Global ETF News Older than One Year
Passive funds leave actives languishing
March 15, 2024--Assets in US index-trackers now outstrip those in stock selectors as investors opt for a smoother ride
Water can dramatically change the landscape, as the slow but steady process of erosion creates cliffs, caves and oxbow lakes.
A similarly remorseless transformation has been occurring in the fund management industry as active managers (those who like to select stocks) have been outcompeted by passive managers (those who track an index).
It was a sign of the times at the end of last year when the amount of assets invested in US passive funds reached $13.3tn, according to Morningstar, just pipping the $13.2tn invested in active funds. Another signal in January was the decision of Abrdn, the active manager, to shed a tenth of its staff in a cost-cutting exercise, having previously lost most of the vowels in its name.
Source: ft.com
Impact Investing Market Forecast to Reach $1061.14 Billion by 2028-In-Depth Research Report Released
March 12, 2024--The "Impact Investing Global Market Report 2024" report has been added to ResearchAndMarkets.com's offering.
The impact investing market has been witnessing exponential growth, fueled by increasing demand for sustainable investment opportunities and the strategic development of ESG-compliant products.
According to a recent market research report, which provides comprehensive insights into this dynamic sector, the impact investing market size is foreseen to experience a significant expansion from $478.15 billion in 2023 to an impressive $1061.14 billion by 2028.
Source: Research and Markets
How Inflation Radically Changes Economic Ideas
March 7, 2024-Inflation teaches us that supply, not demand, constrains our economies, and government borrowing is limited
The unexpected resurgence of inflation is a slap in the face, telling us that the consensus ideas of economic policy are wrong and need to change. Fortunately the "new" ideas we need are well tested and sitting on the shelf.
Inflation comes when aggregate demand exceeds aggregate supply.
The source of demand is not hard to find: in response to the pandemic's dislocations, the US government sent about $5 trillion in checks to people and businesses, $3 trillion of it newly printed money, with no plans for repayment. Other countries enacted similar fiscal expansions and reaped inflation in proportion. Supply is more contentious. Supply did shrink during the pandemic. But inflation spiked after the pandemic was largely over, and many "supply shock" industries were producing as much as before but could not keep up with demand.
Source: imf.org
Red Sea Attacks Disrupt Global Trade
March 7, 2024-In the first two months of 2024, Suez Canal trade dropped by 50 percent from a year earlier while trade through the Panama Canal fell by 32 percent, disrupting supply chains and distorting key macroeconomic indicators
In the past few months, global trade has been held back by disruptions at two critical shipping routes.
Attacks on vessels in the Red Sea area reduced traffic through the Suez Canal, the shortest maritime route between Asia and Europe, through which about 15 percent of global maritime trade volume normally passes.
Instead, several shipping companies diverted their ships around the Cape of Good Hope. This increased delivery times by 10 days or more on average, hurting companies with limited inventories.
On the other side of the world, a severe drought at the Panama Canal has forced authorities to impose restrictions that have substantially reduced daily ship crossings since last October, slowing down maritime trade through another key chokepoint that usually accounts for about 5 percent of global maritime trade.
Source: imf.org
Global Digitalization in 10 Charts
March 4, 2024---Digital technologies are transforming communications, business, health, education, finance, and more.
Yet there remains a multi-dimensional digital divide across countries, businesses, and individuals, which is compounding the development divide. Hospitals, schools, governments, and businesses cannot operate effectively and efficiently without digital tools.
The digital divide is holding back growth and limiting opportunities for the billions who are still unconnected, and for those who are connected by not harnessing the full potential of these technologies.
The new World Bank Group "Digital Progress and Trends Report 2023" tracks global progress of digitalization and countries' production and use of digital technologies, from digital jobs, digital services exports, and app development to internet use, affordability, quality, and more. The report highlights two clear trends that are shaping our digital future: The importance of digital public infrastructure and the transformative potential of artificial intelligence (AI).
Source: worldbank.org
IMF Working paper-The Consequences of Falling Behind the Curve: Inflation Shocks and Policy Delays Under Rational and Behavioral Expectations
March 1, 2024-Summary:
Central banks in major industrialized economies were slow to react to the surge in inflation that began in early 2021. The proximate causes of this surge were the supply chain disruptions associated with the easing of COVID restrictions, fiscal policies designed to cushion the economic impact of COVID, and the impact on commodity prices and supply chains of the war in Ukraine. We investigate the consequences of policy delay in responding to inflation shocks.
First, using a simple three-period model, we show how policy delay worsens inflation outcomes, but can mitigate or even reverse the output decline that occurs when policy responds without delay. Then, using a calibrated new Keynesian framework and two measures of loss that incorporate a "balanced approach" to weigh inflation and the output gap, we find that loss is monotonically increasing in the length of the delay. Loss is reduced if policy, when it does react, is more aggressive. To investigate whether these results are sensitive to the assumption of rational expectations, we consider cognitive discounting as an alternative assumption about expectations. With cognitive discounting, forward guidance is less powerful and results in a reduction in the costs of delay. Under either assumption about expectations, the costs of a short delay can be eliminated by adopting a less inertial policy rule and a more aggressive response to inflation.
Source: imf.org
IMF Working Paper-Navigating the Evolving Landscape between China and Africa's Economic Engagements
February 28, 2024-Summary:
China and Africa have forged a strong economic relationship since China's accession to the WTO in 2001. This paper examines the evolution of these economic ties starting in the early 2000s, and the subsequent shift in the relationship triggered by the commodity price collapse in 2015 and by the COVID-19 pandemic.
The potential effects on the African continent of a further slowdown in Chinese growth are analyzed, highlighting the varying effects on different countries in Africa, especially those heavily dependent on their economic relationship with China. The conclusion offers a discussion of ways how African countries and China could adapt to the changing relationship.
Source: imf.org
IMF Working Paper-Determinants of Zombie Banks in Emerging Markets and Developing Economies
February 23, 2024-Summary:
While deeply undercapitalized banks have been shown to misallocate credit to weak firms, the drivers of such zombie banks are less researched, particularly across countries. To furnish empirical evidence, we compile a dataset of undercapitalized banks from emerging markets and developing economies.
We classify zombie banks as those not receiving remedial treatment by owners or regulators or, alternatively, remaining chronically undercapitalized. Using logit regressions, we find that country-specific factors are more influential for zombie status than bank characteristics, alhough some become significant when disaggreating by region. The paper's overall findings imply the need for a proper regulatory framework and an effective resolution regime to deal with zombie banks more decisively.
Source: imf.org
Crypto exchange-traded products hit bull run levels with $67B AUM
February 20, 2024--Record year-to-date crypto product inflows, slowing outflows, and positive price action have made the perfect recipe for the swelling AUM.
A record week of inflows for crypto-derived exchange-traded products (ETPs) has pushed their combined assets under management (AUM) to levels not seen since the last bull market peak in 2021, according to CoinShares.
Crypto investment products' AUM now stands at $67 billion, "marking the highest level since December 2021," CoinShares research head James Butterfill wrote in a Feb. 19 report, pinning the AUM rise on year-to-date inflows of $5.2 billion and positive crypto market price action.
Source: cointelegraph.com
Emerging Markets Navigate Global Interest Rate Volatility
January 31, 2024--Major emerging markets have shown resilience to global rate gyrations, but more challenging times could be ahead
Global interest rates in recent months have gone on a rollercoaster, especially those on longer-term government bonds. Yields on 10-year US Treasuries are climbing again after pulling back from a 16-year high of 5 percent in October. Interest rate moves in other advanced economies had been equally prodigious.
Emerging market economies, however, saw much milder rate moves. We take a longer-term perspective on this in our latest Global Financial Stability Report, demonstrating that the average sensitivity to US interest rates of 10-year sovereign yield of Latin American and Asian emerging markets declined by two-thirds and two-fifths, respectively, during the current monetary policy tightening cycle compared with the taper tantrum in 2013.
While the lower sensitivity is in part due to the divergence in monetary policy between advanced economies’ and emerging markets’ central banks over the past two years, it nonetheless challenges findings in the economic literature that show large spillovers from advanced economies’ interest rates to emerging markets. In particular, major emerging markets have been more insulated from global interest rate volatility than would be expected based on historical experience, especially in Asia.
Source: imf.org
