Year: 2016

World Finance Real Estate Awards 2016

Posted on by Helen

The mere fact real estate is a hard asset lends it a distinct advantage over other, more abstract alternatives. Subdued economic growth with the odd spat of volatility means that, while conditions are less than advantageous for financial markets, they have supported growth in the real estate sector.

Where investors in years past have ploughed their money into high-risk, high-reward opportunities, an uneven recovery has given rise to a more cautious approach that may well squeeze profits – though by no means dampen enthusiasm – for the real estate sector.

Institutional investors are only now starting to pull back from these opportunistic investments, with interest rates and cap rates on the rise. Investors are gravitating towards low risk deals, even if that means lower returns, and are generally waiting on markets to improve before they resort to their old ways. The focus for now at least is on real estate fundamentals, and on leveraging what cost efficiencies they can in what remains a tight operating environment.

Property and real estate act as the building blocks on which budding and healthy economies are built

These shifts make for a highly complex – and sometimes confusing – marketplace. Yet real estate is on the up. Volatility is highlighting the industry’s relative safety, and money typically invested in commodities is being diverted, with rising prices in key cities across the globe becoming by far the better option.

Cushman & Wakefield is of the opinion that new sources of capital, unsatisfied demand and strong supply of debt are all likely to result in global real estate trading, whereas volatility elsewhere is having a significant impact.

What’s more, given the real estate market makes up such a key component of the global economy – even more so in times of high volatility – the companies operating in this space will have the world’s attention fixed on them. Having rebounded considerably over the past year, the real estate market is expected to strengthen further over the coming months, in large part due to the winners of this year’s World Finance Real Estate Awards.

The 2016 awards have been presented to the most impressive names in the business, and as governments around the world attempt to stimulate their economies through fiscal reform, we pay tribute to the private property and construction firms that are doing their bit.

Where’s hot?
In its recent Emerging Trends in Real Estate report, PwC wrote: “For real estate, 2016 will see investors, developers, lenders, users and service firms relying upon intense and sophisticated coordination of both their offensive and defensive game plans. In an evermore competitive environment, with well-capitalised players crowding the field, disciplined attention to strategy and to execution is critical to success.”

Although there are challenges to be faced for the real estate sector, investors are generally bullish about its prospects. In fact, real estate is something of a rarity in that it’s one of a few sectors where solid and consistent returns are near enough guaranteed – not just in emerging markets, but in mature ones too.

Most equities are either flat or negative, and a variety of factors have inflicted pains on financial markets, including an end to quantitative easing in the US, the slowdown in China and the collapse in oil prices. Real estate represents a relative safe haven, as it is one of very few sectors where investors are unanimously confident. San Francisco, New York and Los Angeles are the US’ hot spots, whereas in Europe London is by far and away the most popular destination, followed by Paris and Frankfurt. In the Asia-Pacific region, Japan and Australia have come out on top, with Tokyo, Sydney and Melbourne making up the top three locations.

Looking at the situation as it stands, it’s clear the foundations have been laid for what promises to be a fruitful period for property and real estate.

According to a survey conducted by Inman, 30 percent of respondents said they were extremely optimistic about the housing market, while 42 percent said they were somewhat optimistic. In contrast, only six percent said they were somewhat or extremely pessimistic. When asked about their optimistic outlook, one respondent noted: “After being somewhat reserved in my optimism in 2015, I do believe that 2016 will be very good. If interest rates continue to be under six percent, shadow inventory remains low and in check, unemployment remains under 10 percent, local economies continue to strengthen, and inventory is adequate, consumers will have the confidence to get off the fence and make their moves in purchasing and selling.”

Better building blocks
One area in which investors are taking a notable interest is in commercial real estate, where the benefits are more prominent than arguably any other sector. In major markets around the world, commercial property prices have risen substantially, and positive changes in fundamentals and rising expectations of growing cash flow have push prices upwards.

“Commercial real estate is one of the safest investments because prices and values generally do not change at the drop of a hat”, according to a recent Deloitte report. “Commercial real estate is also a tangible asset, and as such, it is easier to see and understand what is going on with individual properties or with the asset class overall.”

The lingering concern is a housing boom in more developed markets could impact affordability and seriously compromise appetite for real estate. The latter stage of this decade could therefore see growth continue but at a slower pace, meaning real estate investors must look to niche areas of the sector if they are to preserve capital and promote sustainable growth.

Stephen Phillips, President of Berkshire Hathaway HomeServices, insisted in an interview with Business Insider that the market is at a turning point with regards to the gap between prices and wages. New builds and intelligent investment will go some way towards rectifying the gulf in wages and prices.

Property and real estate act as the building blocks on which budding and healthy economies are built. As governments seek to make their economies and infrastructure fit for a modern world, real estate and construction firms are helping to drive this vital area of growth.

The World Finance Real Estate Awards offer an insight not only into what it takes to succeed in today’s market, but into the ways in which the industry is likely to change in the coming years. By looking at a wide cross-section of performance indicators, the judging panel at World Finance, together with our readers, have picked out the brightest names in the business.

