EU Reaches Agreement on Greek Debt, Markets Rally
Eurozone leaders reached a deal with Greek debtholders on Thursday, October 27, agreeing to a 50% writedown on Greek debt. Officials expressed confidence that the writedown will set Greece on a sustainable path to reducing its public debt levels. Additionally the EFSF fund's firepower will be increased "four or five times" to provide further risk insurance to new bonds issued by eurozone countries. While many of the technical details behind the plan have yet to be fully disclosed, the consensus seems to be that this is a step in the right direction. Following the announcement, global markets immediately rallied with European and U.S. indices up 3%-4%.
ETF Securities Criticises iShares' Labelling Proposals
ETF Securities rejected iShares' proposal that commodity-linked exchange traded products (ETPs) should be reclassified. ETF Securities labels both its physically-backed and futures-based commodity-linked products as exchange traded commodities (ETCs). Recently, in response to regulators' criticisms of the ETF industry, iShares has embarked on a campaign to improve transparency across the industry and has targeted ETCs as a potential problem. iShares contends that only physically-backed commodity-linked products deserve the label "ETC" and futures based commodity-linked products should be called exchange traded notes (ETNs). Townsend Lansing, head of regulatory affairs at ETF Securities, called iShares' suggestions "false distinctions" and stated investors were not confused by the labelling technique. Moreover, touching on the issue of counterparty risk, Lansing went on to comment that iShares' practice of securities lending was "no different in terms of credit risk to a swap-backed platform which has exposure to counterparties, but uses collateral to offset it."
Lyxor "Considers" Delisting Hong Kong ETFs
Lyxor stated on Thursday, October 27 that it was "considering different strategies" regarding its ETFs listed in Hong Kong, including potentially delisting. The statement followed a report in Asian Investor earlier in the week regarding recent speculation that Lyxor would delist its entire suite of 12 ETFs from the Hong Kong exchange. At the moment, Lyxor's ETF range in Hong Kong has $7.1 billion under management, but has registered net outflows of $1 billion in the first eight months of the year. Speculation regarding the reason for possible delisting includes net outflows, low trading volume, and the loss of Christine Huang, the Hong Kong VP of sales and marketing for ETFs. Lyxor has stated a formal announcement will be made soon to keep investors informed.
iShares Launches a New Global Equity ETF in London
iShares launched an ETF tracking the MSCI All Country World Index (ACWI) on the London Stock Exchange this week. The MSCI ACWI index comprises stocks from 24 developed and 21 emerging markets weighted by free-float market capitalisation. Despite the fact that the index represents such a broad range of equities, the ETF is physically replicated in accordance with iShares' stated preference. In delivering the index return, the ETF engages in optimised sampling rather than full replication. Currently, the ETF holds approximately 700 of the nearly 9,000 securities in the index. Here are the details of the new ETF from iShares:
ZKB Lists Two Physical Gold ETFs in Switzerland
The Zurich Kantonalbank listed two physical gold ETFs traded on the Swiss Stock Exchange this week. The ZKB Gold ETF is for investors who are not afraid of assuming some US dollar currency risk. The ZKB Gold ETF hedged is for investors looking for the performance of gold with the US dollar currency risk hedged. This hedging can offset the consequences of a collapse in the value of the US dollar versus the Swiss franc. Here are the details for the new physical gold ETFs from ZKB:
