a baby-step forward. After all, it’s less than half percent initially and three months later we will go up to 0.8 percent” Pension funds have to go in and buy half a percent of the index. We should look at the active international funds A-share market is driven by retail investors, and even institutional investors behave like them as the time frame for their performance measurement is very short Goldman’s Moe: Taking A shares plus the Hong Kong-listed Chinese stocks, known as H shares, currently in the index, China stocks could be more than 50 percent of the MSCI Emerging Markets Index over the next five to eight years “Institutional investors globally will need to take this market very seriously” Likes both A and H shares, but A shares are incrementally more attractive as they trade more cheaply. There are also undiscovered or under-researched stocks in China that offer some alpha opportunities for overseas investors BoAML strategists including head of China equity strategy David Cui: Foreigners own 2 percent of A shares versus 28 percent for India, 30 percent for Japan and 40 percent for Taiwan, which suggests sustained A-share purchases by overseas investors over time They’re likely to initially focus on quality large-caps due to lack of familiarity with the broad market and relatively small A-share weighting To get the yuan accepted globally, China may continue to support foreign purchases of A shares At full inclusion, A shares could account for 30 percent of the MSCI Emerging Markets Index, attracting roughly $900 billion of inflows JPMorgan’s head of China equity strategy Haibin Zhu: Expect around $3.3 billion of inflows to A shares, but the impact on the market will be limited “However, this is a very important step in China’s capital account opening-up process and a symbolic event of the capital market connectivity between China and the world” “China’s equity market now officially enters the global space” Nicholas Yeo, head of China equities at Aberdeen Standard Investments: “We would not be buying just because of MSCI inclusion -- you don’t want to be buying along with many others as well. At least for active funds, those who wanted to be involved have already been involved” Trade war and deleveraging concerns are weighing on domestic investor sentiment, making MSCI a “non-event” given its size The potential for improvement in Chinese companies’ fundamentals and the quality of the stock market is of bigger significance than MSCI inclusion, as long-term, fundamentals-focused foreign fund managers participate UBS Group AG head of China equities Thomas Fang: Investors have accumulated A shares over the past two months Domestic institutional investors are increasingly appreciating the global, long-term valuation and growth approach. Retail investors tend to trade more on news, and more often Mobius Capital Partners LLP co-founder Mark Mobius “With the A-share market coming into the availability of foreign investors, the opportunities are incredible” Look at both China and Hong Kong because very often there are discrepancies in pricing and valuations