World Finance Real Estate Awards 2016

Asia
Property Company of the Year
Mah Sing Group Berhad

Best Residential Developer
Paramount Land

Best Mixed Use Developer
KT Group

Best Retail Developer
CapitaLand

Best Office Developer
Cheung Kong Hodings

Best Advisor
CBRE

Best Industrial Developer
Soilbuild Group Holdings

Best Leisure Developer
Dailan Wanda Group

Most Innovative Developer
Frasers Centrepoint

Most Socially Responsible Developer
Soilbuild Group Holdings

Outstanding Contribution
KT Group

Property of the Year
Capitol Grand

Best REIT
Soilbuild Business Space REIT

Middle East
Property Company of the Year
United Real Estate Company

Best Residential Developer
Dar Al Arkan Real Estate Co

Best Mixed Use Developer
Alfardan Group

Best Retail Developer
Emaar

Best Office Developer
SODIC

Best Advisor
Colliers International

Best Industrial Developer
Barwa Real Estate

Best Leisure Developer
United Real Estate Company

Most Innovative Developer
TDIC Abu Dhabi

Most Socially Responsible Developer
Emaar Properties

Outstanding Contribution
Emaar Properties

Property of the Year
Abdali Mall

Best REIT
Emirates REIT

Europe
Property Company of the Year
Optimum Asset Management

Best Residential Developer
Aristo Developers

Best Mixed Use Developer
Dana Holdings

Best Retail Developer
Westfield

Best Office Developer
HB Reavis

Best Advisor
CBRE

Best Industrial Developer
Prologis

Best Leisure Developer
Aerium

Most Innovative Developer
NEF Real Estate

Most Socially Responsible Developer
Prologis

Outstanding Contribution
Trigranit

Property of the Year
Okhta Mall

Best REIT
Altsria REIT

Latin America
Property Company of the Year
TGLT

Best Residential Developer
TGLT

Best Mixed Use Developer
IRSA

Best Retail Developer
Grupo MRP

Best Office Developer
Odebrecht Realizacoes Immobiliarias

Best Advisor
Jones Lang LaSalle

Best Industrial Developer
Global Logistics Properties

Best Leisure Developer
Odebrecht Realizacoes Immobiliarias

Most Innovative Developer
Odebrecht Realizacoes Immobiliarias

Most Socially Responsible Developer
Mexico Retail Properties

Outstanding Contribution
TGLT

Property of the Year
Alto Comahue Shopping Centre

Best REIT
Fibra Uno

North America
Property Company of the Year
Westfield Group

Best Residential Developer
Holland Partner Group

Best Mixed Use Developer
Silverstein Properties

Best Retail Developer
Westfield Group

Best Office Developer
Cadillac Fairview

Best Advisor
JLL

Best Industrial Developer
DCT Industrial

Best Leisure Developer
Hyatt Group

Most Innovative Developer
Trinity Development Group

Most Socially Responsible Developer
Ivanhoe Cambridge

Outstanding Contribution
Diamond Group

Property of the Year
Millennium Tower

Best REIT
Gramercy Property Trust

Africa
Property Company of the Year
The Billion Group

Best Residential Developer
Berman Bros

Best Mixed Use Developer
Rabie Property Group

Best Retail Developer
The Billion Group

Best Office Developer
Growthpoint Properties

Best Advisor
CBRE

Best Industrial Developer
Abland

Best Leisure Developer
Marriott International

Most Innovative Developer
McCormick Property Development

Most Socially Responsible Developer
McCormick Property Development

Outstanding Contribution
The Billion Group

Property of the Year
Garden City Mall

Best REIT
Vukile Property Fund

World Finance Banking Awards 2016

Posted on by Helen

In keeping with a more-than-five-year trend in which those slow to change have fallen by the wayside, the banking sector has this year been awash with major regulatory and technological change. Virtually unrecognisable from that of a few years ago, this is a new era for banking: one in which the customer lies at the heart of every decision, and sustainability as opposed to profitability is key. Survival – it seems – rests on the ability of banks big and small to keep pace with the rate and scale of the transformation, and nowhere else is this more visible than among the banks featured in this year’s World Finance Banking Guide.

Banking Guide 2016

Trust in the banking sector has been restored, and customer-centricity has emerged as an absolute requirement if banks harbour any hopes of survival. People – not profitability – can make or break a business, and many a major name has committed to that sentiment in the hope of pushing ahead of its rivals. New operating strategies have emerged to put customers and employees at the centre of businesses, and technology has proven decisive in the sector’s transformation.

Aside from restoring faith in the sector, technology has paved the way for new and innovative names, and while they can hardly compete with industry stalwarts on scale, a technology-first mentality has opened the door to a range of new opportunities. Investment in IT is no longer an option but a requirement for any bank with aspirations of becoming a market leader. And as much as these investments have proven costly, the benefits to both bank and customer cannot be understated.

Elsewhere, a raft of regulatory reforms has done a great deal to redefine the operating environment. While the burden has, for some, proven too much to bear, others have treated this new regulatory system as an opportunity to stand out from the crowd. Of course, the debate over whether these reforms are beneficial at all will rage on, but the overhaul itself is proof of the fact that banking is a changed proposition.

As much as markets have regained a foothold this past year, stability rests in large part on the banking sector and its ability to push money into and around the economy. This is a banking sector that rests on a threefold commitment to customer service, compliance and innovation, without which this new economic landscape would not exist. The guide provided with this issue takes a look at how banking in all its various forms is spearheading these latest developments, and realising a more sustainable measure of prosperity.

As ever, we’ve scoured the globe for the names that have truly set their markets alight and the ones that have not only exceeded expectations, but also delivered where others have failed. Our research team, together with input from our readers, has delved into the markets to find out which individuals and institutions have pushed the envelope and provided the very best in leading financial services.

With our in-house judging panel, we have selected the finest performers of the year – a challenging task with many tightly contested categories. In the supplement, readers will find insight into each of the year’s leading institutions, as well as those individuals who have made a real difference on each continent. Once again, congratulations to our winners, who we hope to see much more of in the months and years to come.

World Finance Banking Awards 2016

Best Retail Bank, Angola
Banco de Fomento Angola

Best Banking Group, Azerbaijan
PASHA Bank

Best Commercial Bank, Azerbaijan
PASHA Bank

Best Banking Group, Bolivia
Banco Mercantil Santa Cruz

Best Investment Bank, Brazil
BTG Pactual

Best Banking Group, Brunei
Baiduri Bank

Best Commercial Bank, Canada
BMO Bank of Montreal

Best Banking Group, Chile
Banco de Crédito e Inversiones

Best Private Bank, Chile
Banco de Crédito e Inversiones

Most Sustainable Bank, Chile
Banco de Crédito e Inversiones

Best Banking Group, Cyprus
Eurobank Cyprus

Best Banking Group, Dominican Republic
Banco Popular Dominicano

Best Commercial Bank, Dominican Republic
Banco de Reservas

Best Retail Bank, Dominican Republic
Banco de Reservas

Best Investment Bank, Dominican Republic
Banco de Reservas

Best Banking Group, France
Crédit Mutuel

Best Commercial Bank, Germany
Commerzbank

Best Banking Group, Ghana
Zenith Bank Ghana

Best Private Bank, Greece
Eurobank

Best Retail Bank, Greece
Eurobank

Best Commercial Bank, Hungary
ING Bank Hungary Branch

Best Banking Group, Jordan
Jordan Islamic Bank

Best Commercial Bank, Kenya
Co-operative Bank of Kenya

Most Sustainable Bank, Lebanon
Bankmed

Best Banking Group, Lebanon
Bankmed

Best Private Bank, Liechtenstein
Kaiser Partner

Best Banking Group, Macau
ICBC (Macau)

Best Commercial Bank, Mozambique
Banco BCI

Best Commercial Bank, Myanmar
Kanbawza Bank (KBZ Bank)

Best Retail Bank, Myanmar
Kanbawza Bank (KBZ Bank)

Best Banking Group, Myanmar
Ayeyarwady Bank

Best Private Bank, Myanmar
Ayeyarwady Bank

Most Sustainable Bank, Myanmar
Ayeyarwady Bank

Best Banking Group, Nigeria
Guaranty Trust Bank

Most Sustainable Bank, Nigeria
Access Bank

Best Banking Group, The Philippines
Rizal Commercial Banking Corporation

Best Commercial Bank, The Philippines
Rizal Commercial Banking Corporation

Best Investment Bank, Portugal
CaixaBI

Best Commercial Bank, Portual
ActivoBank

Most Sustainable Bank, Saudi Arabia
Arab National Bank

Best Private Bank, Spain
Banca March

Best Commercial Bank, Sri Lanka
Sampath Bank

Best Retail Bank, Sri Lanka
Sampath Bank

Most Sustainable Bank, Sri Lanka
People’s Bank

Best Banking Group, Sri Lanka
People’s Bank

Best Commercial Bank, Taiwan
Mega ICBC

Best Retail Bank, Turkey
Garanti Bank

Best Banking Group, Turkey
Akbank

Best Private Bank, US
Brown Brothers Harriman

Best Commercial Bank, US
Bank of the West

Banker of the Year, Asia
Aung Ko Win at Kanbawza Bank (KBZ Bank)

Banker of the Year, Middle East
Dr. Robert Maroun Eid at Arab National Bank

Banker of the Year, Europe
Jose Maria Ricciardi at Haitong Bank

World Finance Global Insurance Awards 2016

Posted on by Helen

Traditional operating models in the insurance sector are facing intense pressures to either embrace advances, or fall foul of disruption. Higher customer expectations, macro economic volatility and the transition to digital have all contributed to an existential crisis for insurers, with many forced to confront the fact the ground on which their value proposition was built has since shifted.

Despite this, too many have been unwilling to change, and those wedded to a business-as-usual outlook have been left to rot by the wayside. Deloitte said in a recent report: “We believe the industry’s hesitance to take bolder, faster steps toward transformation may be the result of reliance on a series of what we call ‘orthodoxies’ – core presumptions about the strength and uniqueness of an insurer’s traditional value proposition and business models. Many insurers have treated these orthodoxies as entry barriers effectively insulating them from being disrupted in a significant way by internal or external upstarts.”

The consensus is that issues to do with capacity and competition are unlikely to change much – if at all – in the coming years, and while these and other challenges remain, an improved outlook for the global economy bodes well for the sector as a whole. Technology is perhaps the defining focus of our times, and the transition to digital this past year alone has empowered some businesses while handicapping others. Now as ever, the standout performers are those most willing to embrace change.

Now as ever, the standout performers are those most willing to embrace change

The recipients of this year’s World Finance Global Insurance Awards are made up of the most impressive names in the business, and as governments around the world attempt to stimulate their economies through fiscal reform, we pay tribute to the insurance firms doing their bit to restore order.

The World Finance Global Insurance Awards offer an insight not only into what it takes to succeed in today’s market, but into the ways in which the industry is likely to change in the coming years. By looking at a wide cross section of performance indicators, the judging panel at World Finance has picked out some of the brightest names in the business.

Insurance goes digital
According to Shaun Crawford, Global Insurance Leader at EY: “Many insurers are investing in digital platforms that strengthen their relationships with customers across all product classifications and geographies. Their goal is to empower both businesses and consumers to better shop for insurance, making products more transparent [and] easier to understand and compare.”

The result is a sharper focus on data analytics, cloud computing and modelling techniques to map risks or strategic priorities. More than that, investment in digital platforms means insurers have been able to more easily streamline processes, while at the same time improve collaboration and regulatory compliance. While insurance historically has been a rather opaque and rarely understood product, evolving technological platforms have boosted familiarity with insurance on the consumer’s part.

Crucially, insurers no longer have a monopoly on pricing and risk assessment, now disruptive trends have allowed greater numbers access to data and analytic capabilities. Disrupt or be disrupted is the name of the game.

According to a 2016 PwC report: “So far, incremental innovation has helped insurers meet most new customer expectations. But, with the demands of the shared economy, usage-based models, Internet of Things, autonomous cars and wearables, they have an opportunity to do more radical innovations and experiment with new business models. In this context, customers have a need for new insurance solutions, and established carriers (i.e. incumbents) have an opportunity to provide tailored products and services for different segments.”

The upshot is insurers must cater to consumers in a way they have not experienced up until now. An inability to keep pace with changing consumer appetites, therefore, can break a business, and technology – perhaps more than any other factor – is the difference between success and failure.

Industry acquisitions
Aside from technology, one of the drivers sparking real and progressive changes in the insurance sector is consolidation. JLT Specialty noted in a recent report that the soft insurance market has accelerated its mergers and acquisitions (M&A) activity this past year. This trend, at least in the immediate future, is unlikely to have much of an effect on the oversupply of capacity, and so the climate will remain highly competitive, provided there is no significant drop off in claims activity. Far from alone in this capacity, insurance is just one of many sectors to have embraced M&A as a means of boosting revenue growth, breaking new markets and increasing operating efficiencies.

On the one hand, this M&A spree is indicative of a soft insurance market, though it’s also a symptom of growing confidence in the sector’s ability to perform, and perform well. “Positive macro conditions, including an improving economy and low interest rates, encouraged company boards and executives in insurance, healthcare, technology, food and beverage, transportation, and other industries to look for ways to put accumulated capital to work”, according to a Deloitte report on the matter. “M&A is often an effective way to spur growth and expand market share, and it proved to be a popular choice for companies of all sizes.”

Of course, all this is part and parcel of insurers’ efforts to appease the customer, for whom enhanced interaction, new offerings and data competence are the expectation. However, while the situation for insurance on the whole is positive, the situation varies greatly from place to place.

Regional variations
In the Asia-Pacific region, for example, the outlook for life and non-life insurance is looking promising, in spite of an economic slowdown. The opportunity for insurers here rests with the country’s emerging middle class; a rise in household incomes has caused this development to come about. Here, as with most places, technology is driving mobile and web-based sales, and the majority of customers appear willing to embrace new, digital channels.

In Europe, stagnant growth and a general reluctance to invest in businesses means insurers are up against significant challenges. As much as the situation has handicapped the majority, the situation means the incentive to focus on the customer is growing. This sentiment, combined with sharper regulatory scrutiny, will give rise to consumer-centric products across the continent.

In the US, meanwhile, while the opportunities are not distributed evenly across the industry, insurance sales are driven by an economic recovery and expectations that interest rates will increase.

The 2016 World Finance Global Insurance Awards offer an insight into the latest industry developments – not just in Asia, the US and Europe, but across the globe. Looking at the recipients, it is clear there have been many developments in this past year. Without the work of this year’s award winners, the industry would likely not be in the position it is today.

World Finance Global Insurance Awards 2016

Argentina
General – Caja de Seguros
Life – BNP Paribas Cardif

Australia
General – Insurance Australia Group
Life – BT Financial Group

Austria
General – UNIQA Insurance Group
Life – Sparkassen Versicherung

Bahrain
General – Bahrain Kuwait
Life – Life Insurance Corp

Bangladesh
General – Green Delta Insurance Company
Life – MetLife Alico

Belgium
General – Ethias
Life – Argenta

Brazil
General – Allianz
Life – Brasilprev

Bulgaria
General – Armeec Insurance
Life – SiVZK (TUMICO)

Canada
General – Intact
Life – Manulife

Caribbean
General – General Accident
Life – Scotia Life

Chile
General – Sura Insurance
Life – Consorcio Seguros

Colombia
General – Liberty Seguros
Life – Bolivars

Costa Rica
General – Assa
Life – Adisa

Cyprus
General – Royal Crown Insurance
Life – CNP Cyprialife

Denmark
General – Top Danmark
Life – Sampension

Egypt
General – Misr Insurance
Life – Suez Canal Insurance

Finland
General – Op Pohjola
Life – Nordea Life Assurance

France
General – Covea
Life – AXA

Germany
General – HDI-Gerling
Life – Zurich

Greece
General – INTERAMERICAN
Life – NN Hellas

Hong Kong
General – AXA General Insurance
Life – HSBC Insurance (Asia)

Hungary
General – Allianz Hugaria
Life – Magyar Posta Életbiztosító

India
General – ICICI Lombard
Life – Max Life Insurance

Indonesia
General – Jasa Indonesia
Life – PT Asuransi Jiwasraya

Jordan
General – Middle East Insurance Company
Life – Jordan Insurance

Italy
General – Unipol Assicurazioni
Life – Poste Vita S.p.A.

Kazakhstan
General – Nomad Insurance
Life – JSC Kazkommerts-Life

Kenya
General – CIC General Insurance
Life – Britam Life Assurance

Kuwait
General – Gulf Insurance Group
Life – Gulf Insurance Group

Liechtenstein
General – Vienna Insurance Group
Life – Baloise Life

Luxembourg
General – AXA Assurance
Life – Swiss Life

Malaysia
General – Etiqa Insurance
Life – AIA

Malta
General – Gasanmamo
Life – HSBC Life

Mexico
General – GNP
Life – Seguros Monterrey New York Life

Myanmar
General – IKBZ Insurance
Life – IKBZ Insurance

Netherlands
General – Achema
Life – Srlev NV

New Zealand
General – TOWER
Life – Asteron Life

Nigeria
General – Zenith General Insurance
Life – FBNInsurance Limited

Norway
General – SparBank 1
Life – Nordea Liv

Oman
General – Oman United Insurance
Life – National Life

Pakistan
General – Adamjee Insurance
Life – EFU Life

Panama
General – Assa
Life – Pan America Life

Peru
General – Rimac Seguros
Life – Pacifico Seguros

Philippines
General – Standard Insurance
Life – Pru Life

Poland
General – UNIQA
Life – MetLife TUnZiR

Portugal
General – Allianz Seguros
Life – Ocidental Seguros

Russia
General – Alfa Strakhovanie
Life – Renaissance Zhizn Insurance Company

Saudi Arabia
General – Bupa
Life – Medgulf

Serbia
General – Generali Osiguranje Srbija
Life – Generali Osiguranje Srbija

Singapore
General – QBE Insurance
Life – AIA Singapore

South Korea
General – Samsung
Life – Hanwha Life

Sri Lanka
General – Sri Lanka Insurance Corp
Life – Ceylinco Life Insurance

Sweden
General – Trygg-Hansa
Life – Alecta

Switzerland
General – Swiss Mobi
Life – Swiss Life

Taiwan
General – Cathay Century Insurance
Life – Fubon Life Insurance

Thailand
General – The Viriyah Insurance Pcl
Life – Thai Life Insurance

Turkey
Non-Life – Zurich Sigorta
Life – Anadolu Hayat Emeklilik

UK
General – Allianz
Life – Legal & General

US
General – Progressive Corporation
Life – Lincoln Financial Group

Vietnam
General – Baoviet
Life – Baoviet Life

World Finance Oil & Gas Awards 2016

Posted on by Helen

The past year has been a momentous one for the oil and gas industry. Ever since the price of oil started to slide from historic highs in 2014, commentators have been asserting that the commodity has finally bottomed out.

After touching below $30 a barrel – a 70 percent decline from pre-slump highs – at the start of the year, the price of oil did see some recovery. However, Brent crude has scarcely been able to rise much above $50 a barrel. When – if ever – oil will rebound to pre-2014 levels is anyone’s guess.

Major producers such as Saudi Arabia and Iraq are still pumping out the commodity at record levels, and much-hyped OPEC talks looking to make agreements on slashing production levels have consistently burned out. What is certain, however, is that this seemingly new – or perhaps endless – low for oil is shaking up the entire global energy industry.

While many rigs have closed and firms have gone bust, US shale is still roaring ahead

Americanising oil
After two years of depressed prices, shale oil in the US finally started to feel the pinch in 2016. While American unemployment rates have largely fallen over the last year, it saw upticks at the start of 2016 in states dominated by the shale oil industry: Texas, Oklahoma and North Dakota all saw unemployment claims rise by 25 percent in January 2016 compared to a year earlier. Much of this can be put down to the oil industry shedding jobs, as low prices have squeezed many producers out of the market.

However, while many rigs have closed and firms have gone bust, US shale – for both oil and gas – is still roaring ahead. Those firms that have been forced out of the market were the ones that were only able to survive in the era of low interest rates and pre-2014 high prices. Stronger firms are still shaking up the global oil and gas market. Shale – as is now well known – has pushed the US away from being a major energy importer, instead putting it in the position where it not only produces energy for domestic demands, but also exports it.

This was signified at the end of 2015, when the US lifted its restriction on the export of crude oil. According to the EIA: “In the first five months of 2016, US crude oil exports averaged 501,000 barrels per day – 43,000 barrels per day (nine percent) more than the full-year 2015 average.” The destination of these exports has also seen huge changes: prior to the restrictions being lifted in December 2015, the majority of exported crude went to Canada. However, as the EIA noted: “In March 2016, total crude oil exports to countries other than Canada exceeded those to Canada for the first time since April 2000.”

Shale gas production has also seen the US export more of its liquid natural gas. February 2016 saw the US ship its first large export, destined for Brazil. Cheniere Energy, the US firm that carried out the shipment, said this represented a turning point for gas exports from the US, with energy company predicting “the US will be one of the biggest three suppliers of [liquefied natural gas] by 2020”.

Capital cutbacks
The collapse in oil prices has had major ramifications for business investment in the oil and gas industry. Low prices have meant high cost investments are no longer seen as profitable or possible. Projects have been cut left, right and centre, either because they no longer seem viable or as an attempt to rein in excessive spending.

Since the beginning of crude’s price slip, nearly $400bn-worth of projects have been delayed, pushed back or cancelled in the oil industry. According to a 2016 study by the energy consulting firm Wood Mackenzie, oil companies have put 68 major projects on hold. This means, according to estimates, roughly 27 billion barrels of oil will not be produced as originally planned. Since June 2015, the amount of investment spending that has been deferred due to the price crunch has almost doubled.

When it comes to gas, the slump in oil has been producing cuts in capital spending. In 2014 and early 2015, China’s large natural gas shale fields were an exciting prospect to many. The country was recognised as having the largest shale natural gas reserves in the world, and its growing energy demands meant the fuel’s development and use was a lucrative prospect. International energy firms flooded into the country, in the hope of developing the field, primarily located in the Sichuan basin.

However, once the dip in revenue from collapsed oil prices became more evident, this interest soon waned. Since 2015, many international energy firms have pulled out, delayed or shelved plans to invest in the country’s vast shale gas fields. As Bloomberg reported: “China missed its annual shale gas target of 6.5 billion cubic metres last year, and earlier reduced its 2020 production goal to about a third of its original estimate.” In the meantime, the country’s shale boom remains on the rocks.

Going forwards, once energy firms have readjusted to wherever oil prices stabilise, the large funds needed for investing in China’s shale gas potential should be forthcoming. The country’s proven shale reserves – the largest in the world – aren’t going anywhere, and the world’s insatiable demand for energy is likewise destined to stay put.

Interest in Iran
One of the most watched trends in the oil sector in 2016 has been the lifting of sanctions on Iran. The Islamic Republic is now tipped to make a major splash in the oil market as it absorbed back into the global economy. According to the Economist Intelligence Unit, Iran will start exporting up to 700,000 barrels a day by the end of 2016.

However, it will take a number of years before the country is able to return to pre-sanctions levels of production and exporting. A number of stumbling blocks still exist: financial firms are still reluctant to get involved in Iran, potentially hurting its oil sector, while banks in Europe and the US are treading carefully after several high-profile firms received fines for previously flouting sanctions against Iran. A number of sanctions remain in place by the US, restricting the ability of banks to do business with those labelled as sponsors of terrorist groups such as Hezbollah – and Iran’s opaque business structure makes doing business with those classified as such a distinct possibility. These factors will also hamper Iran’s ability to broker shipping deals for oil exports.

At the same time, Iran’s oil facilities are in need of upgrades. The quickest way to achieve this would be through foreign investment from energy firms. However, concerns over the climate for business in Iran could to deter this, along with Iran’s complex rules on foreign ownership of assets.

The new norm
The world oil and gas industry is now adapting to a new normal: low prices. This has shaken up the sector, with the price squeeze seemingly set to continue. While a decade ago talk was of ‘peak oil’ and hydrocarbon demand outstripping supply, today the opposite is the case. World demand is steadily growing, and newly discovered fields and new extraction techniques mean the world is producing more gas and oil than ever before.
The new regime of low prices in 2016 has forced weaker producers out of the market and shelved less viable projects, creating a meaner, leaner and more efficient oil and gas industry. World Finance takes a look at those players who are contributing to this exciting new market in the World Finance Oil and Gas Awards 2016.

World Finance Oil & Gas Awards 2016

Best Fully Integrated Company
Africa – Sonangol
Asia – PetroChina
Middle East – Saudi Aramco
Eastern Europe – Rosneft
Western Europe – Eni
Latin America – Ecopetrol
North America – Hess Corporation

Best Independent Company
Africa – Oando
Asia – Loyz Energy
Middle East – Dana Gas
Eastern Europe – Irkutsk Oil Company
Western Europe – Premier Oil
Latin America – Pluspetrol
North America – Jones Energy

Best Exploration & Production Company
Africa – Sasol Exploration and Production International
Asia – PTTEP
Middle East – Genel Energy
Eastern Europe – Novatek
Western Europe – Independent Oil and Gas
Latin America – PetroRio
North America – Occidental Petroleum

Best Downstream Company
Africa – Engen Petroleum
Asia – Thai Oil
Middle East – Gulf Petrochem
Eastern Europe – Mol Group
Western Europe – Varo Energy
Latin America – YPF
North America – Valero Energy

Best Upstream Service & Solutions Company
Africa – Nigerdock
Asia – Serba Dinamik
Middle East – Saipem
Eastern Europe – Grupo Servicii Petroliere
Western Europe – Aker Solutions
Latin America – Weatherford
North America – Schlumberger

Best Downstream Service & Solutions Company
Africa – Kenol Kobil
Asia – Petronas
Middle East – ENOC
Eastern Europe – Litasco
Western Europe – Repsol
Latin America – Puma Energy
North America – Kinder Morgan

Best Drilling Contractor
Africa – PIDWAL
Asia – COSL
Middle East – Saipem
Eastern Europe – Exalo Drilling
Western Europe – Maersk Drilling
Latin America – San Antonio International
North America – Noble Drilling

Best Investment Company
Africa – Helios Investment Partners
Asia – Kerogen Capital
Middle East – Mubadala Development Company
Eastern Europe – Alfa Group
Western Europe – Blue Water Energy
Latin America – EIG Global Energy Partners
North America – EnCap Investments

Best EPC Service & Solutions Company
Africa – Amec Foster Wheeler
Asia – Chiyoda Corporation
Middle East – Consolidated Contractors Company
Eastern Europe – RusTechnip
Western Europe – Amec Foster Wheeler
Latin America – CFPS Engenharia E Projetos
North America – McDermott International

Best Sustainability Company
Africa – SPDC
Asia – PTT Public Company Limited
Middle East – ADNOC
Eastern Europe – Irkutsk Oil Company
Western Europe – Total
Latin America – Pacific Exploration and Production
North America – Cenovus Energy

Best Oil & Gas Port Facility
Africa – Port Harcourt
Asia – Port of Singapore
Middle East – Ras Laffan Port
Eastern Europe – Kozmino Port
Western Europe – Port of Rotterdam
Latin America – Guanabara Bay
North America – Houston Fuel Oil Terminal

Best CEO
Africa – Aidan Heavey, Tullow Oil
Asia – Datuk Wan Zulkiflee Wan Araffin, Petronas
Middle East – Amin Nasser, Saudi Aramco
Eastern Europe – Igor Sechin, Rosneft
Western Europe – Claudio Descalzi, Eni
Latin America – Juan Carlos Echeverry, Ecopetrol
North America – Steven J Kean, Kinder Morgan

US trade deficit widens

Posted on by Helen

The US trade gap widened in August, according to the latest figures from the US Commerce Department. The new data shows the US’ trade deficit grew to $40.7bn, a $1.2bn increase over July’s revised figures. The US trade deficit in July stood at $39.5bn, revised from its previous figure of $39.47bn.

The extent of the trade deficit’s expansion in August was unexpected, with economists polled by Reuters anticipating that the figure would fall to $39.3bn. However, while the US trade gap widened – a particularly contentious issue in the current US election cycle – the data points towards some positive trends within the US economy.

While the US trade gap widened, the data points towards some positive trends within the US economy

Exports increased by $1.5bn over July’s revised figures, standing at $187.9bn. This put exports at their highest level since July 2015, suggesting that the effect of the dollar’s appreciation on international demand has waned.

Goods took the largest share of the export increase, rising by $1.2bn to $125.3bn. The export of industrial supplies and materials increased by $1.4bn, although this rise was offset by declines in other areas. The export of civilian aircraft exports fell by $0.8bn, while the export of other capital goods increased.

This surge in exports was eclipsed by an even greater increase in US imports. However, this reported increase still spells good news for the economy: US imports grew by $2.6bn, compared with July’s figures, indicating strong demand within the US economy. In particular, capital goods imports increased by $1.2bn, suggesting a strengthening of US business sentiment.

IMF warns governments over rising global debt levels

Posted on by Helen

The International Monetary Fund (IMF) encouraged governments to implement measures to reduce global debt to a level that is more in line with global GDP. Following the release of its October 2016 Fiscal Monitor report, the IMF said swift government intervention is necessary to combat the current global debt level of $152trn – 225 percent of global GDP. Two thirds of global debt is held in the private sector.

Speaking at a press conference following the release of the report, Vitor Gasper, director of the IMF’s fiscal affairs department, said $152trn is a record amount in global debt. “A crucial message from the fiscal monitor is that when private debt is on an unsustainable path, it is important to intervene early on in the process to make sure financial crises and recessions can be prevented.”

Swift government intervention is necessary to combat the current global debt level of $152trn – 225 percent of global GDP

Overall, debt has not yet fallen from the levels reached during the 2008 global financial crisis. According to the IMF report, slow economic growth since this event has resulted in debt levels not being reigned in.

To combat this spending, the IMF suggested governments lead programmes to restructure debt and tax deals in order to encourage creditors to extended repayment periods. While combating debt levels has traditionally fallen under the responsibility of central banks, the IMF has suggested more active government policies may be more effective in the long term.

“Fiscal policy can do more, as the case may be, to restore nominal growth, facilitate adjustment, and build resilience”, Gaspar said. He also explained that global markets are diverse, and there is not a suitable one-size-fits-all approach. Instead, a comprehensive, consistent and coordinated effort is needed from governments.

Also highlighted in the IMF report was the uneven distribution of debt across the world. High levels of debt were concentrated in advanced economies and some large emerging markets, like China.

The release of the Fiscal Monitor report immediately followed the release of the IMF’s World Economic Outlook, in which it predicted global growth would slow to 3.1 percent in 2016.

IMF cuts growth forecast following advanced economy slowdown

Posted on by Helen

On October 4, the International Monetary Fund (IMF) unveiled its latest World Economic Outlook report, in which it announced that it was lowering its global growth forecast for 2016. Due to slowed growth in the US and other advanced nations, the fund now expects global growth to slow to just 3.1 percent in 2016, before picking up again slightly, to 3.4 percent, in 2017.

This revised forecast reflects lower-than-expected growth in the US, and economic uncertainty in the EU following Britain’s shock referendum vote earlier this year. Recovery from the 2008 financial crisis has also proved slower than previously anticipated, further depressing global growth.

“Our expectations for future growth and productivity have fallen in light of recent disappointing outcomes”, said the IMF’s Economic Counsellor, Maurice Obstfeld.

Due to an economic slump in the US and other advanced nations, the fund now expects global growth to slow to just 3.1 percent in 2016

“Declining growth rates, along with increased income inequality and concerns about the impact of migration, contribute to political tensions that block constructive economic reforms and threaten a rollback of trade integration.”

While advanced economies across the globe are predicted to suffer from subdued growth, the UK in particular is set to experience a significant downturn in the wake of its historic Brexit vote. According to the IMF, UK growth will slow to 1.8 percent this year, before shrinking further to 1.1 percent in 2017. This dramatic downturn would see the UK’s economy growing at less than half its pre-Brexit rate.

The US, meanwhile, is suffering from low levels of imports and poor business investment, leading the IMF to lower its growth forecast to 1.6 percent, down from 2.2 percent in July.

Despite sluggish growth in advanced economies, it is anticipated that emerging markets and developing economies will experience an economic acceleration for the first time in six years. While a downturn in oil prices and a spike in civil conflicts have blighted Middle Eastern economies, resilient growth in Asia has offset stagnation in emerging markets.

India is set to outpace all other major global economies in terms of growth, with its GDP projected to rise by 7.6 percent in 2017. Furthermore, Russia and Brazil are expected to emerge from recession next year, and so the IMF predicts that growth in developing economies will continue to flourish.

As advanced nations such as the US and the UK look to combat their recent economic stagnation, the IMF has advised that governments should invest in education, infrastructure and technology, while seeking to maintain easy monetary policies.

Global manufacturing sector expands at a modest rate

Posted on by Helen

Global manufacturing saw a modest expansion in September, according to the JP Morgan Global Manufacturing PMI. The composite index, produced by JP Morgan and IHS Markit, recorded a slight uptick in world manufacturing growth at 51.0, up from August’s 50.8. Although 2016 Q3’s average headline reading now stands at 50.9 – the highest since the last quarter of 2015 – it remained under the long-run survey average.

Growth for September was primarily carried by a growth in consumer and intermediate goods, with the investment goods sector experiencing a minor contraction.

The manufacturing sector in particular has felt the impact of the current slowdown in global trade growth, it was noted. “Part of the reason for the ongoing below long-run average expansions in new work and production”, the index report noted, “was the continued lacklustre trend in international trade volume”.

