The Economist (July 6)
A profound “energy transition is under way: from fossil fuels to clean energy. Of all the oil majors, Shell’s attempts to navigate it…are the most intriguing.” With a $52 billion acquisition of BG Group, Shell became “the biggest listed gas producer” while its oil reserves have dropped “lower than those of its Western peers…. Shell is bolder than its rivals in forecasting huge global demand for clean power over the next 30 years. And it is the only firm to link its executive’s pay to progress in reducing emissions across its operations.”
Tags: BG Group, Clean energy, Clean power, Energy, Executive pay, Fossil fuels, Gas, Oil majors, Reserves, Shell, Transition
Reuters (August 29)
“The prospect of a no-deal Brexit is becoming increasingly feasible in the eyes of investors who are hedging against the risk of the currency tanking if Britain is left isolated from the EU, its largest trading partner.” Bank of America Merrill Lynch has warned that central bank selling of more than 100 billion pounds in reserves “could be a major catalyst for a significant sterling downturn” should the UK leave the EU without a deal.
Tags: BAML, Brexit, Central bank, Currency, EU, Hedging, Investors, No-deal, Reserves, Risk, Sterling, Trading partner, UK
Reuters (September 1)
“Activity in China’s manufacturing sector unexpectedly expanded at its fastest pace in nearly two years in August as construction boomed, suggesting the economy is steadying in response to stronger government spending.” The strong performance “may reinforce growing views that China’s central bank will be in no hurry to cut interest rates or banks’ reserve requirements, for fear of adding to high debt levels or fuelling asset bubbles.”
Tags: Asset bubbles, Boom, China, Construction, Debt, Economy, Government, Interest rates, Manufacturing, Pace, Reserves, Spending, Steadying
Financial Times (October 5)
Amidst continuing outflows, emerging markets are much better placed than before the 1997 Asian currency crisis. “Record levels of reserves” should give “troubled countries a window for reform.” Reserves stand roughly 10 times higher than the past crisis. “While no amount of reserves can withstand the loss of market trust, money does buy time. Using reserves to offset capital flight allows central banks temporarily to avoid the classic EM crisis response of tighter monetary policy amid a recession to protect their currency and avoid imported inflation.”
Tags: Asia, Banks, Capital, Crisis, Emerging markets, Market, Monetary policy, Outflows, Recession Inflation, Reform, Reserves
Institutional Investor (August Issue)
“Investors confront the risk of a carbon bubble fueled by stranded oil and gas assets” should major governments decide to impose strict carbon legislation to combat climate change. One recent report asserts that “to limit the rise in global temperatures to 2 degrees Celsius between now and 2050, only 20 percent of the world’s fossil fuel reserves can be extracted and burned.”
Tags: Carbon, Climate change, Extraction, Fossil fuel, Gas, Global temperatures, Governments, Investors, Legislation, Oil, Reserves, Risk
Forbes (May 5, 2013)
Urging financial institutions to adopt one-size fits all risk models has can be disastrous. “We have real-life proof of the folly in this kind of forced uniformity: the Basel Accords. For years regulators around the world have been concocting uniform risk assessments to judge bank loans. The results of this exercise have been disastrous. Banks had to hold no reserves against government debt yet hold hefty set-asides for business loans. Greek government bonds were seen as infinitely safer than a loan to, say, IBM. Mortgage-backed securities also got preferred regulatory treatment–and we all know where that led.”
Tags: Banks, Basel Accord, Government debt, Loans, Mortgage-backed securities, Regulators, Reserves, Uniform risk assessment
Financial Times (September 5)
The world needs to awake to the threat posed by global food crisis. After all, we’ve had two in the past 2 years. Riots sparked by food shortages in 2007-08 brought down governments in Haiti and Madagascar. Last week, a 30% spike in the price of bread, caused unrest in Mozambique. “Steps should be taken to mitigate the severity of crises when they strike.” Larger reserves are one of the first steps that we should take.