Global ETF News Older than One Year
ETF investors jumped into a host of lossmaking trades in 2023
January 8, 2024--The unusual behaviour hit returns but also challenges theory that buy-high-sell-low mentality tends to prevail
Exchange traded fund investors pumped money into a host of lossmaking trades last year while pulling money out of a range of better-performing assets.
The unusual move, challenge the received wisdom that investors all too often jump on passing bandwagons and buy whatever is rising in value, typically at the wrong point in the cycle.
In the short term, at least, though, the divergences between performance and flows will have hit ETF investors in the pocket.
Source: ft.com
Protracted period of low growth looms large, undermining progress on sustainable development, warns UN flagship economic report
January 4, 2023-- Weakening global trade, high borrowing costs, elevated public debt, persistently low investment, and mounting geopolitical tensions put global growth at risk
Global economic growth is projected to slow from an estimated 2.7 per cent in 2023 to 2.4 per cent in 2024, trending below the pre-pandemic growth rate of 3.0 per cent, according to the United Nations World Economic Situation and Prospects (WESP) 2024, launched today. This latest forecast comes on the heels of global economic performance exceeding expectations in 2023.
However, last year's stronger-than-expected GDP growth masked short-term risks and structural vulnerabilities.
The UN's flagship economic report presents a sombre economic outlook for the near term. Persistently high interest rates, further escalation of conflicts, sluggish international trade, and increasing climate disasters, pose significant challenges to global growth.
The prospects of a prolonged period of tighter credit conditions and higher borrowing costs present strong headwinds for a world economy saddled with debt, while in need of more investments to resuscitate growth, fight climate change and accelerate progress towards the Sustainable Development Goals (SDGs).
view the United Nations World Economic Situation and Prospects (WESP) 2024 report
Source: un.org
G20 trade policy direction becoming more restrictive amid continued slow trade growth
December 18, 2023--Trade measures introduced by G20 economies have become more restrictive in recent months, according to the 30th WTO Trade Monitoring Report on G20 trade measures issued on 18 December.
The report shows that between mid-May and mid-October 2023, G20 economies introduced more trade-restrictive than trade-facilitating measures on goods, although the value of traded merchandise covered by facilitating measures continued to exceed that covered by restrictions. Director-General Ngozi Okonjo-Iweala called on the G20 to show leadership and contribute to economic stability and growth by unwinding recent and longstanding restrictions on trade.
Source: World Trade Organization (WTO)
IMF Working Papers-Fiscal Impacts of Climate Disasters in Emerging Markets and Developing Economies
December 15, 2023-Summary:
Climate-induced disasters are causing increasingly frequent and intense economic damages, disproportionally affecting emerging markets and developing economies (EMDEs) relative to advanced economies (AEs). However, the impact of various types of climate shocks on output growth and fiscal positions of EMDEs is not fully understood.
This research analyzes the macro-fiscal implications of three common climate disasters (droughts, storms, and floods) using a combination of macroeconomic data and comprehensive ground and satellite disaster indicators spanning the past three decades across 164 countries.
Across EMDEs, where agriculture tends to be the principal sector, a drought reduces output growth by 1.4 percentage points and government revenue by 0.7 percent of GDP as it erodes the tax bases of affected countries. Meanwhile, likely reflecting limited fiscal space to respond to a disaster, fiscal expenditure does not increase following a drought. A storm drags output growth in EMDEs, albeit with negligible impact on fiscal revenue, but government expenditure increases due to reconstruction and clean-up efforts. We find only limited impact of localized floods on growth and fiscal positions. In contrast, AEs tend to experience negligible growth and fiscal consequences from climate-induced shocks. As these shocks have much more detrimental effects in EMDEs, international support for disaster preparedness and climate change adaptation play a crucial role for these countries to confront climate change.
Source: imf.org
Developing Countries Paid Record $443.5 Billion on Public Debt in 2022
December 13, 2023-Poorest countries face risk of debt crises as borrowing costs surge
Amid the biggest surge in global interest rates in four decades, developing countries spent a record $443.5 billion to service their external public and publicly guaranteed debt in 2022, the World Bank's latest International Debt Report shows.
The increase in costs shifted scarce resources away from critical needs such as health, education, and the environment.
Debt-service payments-which include principal and interest-increased by 5 percent over the previous year for all developing countries. The 75 countries eligible to borrow from the World Bank's International Development Association (IDA)-which supports the poorest countries-paid a record $88.9 billion in debt-servicing costs in 2022. Over the past decade, interest payments by these countries have quadrupled, to an all-time high of $23.6 billion in 2022. Overall debt-servicing costs for the 24 poorest countries are expected to balloon in 2023 and 2024-by as much as 39 percent, the report finds.