The manufacturing sector in particular has felt the impact of the current slowdown in global trade growth

Employment in manufacturing around the world expanded marginally – the second such expansion in the past three months. The US, Europe, Japan and India all saw gains in manufacturing employment, while China, South Korea, Brazil and Russia saw manufacturing job loses.

In general, conditions for manufacturing in Europe were among the strongest. The eurozone experienced a rapid expansion, with Germany, Austria and the Netherlands spearheading the economic union’s growth. The UK also saw strong expansion, with manufacturing at a 27-month high. Growth increased modestly in Poland, the Czech Republic and Russia. The US, however, experienced subdued growth.

The September Markit Manufacturing PMI for the US was also released, which reported a headline figure of 51.5. Although above the world’s average for growth, the figure represents a three-month low for manufacturing expansion in the US economy. Output and new orders in particular suffered from a slower pace of expansion. Employment in manufacturing, however, increased at a sharper pace than in August, although the “pace of staff hiring remained weaker than the average since the jobs rebound began in early-2010”, according to the report.

Chinese RMB officially joins the IMF’s reserve currency list

Posted on by Helen

For the first time since 1999, a new member has joined the International Monetary Fund’s (IMF’s) list of reserve currencies. China’s yuan (RMB) is the first new currency to join the list since the euro was launched, and represents a significant moment in the development of China as a global economic power.

The US dollar, the yen and the British pound are the other currencies in the IMF’s Special Drawing Rights (SDR) basket; the currencies the IMF hands out in loans. The RMB was added to the pile on October 1, the same day the founding of the People’s Republic of China is celebrated.

The RMB’s inclusion in the SDR supports China’s efforts to reduce the world’s dependence on the US dollar as the default reserve currency

“The inclusion into the SDR is a milestone in the internationalisation of the renminbi, and is an affirmation of the success of China’s economic development and results of the reform and opening up of the financial sector”, said the People’s Bank of China in a statement, as reported by Reuters. Its inclusion on this list supports China’s efforts to reduce the world’s dependence on the US dollar as the default reserve currency. The IMF rejected China’s application for the RMB to join the SDR in 2010.

The weighting of the SDR basket is still overwhelmingly in favour of the US dollar, at 41.73 percent. The euro is second at 30.93 percent, with the RMB now making up 10.92 percent. The decision to include the RMB on the list of global reserve currencies was announced in 2015, so this week’s finalisation should not have an immediate impact on global markets.

Despite the development of the currency over the last decade, the decision was not met with universal support. Some critics have argued the RMB does not meet the IMF’s requirements of being freely usable and widely traded. The RMB is currently the world’s fifth most-used currency in terms of value of payments.

In August last year, the RMB suffered a surprise devaluation, prompting accusations that the Chinese Government was engaging in currency manipulation. US presidential nominee Donald Trump said he would label China a currency manipulator if he wins the election.

For more information on the RMB’s potential as a global currency, click here to view a previous World Finance report.

Deutsche Bank’s troubles deepen as hedge funds move their business elsewhere

Posted on by Helen

German banking giant Deutsche Bank has been sent spiralling into crisis as several of its hedge funds have begun to pull their business from the lender. With concerns over Deutsche Bank’s future mounting, around 10 funds have already sought to reduce their position with the bank by moving some of their listed derivatives holdings to other firms, according to a report by Bloomberg News.

The move serves to further fuel Deutsche’s current financial turbulence. Shares at the investment bank plummeted to a 33-year low this week, sending shockwaves around the wider US banking market and causing banking stocks to fall by 1.6 percent. In the wake of its clients’ decision to move their assets elsewhere, Deutsche Bank shares plunged below €10 for the first time in its 146 years of business.

“In any given week, we experience ebbs and inflows”, Deutsche Bank’s Chairman of Hedge Funds, Barry Bausano, was reported as saying by Bloomberg. “This week is no different; it goes on all the time.”

Deutsche Bank shares have plunged below €10 for the first time in its 146 years
of business

Recent volatility has caused some industry experts to suggest the German Government could be called upon to rescue the bank, although strict EU legislation makes it difficult for countries to inject state funds into struggling financial institutions. Such a bailout may just prove necessary, however, if the bank were to continue on its downward spiral.

In June, the IMF said the German giant is the world’s most dangerous bank in terms of its contribution to systemic risk. According to the IMF, financial ruin at Deutsche Bank would have a catastrophic effect on the global economy.

In addition to the bank’s new hedge fund woes, the lender is also embroiled in a costly legal dispute with the US Department of Justice. Last week, the regulator hit Deutsche with a $14bn fine after finding the bank guilty of mis-selling mortgage-backed securities in the years leading up to the global financial crisis. While the bank believes its ongoing negotiations with the Department of Justice will result in a substantially smaller settlement, the high-profile probe has reignited investor fears over the financial health of Europe’s biggest investment bank.

Responding to these pressing concerns, the move by Deutsche Bank’s clients is proving to be something of a catalyst for a further share price slide. If more clients follow this lead and pull their business from the lender, Deutsche Bank could well buckle under this mounting financial pressure.

The collapse of Hanjin Shipping makes waves in South Korea’s business culture

Posted on by Helen

Ever since South Korea’s Hanjin Shipping filed for bankruptcy protection on August 31, there has been trouble at sea. Currently, around 85 Hanjin vessels remain in maritime limbo, turned away from global ports due to their inability to make charter payments. As a result, more than $14bn in cargo is stranded at sea, while crews aboard the marooned ships are forced to watch their food and water supplies dwindle.

Over the past month, as Hanjin floundered, the wider shipping industry has also been battling against rough waters. The demise of the world’s seventh biggest container carrier has understandably had a grave impact on the sector, sending freight rates skyrocketing and prompting a flurry of shipment re-bookings. In the wake of this crisis, some experts have even suggested that Hanjin is to shipping in 2016 as Lehman Brothers was to finance in 2008.

Chaebol culture
Just as Lehman Brothers was thought to be ‘too big to fail’, Hanjin had previously been deemed too economically viable to ever fall into bankruptcy. However, struggling to remain profitable in the midst of a global shipping downturn, the indebted firm turned to the South Korean Government for financial aid earlier this year.

Eager to rescue a crisis-stricken Hanjin, the state-run Korea Development Bank invested a substantial KRW 1trn ($910m) in the shipping line. It soon became all too apparent, however, that this sum would fail to save Hanjin, as the troubled conglomerate began to crumble under the weight of its KRW 5.6trn ($5bn) debts. Faced with this reality, the South Korean Government quickly adopted a hard line with the firm, terminating its financial support with immediate effect.

Chaebols continue to dominate South Korea’s economy. Samsung alone is responsible for around 20 percent of South Korea’s GDP

This new tough stance towards Hanjin marks something of an unusual political move. Seoul has a long history of providing financial support to the nation’s largest conglomerates, with this close relationship between politics and big business having emerged as a hallmark of South Korean economics. By suddenly severing ties with one of the nation’s most powerful ‘chaebols’ (large family-run business conglomerates), the government may be set to shake up a decades-old business culture.

Chaebols first rose to prominence in the early 1960s, when the South Korean Government began to collaborate closely with corporations in order to modernise a stagnant post-war economy. “Everyone is familiar with the economic rise of South Korea and the Miracle on the Han River”, said Kyle Ferrier, Director of Academic Affairs and Research at the Korea Economic Institute of America, referring to the nation’s period of remarkable economic growth following the Korean War.

Ferrier continued: “It simply couldn’t have been done without these conglomerates. These chaebols helped to pool resources and develop Korea from an agrarian economy to a low-tech manufacturing economy, and finally to the high-tech heavy industry economy it is today.”

After decades of receiving state-sponsored credit and assistance, chaebols emerged as economic heavyweights by the 1980s, turning the nation’s 1985 trade deficit into a trade surplus by 1986. By the time the East Asian financial crisis gripped South Korea in 1997, many firms had grown so exponentially that their collapse would have threatened to topple the entire South Korean economy.

