NEW YORK Oct 17 (Reuters) - Moody’s warned on Monday it may slap a negative outlook on France’s Aaa credit rating in the next three months if the country fails to make progress on crucial fiscal and economic reforms.Moody’s also will take into account any potential adverse developments in financial markets or in the economy in assessing the outlook, it said, noting that the government has now less room to stretch its finances than it did during the financial crisis of 2008.A negative outlook would be a sign that Moody’s could downgrade France in the next couple of years.”The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government’s Aaa debt rating,” Moody’s said in a statement.The warning comes as European Union leaders discuss measures to protect the region’s financial system from an expected Greek debt default. Those measures should include injection of capital into banks with exposure to Greek debt.France may face a number of challenges in the coming months, such as the need to provide additional support to other European countries or to its own banking system, Moody’s said.For France to maintain a stable outlook on its rating, it will need to prove its “continued commitment to implementing the necessary economic and fiscal reform measures,” the ratings agency said.The government will also have to show “visible progress in achieving the targeted sustainability improvements” in its debt ratios, Moody’s said.France’s debt metrics are now among the weakest of its Aaa peers, the agency said.
For a fund company expanding out of its home market, a crucial question is whether a distribution strategy that works well locally will also work in other countries. You might call it the Abba Dilemma: Knowing me, knowing you? The Swedish popstersâ 1977 hit single went on to suggest there is nothing we can doÂ, but new research from Lipper hopes to shed some light on this issue. The first step is to appreciate the importance of product development. At the end of 2001 the European mutual funds industry stood at 3 trillion euros ($4.2 trillion) in assets under management. By the end of the first quarter of 2011 this had grown to nearly 5.5 trillion. Of this latest total, 43 percent (2.4 trillion euros) of assets are now managed in funds that have been launched in the past nine years. In other words, 97 percent of industry growth since the end of 2001 has come from product development. This is not just a quirk of the statistics over a longer time period. In 2010, for example, most local fund markets in Europe saw funds which were launched in previous years (referred to as ÂbacklistÂ funds) suffering redemptions while funds launches in 2010 enjoyed inflows. You can see a chart showing these findings by clicking here But this is not a uniform pattern. The most successful local market in 2010 (in terms of fund sales) was the UK. And in this market the vast majority of flows were into backlist funds, accounting for 81 percent of net sales. This market stands out in Europe for the importance of Independent Financial Advisers (IFAs) as a distribution channel. Historical data reinforces just how important this has been. The weighting of flows into funds with a track record ranges from 40 percent (2007) or 50 percent (2004) to around 90 percent (2003 and Q1-2011), but the UK industry has achieved positive net sales in every year analysed Â unlike most of the rest of Europe. While the FSAÂs Retail Distribution Review (RDR) looks set to shake-up the way that intermediaries are paid, the way that platforms generate revenues (or the way they disclose this), and the formal qualifications intermediaries must have, the benefits that the current model has achieved in not simply pushing the latest product to hit the market should not be underestimated. By contrast, those markets that suffered the greatest outflows from backlist funds are also those where banks and insurance groups have traditionally played a dominant role in mutual fund distribution: Spain, France, Italy, Germany. An analysis of historical trends again underlines this view. In only the boom years of 2003 and 2005 did backlist funds manage a full year of positive net sales across Continental Europe. You can see a chart showing these findings by clicking here REDEMPTIONS While the retreat by banking groups from promoting their mutual fund ranges in the wake of the financial crisis has been rightly highlighted elsewhere, it is possible to establish that the slow-down actually began in the second quarter of 2006. This happened as bond funds (previously the staple diet of Continental European retail investors) entered a cycle of redemptions that they only really came out of in 2009 Â and have fallen back into since the winter of 2010. This does not inevitably put all of the blame for the appeal of new funds at the doorstep of large financial services groups (at the very least because this is aggregate data), but it is an issue that needs to be addressed. And such a process may already be underway as the European Commission looks more closely at distribution as part of broader initiatives (e.g. the original intention of the Packaged Retail Investment Products [PRIPS] initiative) and not just at products like Ucits funds. The missing element from the picture painted so far is cross-border funds, those funds using the Ucits passport to sell into multiple countries and tending to be domiciled in Luxembourg or Ireland. Groups that have been successful with such funds have come out well through the financial crisis (in terms of sales), selling their products to professional fund buyers that will include funds of funds, private banks, banksÂ open (or guided) architecture platforms, as well as institutional investors. You can see a chart showing these findings by clicking here The cross-border sales figures are far more similar to the UK than the largest Continental European industries, with backlist funds forming between 60 percent and 80 percent of sales activity each year except during the initial sell-off in 2007-08 of the financial crisis. It is worth highlighting that new product launches actually kept the cross-border industry in positive territory in 2007, underlining the importance of product development for these groups too. Having highlighted the broad difference between the IFA-led UK market and many bank-dominated European markets, the rise and evolution of cross-border funds adds a further twist to this story. Bank-owned and independent asset managers generated about the same level of cross-border sales in 2010, and over 70 percent of these flowed into backlist funds for both types of business. This research provides evidence of the relationship between fund distribution channels and sales patterns, and how this varies around Europe, as well as exceptions to this in the cross-border industry. And as the European industry becomes increasingly internationalised by such developments, a steady shift away from new funds may result. ($1 = 0.713 Euros)
* SOCFIN part of France’s Bollare GroupBy Simon AkamFREETOWN, Oct 12 (Reuters) - Sierra Leone authorities have arrested 39 protesters in the south of the West African nation, following tensions between the local population and a unit of international agro-investor Socfin .The locals were protesting a multi-million dollar land deal in which the government is leasing to Societe Financiere des Caoutchoucs (Socfin) 12,500 hectares for oil palm production in the Pujehun district.The initial phase of the deal is worth $112 million.Green Scenery, an NGO in Sierra Leone, said some locals have complained they were not properly consulted and were not given information concerning the deal, signed in April.Farmland in many developing countries has attracted foreign investors in recent years, but a U.N. Food and Agriculture Organisation official last year warned some big land lease deals might risk deepening poverty and ramping up social tensions.Green Scenery said in a statement locals had blocked Socfin operations in the area since Oct. 3 because they were angry about not receiving information on the lease agreement, in which a local chief was involved.The statement did not give details of what information the farmers said they were deprived of.Gerben Haringsma, the general manager of Socfin Agricultural Company Sierra Leone Ltd, told Reuters the company was investing in social projects and the protesters were in the minority.”We tried for weeks to reason with these guys (the protesters).”“The government decided to stop it, saying this was getting out of hand,” he added.Socfin, part of France’s Bollore Group , owns more than 51,000 hectares of palm estates in Nigeria, Ivory Coast and Cameroon.David Sesay, assistant inspector general of police for the southern region of Sierra Leone, said officers arrested 39 people on Tuesday and took 27 to the country’s second city of Bo for questioning.”The people were continually rioting, blocking the road, and impeding people from going to work,” he said.Sierra Leone was devastated by civil war between 1991 and 2002, and held presidential elections in 2007.Since the end of hostilities the minerals-rich country with abundant resources such as iron ore, bauxite, diamonds and titanium ore, has attracted a number of foreign investors.African Minerals is developing a site at Tonkolili in the centre of the country which it has said is potentially the world’s largest deposit of the iron ore magnetite.In the agricultural sector, alongside Socfin Swiss commodities trader Addax, has leased a large area for sugarcane for biofuel use near the town of Makeni.”In some ways the renewed interest in agriculture is a welcome reversal of decades of underinvestment in the agricultural sector that has contributed to rural poverty and urban migration,” Oli Brown, environmental affairs officer with the United Nations in Freetown, said in an email.”However agricultural investment needs to be carefully managed and designed to ensure that it contributes to rural development and does not exacerbate food insecurity.”
* Analysts say the move does not mark any policy shiftBEIJING, Oct 12 (Reuters) - China on Wednesday unveiled a set of measures to expand financing supports for cash-starved small businesses, a step signalling some relaxation of credit controls but not amounting to a fundamental shift in monetary policy.The steps, including allowing small companies to issue more bills and bonds while paying less taxes, were announced on the government’s web site (www.gov.cn) after a cabinet meeting presided over by Premier Wen Jiabao.Small banks will continue to implement “relatively” low reserve requirement ratios (RRR) compared with big banks, the cabinet said, falling short of announcing a cut in RRR as expected by some investors.China’s RRR for big banks now stands at 21.5 percent, and the ratio for smaller banks, which tend to be more focussed on financing smaller firms, is 19.5 percent or even lower.”Currently, some small- and micro- sized firms are facing operating difficulties and the problem is also that they are facing a heavy tax burden and finding it hard to get finance, all of which we need to give high attention to,” said a cabinet statement.The government will raise the threshold for levying value-added and business taxes for such firms, easing their burdens.Despite the move, analysts believe the government will refrain from easing monetary policy in the near term for fear of reigniting inflation pressures.Guo Tianyong, an economist at Central University of Finance and Economics in Beijing, said the move should be seen as a “targeted” easing of credit curbs, rather than an across-the-board policy easing, given inflation remains elevated.Small firms hold the key to a stable job market in China as they account for 75 percent of employment.”It is far-fetched to read these measures as a signal of Beijing relaxing its macro policies,” said Qiao Yongyuan, an analyst at CEBM in Shanghai.”It is a set of detailed guidelines concerning more about providing support for smaller firms and regulating private financing,” he added.China’s annual inflation pulled back to 6.2 percent in August from July’s three-year high, cementing expectations that Beijing will hold off further policy tightening amid uncertainties hanging over the global economic recovery.Since last October, the central bank has raised interest rates five times and increased bank reserve requirement ratios — the percentage of cash deposits they must set aside in their vaults — nine times.The State Council, or cabinet, also vowed to step up a crackdown on the high-interest underground lending market.Cash-strapped Chinese private firms have struggled to win bank loans during a credit clamp-down by Beijing, often forcing them to borrow on the underground markets that pool money from individuals and firms — at annual interest rates as high as 100 percent.The eye-watering rates, more than 15 times China’s benchmark lending rates, have pushed some firms to the limit. And a string of private company bosses in China’s entrepreneurial capital, Wenzhou in coastal Zhejiang, have skipped town after failing to repay such loans.