Source: worldbank.org
Why Digital Trade Should Remain Open
December 13, 2023--Policymakers should consider the benefits of international rules that promote a predictable policy environment, including continued tariff-free digital imports
Digital trade, from software sales to streaming movies, plays a bigger role than ever in the global economy.
Yet with many developing countries struggling to fully participate in digital trade, now is the time for policy reforms that promote inclusion, starting with retaining the current tariff-free environment.
Digital trade has several unique benefits beyond traditional gains from trade. Software trade helps to digitalize the economy, increasing efficiency and boosting productivity. Trade in digital media, such as subscriptions to foreign journals, promotes interconnectivity, communication, and the transmission of knowledge and innovation. Finally, digital marketplaces, such as app stores or freelance programming websites, foster inclusion by reducing trade barriers for small firms and women-led businesses.
Source: imf.org
IMF Working Papers-The Dark Side of the Moon? Fintech and Financial Stability
December 8, 2023-Summary:
Rapid advances in digital technology are revolutionizing the financial landscape. The rise of fintech has the potential to make financial systems more efficient and competitive and broaden financial inclusion. With greater technological complexity, however, fintech also poses potential systemic risks.
In this paper, I use a novel dataset to trace the development of fintech (excluding cryptocurrencies) and empirically assess its impact on financial stability in a panel of 198 countries over the period 2012-2020. The analysis provides interesting insights into how fintech correlates with financial stability: (i) the impact magnitude and statistical significance of fintech depend on the type of instrument (digital lending vs. digital capital raising); (ii) the overall effect of all fintech instruments together turns out to be negative because of the overwhelming share of digital lending in total, albeit statistically insignificant; and (iii) while digital capital raising is estimated to have a positive effect on financial stability in advanced economies, its effect is negative in developing countries. Fintech is still small compared to traditional institutions, but rapidly expanding in riskier segments of the financial sector and creating new challenges for policymakers.
Source: imf.org
IMF-History's Inflation Lessons by Ari and Ratnovski
December 1, 2023--A study of 100 inflation shocks since the 1970s provides valuable pointers for policymakers today
In the early 1970s, conflict in the Middle East set off a spike in oil prices that left central banks around the world scrambling to control inflation.
After a year or so, oil prices stabilized and inflation started to retreat. Many countries believed they had restored price stability and loosened policy to revive their recession-hit economies only to see inflation return. Could history repeat?
World inflation reached historic highs in 2022 after Russia's invasion of Ukraine triggered a terms-of-trade shock akin to that of the 1970s. Disruptions to Russian oil and gas supplies added to COVID supply-chain problems to drive prices higher. In advanced economies, prices rose at the fastest pace since 1984. In emerging market and developing economies, the price increase was the largest since the 1990s.
Source: imf.org
IMF Working Papers-Housing Affordability: A New Dataset
December 1, 2023-- Summary:
The rapid increase in house prices in the past few years, including during the COVID-19 pandemic, raises concerns about housing affordability. The price-to-income ratio is a widely-used indicator of affordability, but does not take into account important factors such as the cost of financing.
The aim of this paper is to construct a measure of housing affordability that takes these factors into account for a large set of countries and long period of time. The resulting dataset covers an unbalanced panel of 40 countries over the period from 1970Q1 to 2021Q4. For each country, the index measures the extent to which a median-income household can qualify for a mortgage loan to purchase an average-priced home. To gauge the performance of the constructed indices, we compare them to other readily-available mesures of affordability and examine the evolution of the indices over time to understand the relevant drivers, including in a regression analysis to assess the extent to which government housing programs could contribute to improving affordability.
Source: imf.org
The AI Awakening
November 30, 2023--Generative AI has introduced tantalizing new possibilities. Yet the initial excitement surrounding AI has given way to genuine and growing concerns. This issue is an early attempt to understand AI's implications for growth, jobs, inequality, and finance.
Full disclosure: This issue of Finance & Development was produced entirely with human intelligence.
But someday soon at least parts of this magazine may be assisted by artificial intelligence-a topic that has dominated global discourse since ChatGPT's introduction one year ago.
Generative AI has introduced tantalizing new possibilities in both the public and private spheres. Think how these "machines of the mind" can improve health care diagnoses, close education gaps, tackle food insecurity with more efficient farming, drive planetary exploration-not to mention eliminate the drudgery of work.
Yet the initial excitement surrounding AI has given way to genuine and growing concerns-including about the spread of misinformation that disrupts democracy and destabilizes economies, threats to jobs across the skills spectrum, a widening of the gulf separating the haves and have-nots, and the proliferation of biases, both human and computational.
Source: IMF.org