While several smaller conglomerates buckled under the strain of the financial crash, the largest chaebols emerged from the crisis with their economic power consolidated and strengthened, thanks to the elimination of their weaker rivals.

In the years since, these sprawling family-run conglomerates – including global brands such as Samsung, Hyundai and LG – have continued to dominate South Korea’s economy. Currently, Samsung alone is responsible for around 20 percent of South Korea’s GDP, while its closest rival Hyundai Group accounts for a further 12 percent. Meanwhile, those at the helm of these vast dynasties enjoy unprecedented political sway, often moving freely between top government jobs and high-ranking corporate positions.

While this unique business structure has until now allowed conglomerates to thrive, chaebol culture could well be under threat as the government watches Hanjin slowly sink.

A sinking ship
The demise of Hanjin unquestionably proves that chaebols are not too big to fail, as perhaps previously thought. In refusing to offer the struggling shipping line a financial life raft, the government is sending others a clear message: a transitional South Korean economy is prepared to withstand the loss of such a huge business empire.

As a government-funded financial safety net is no longer guaranteed for chaebols, Hanjin’s collapse may serve as something of a warning for South Korea’s business giants

As a government-funded financial safety net is no longer guaranteed for chaebols, Hanjin’s collapse may serve as something of a warning for South Korea’s business giants. Ferrier explained: “It signals to other chaebols that just because they’ve had such a long-standing importance to the Korean economy, that doesn’t mean that they will necessarily receive special treatment from the government.”

In recent months, two of the nation’s biggest conglomerates have also been rocked by crises: in late August, the Vice President of Lotte was found dead in an apparent suicide, just hours before he was due to be questioned over corruption allegations. Samsung, meanwhile, had $14bn wiped off its shares in early September, following a botched global recall of its erratically explosive Galaxy Note 7 smartphone.

To add to Samsung’s financial woes, a vast supply of its goods and parts – to the value of around $38m – is currently stranded on Hanjin’s ill-fated ships. Furthermore, a rescue operation for this cargo would cost the company a further $8.8m in alternative transport fees. As Samsung’s marooned shipment ironically goes to show, the oft-interconnected fates of chaebols mean that the financial ruin of one conglomerate can easily spell trouble for another.

This spate of misfortunes befalling South Korea’s all-powerful conglomerates has led some experts to once more reassess the role they play in the nation’s economy. For some time now, a somewhat chaebol-sceptic President Park Geun-Hye has put economic democratisation at the top of her political agenda. Understanding all too well the dangers of monopolies, the Park-Geun-Hye administration is attempting to diversify the economy and encourage competition – and taking centre stage are SMEs, which account for 99 percent of South Korean businesses.

“The government has been trying to create a stronger domestic economy by pushing these SMEs”, Ferrier told World Finance. “In January this year, it also created a $66bn fund for establishing a new Korean Silicon Valley, to encourage tech start-ups and innovation.”

Despite government initiatives to foster a more competitive, creative economy, true reform of chaebol culture will require a shift in cultural attitudes. “In South Korea, working for a chaebol is seen as a sign of stability – a sign of economic and personal success for an individual”, explained Ferrier. Quite simply, there is a level of prestige attached to working for a chaebol that gives them the cultural edge over SMEs.

As the shockwaves from Hanjin’s collapse begin to reverberate around the South Korean economy, public scrutiny of chaebol culture will be unavoidable. An increasing hostility towards the nation’s once-revered conglomerates has been growing of late, especially as multinational chaebols continue to move operations overseas, employing ever-fewer domestic workers. Now, with the government-backed rise of SMEs promising an alternative to absolute chaebol dominance, the tide might slowly be turning for South Korean business culture.

OPEC agrees to reduce oil output

Posted on by Helen

After sustained pressure from the global oil market, the Organisation of the Petroleum Exporting Countries (OPEC) has agreed to introduce a modest reduction in its oil production. The cut is the first since 2008, and represents a softening of Saudi Arabia’s position on the issue.

“OPEC made an exceptional decision today”, said Iranian Oil Minister Bijan Zanganeh. “After two and a half years, OPEC reached consensus to manage the market regarding the decision.” Currently OPEC estimates its overall output to be approximately 33.2 million barrels per day (BPD), but has agreed to cut production by 700,000 BPD to between 32.5 million and 33 million BPD, according to the BBC.

OPEC has agreed to cut production by 700,000 barrels per day, to between 32.5 million and 33 million

The decision represents a significant shift in position from the oil-producing body. Longstanding disagreements between rivals Saudi Arabia and Iran have prevented any previous efforts to curb production, while Saudi Arabia has previously stated it would only reduce output if every other OPEC and non-OPEC producer followed suit.

Iran, on the other hand, has been keen to increase production following the lifting of international sanctions at the beginning of this year. As per this agreement, Iran will be allowed to increase production, with cuts being spread across other producers. While a ceiling has now been put in place, how exactly the cuts will be distributed will be decided at OPEC’s next formal meeting in December

Price slump
Both Iran’s and Saudi Arabia’s economies have struggled as a result of the prolonged slump in the price of oil, but Iran is generally seen as being in a stronger position due to the removal of international sanctions, which should open up new opportunities for growth.

Despite OPEC’s cuts, the world’s other oil producers are continuing with high production rates. As reported by Bloomberg, Russia has increased its production by as much as 400,000 BPD, setting itself on target to break post-Soviet production records. The increase in production has come from the opening of new fields in the country’s north.

In the US, crude oil stocks have fallen along with imports, according to a press release from the US Energy Information Administration. As reported by Reuters, the continued drop in inventories has surprised some analysts, since stocks were expected to rebound after a significant storm impacted inventories in September.

Yellen defends financial regulations and low interest rates

Posted on by Helen

Speaking to the House Financial Services Committee in her semi-annual testimony, Federal Reserve Chair Janet Yellen gave a positive overall assessment of the US financial industry. She noted that post-2008 financial regulations had placed US banks in a better position, and that regulators were continuing to monitor their effectiveness and look out for new risks.

Yellen faced tough questioning from committee members over the practices of big banks and the potential need for them to be broken up. Many committee members also questioned whether banks were still ‘too big to fail’. The concern is that the size of many banks could present a systemic risk to the US economy should they fall into trouble similar to that experienced in 2008. Yellen, however, argued that new regulations had significantly reduced the risk of banks one day requiring a bailout.

Yellen argued that new regulations had significantly reduced the risk of banks one day requiring a bailout

Some Democratic members of the committee argued the recent Wells Fargo scandal showed that the large size of many banks made them too hard to manage, thereby encouraging wrongful doing. Stephen Lynch, a congressman from Massachusetts, argued that the practices of Wells Fargo were unlikely to be limited to just the one bank, and that Yellen should “make their life hell”. Democratic Congressman Brad Sherman of California argued that “Wells Fargo has identified two additional reasons to break these institutions up”.

In response, Yellen noted that the Fed has launched a review of compliance regimes for large financial institutions: “We are undertaking a look comprehensively, not only in the consumer area, but compliance generally, because there have been a very disturbing pattern of violations.”

Although it was intended for her testimony to focus on banking regulation and supervision, Yellen also touched on interest rates when questioned. She shot back at previous claims from US presidential candidate Donald Trump that the Fed was holding interest rates low for political purposes at the behest of the Obama administration. She also affirmed the Fed’s political independence, telling the House Financial Services Committee that political partisanship played no role in rate setting.

Following the Federal Reserve’s decision in September to hold the federal funds rate at between 0.25 percent and 0.5 percent, she noted that continued job growth had strengthened the potential for a rate rise in December.

With the pace of employment growth continuing, not removing the Fed’s monetary accommodation risked pushing inflation above the two percent target. However, she noted that there was no “fixed timetable” when it came to raising interest rates.

How Fides Treasury Services is protecting its clients’ assets from cybercrime

Posted on by Helen

The internet is one of the greatest inventions of our time. It spreads information at the speed of light, brings people together from opposite sides of the globe in an instant, and has instigated a whole new era for business and banking.

With so much good, inevitably there is some bad as well, and the biggest downside of the internet must of course be the looming security issues that now threaten organisations, both big and small. To make matters worse, the methods of cybercriminals are becoming increasingly sophisticated and at an alarming rate; these groups and individuals are constantly finding new and ingenious ways to hack systems.

With so much at stake – from pledges made to customers, to a company’s reputation, not to mention the integrity of capital and assets – security is now at the top of every organisation’s agenda. Implementing the measures needed to ensure maximum safety, however, is no mean feat, which is why more and more companies are turning to third parties to bridge the gap.

Against the background of this growing trend, World Finance had the chance to speak to Andreas Lutz, Chief Marketing Officer at Fides Treasury Services, to discuss both the challenges and opportunities facing corporate treasurers in such a rapidly evolving landscape.

The issues of technology and security have become a very hot topic lately, making them a top priority on the agenda of corporate treasurers everywhere

What are some of the challenges facing treasurers today?
The majority of corporate treasurers today note that their biggest challenges continue to be managing risk effectively, in addition to improving cash visibility and predictability. It has become crucial that more treasurers move to centralised decision-making in order to improve efficiency and visibility, particularly for cash management, operations, funding and hedging.

Moreover, as a result of various highly publicised malware and cyber-attacks, the issues of technology and security have become a very hot topic lately, making them a top priority on the agenda of corporate treasurers everywhere.

How is the issue of technology both a challenge and an opportunity for treasurers?
New tools and technologies present numerous exciting opportunities, especially in the area of payments. However, since automation is not yet complete, many treasurers are still struggling with the traditional challenges for payments. For instance, file formats often differ – even now, with the existence and widespread adoption of ISO 20022, the finance industry’s international standard for electronic data exchanges. Consequently, mass-payments are still relatively slow.

Furthermore, many treasurers still have to work very closely with, and rely on the help of, their IT departments in order to develop end-to-end automation. In my opinion, one of the biggest challenges therefore is working out how to successfully integrate a treasury management system or connectivity provider.

To your mind, what are the biggest security risks facing treasurers?
I think they actually vary from company to company; they also depend on the sector that they are in. That being said, what all treasury departments have in common is the need for communicating with their banks, whether this is via a sophisticated treasury management system (TMS) or through a simple e-banking platform. This being the case, companies need to think about how they can protect information exchange between external systems. For example, a company can engage with the TMS via a service bureau, such as Fides Treasury Services, which then transmits information safely and securely to the bank on their behalf.

For what reasons have security risks increased recently?
Security risks – or, in other words, the number of cybersecurity incidents detected – have increased continuously throughout the last few years; in fact, they have risen by almost 50 percent over the last two to three years alone. I think there are various reasons behind this rapid surge, but some of the obvious ones are, for example, legalities – because most companies still do not involve the law when cybercrimes are carried out by insiders, which means that other organisations become vulnerable themselves when they go on to hire those people in the future.

Secondly, cybercriminals are getting better and better at what they do. Importantly, their targeting has become far shrewder; they know who to go after, which is more often than not SMEs, as they typically have weaker security systems in place.

Finally, I have to say that the connectivity of today’s world, with its massive network that interconnects information within a matter of seconds, makes it far easier for any kind of cybercrime to be committed.

How might outsourcing treasury connectivity services to a third party reduce some of these security risks?
From my point of view, outsourcing provides a logical safeguard and ensures the risk is mitigated. Today, as corporate treasurers rationalise their business models and seek to further automate any processes within the treasury, outsourcing – in regards to further automating, such as bank communications – is an opportunity that is attracting growing examination and consideration.

This is especially the case because a corporation would otherwise have to set up a full-technology infrastructure, which includes establishing business connectivity, transaction management, regular security patches and a great deal more.

Yet, with the use of today’s TMSes and a connectivity provider such as Fides Treasury Services, outsourcing and automating can reduce security risks effectively and efficiently.

How does Fides Treasury Services help streamline this process and ward off security risks?
Maintaining your own infrastructure from a connectivity perspective is no small task: not only is a sizeable investment into state-of-the-art hardware required, but there is also the ongoing challenge of carrying out necessary and frequent security patches in order to improve performance and usability.

We at Fides Treasury Services are specialists in helping our clients build up secure connections to us, and therefore to their entire banking landscapes. In addition to continuously investing in the newest technology and infrastructure, we have implemented as many additional precautions as possible. For example, we carry out comprehensive monitoring of critical systems and automated notifications in the case of any irregularities, and we also perform regular upgrades of network hardware and patching of internet-facing appliances.

Finally, and of crucial importance, we employ the best and brightest trained specialists to assess situations quickly and then act professionally should the need arise. With this and more, our clients can rest assured that their data enjoys the maximum security and confidentiality at any point in time.

How is it that the company differs to competitors?
With our foundations having been laid in 1910, Fides Treasury Services can look back on more than a century of experience in servicing satisfied clients. In addition, being part of the Credit Suisse Group, we are committed to the highest quality and security standards, while also being a specialised multi-banking service provider.

Our solutions are flexible, cost efficient and can be connected with a TMS or enterprise resource planning system. If you don’t have your own system in place, then you can take advantage of our proprietary solutions. These enable you, for example, to have an overview of liquidity at a keystroke, while they also allow you to summarise account information, such as balances from your banking partners around the world. Furthermore, the worldwide transmission of single and bulk payments to your banks is summarised on just one easy to use portal.

Finally, I would like to stress that no matter how you wish to use what we offer, everything we do comes with a wide range of conversion and validation services, as well as the very highest security standards.

What plans do you have for the future?
Fides Treasury Services has been dedicated to providing multi-banking access to both the corporate and financial sectors since 1985, connecting and servicing more than 3,000 clients globally through SWIFT, EBICS, as well as other networks. Our aim is to continue growing, expand globally and further develop our products based on market and client expectations, while also identifying and captivating new business opportunities as soon as they arise.

World trade set to grow at slowest rate since the global financial crash

Posted on by Helen

On September 27, the World Trade Organisation (WTO) announced it was cutting its global trade growth forecast to just 1.7 percent, down from its previous estimate of 2.8 percent in April. This revised forecast marks the slowest anticipated rate of trade and output growth since the global financial crisis of 2008.

The trade body has revealed that the downturn marks the first time in 15 years that international trade has lagged behind global GDP. While trade has typically grown 1.5 times faster than GDP, this growth rate has now shifted, leaving trade growth languishing behind its 1990s peak, when globalisation gained significant momentum. The revised projection reflects an economic slowdown in China and Brazil, as well as lower-than-expected levels of imports to the US.

The downturn marks the first time in 15 years that international trade has lagged behind global GDP

“The dramatic slowing of trade growth is serious and should serve as a wake-up call”, WTO Director-General Roberto Azevêdo said in the trade outlook report. “It is particularly concerning in the context of growing anti-globalisation sentiment. We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development, which are so closely linked to an open trading system.”

The report points to government trade policies as a significant factor behind the recent downturn in growth, highlighting “creeping protectionism” as a threat to international trade and output. As economic isolationism becomes more common on the global political stage, trade is anticipated to grow at only 80 percent of the rate of the economy this year, in the first reversal of globalisation since 2001.

This shift in trade patterns and policy will make it increasingly difficult for the WTO to predict future trade growth. For the first time in the organisation’s history, it is unable to give specific figures for the year to come, and has instead envisioned a range of potential forecast scenarios for 2017. A number of uncertainties are set to affect 2017’s trade growth, including a possible wave of anti-trade sentiment stemming from the UK’s recent decision to leave the EU.

“This is a moment to heed the lessons of history and re-commit to openness in trade, which can help to spur economic growth”, Azevêdo advised. Only time will tell if the WTO’s warning will succeed in curbing the anti-globalisation rhetoric that currently dominates international politics.