Investec offering bespoke personal banking offering for financial advisers.

Specialist Bank Investec Australia has broadened its position in catering to niche professional clients with the rollout of a bespoke personal banking offering for financial advisers.

Investec Australia currently works with around 250 independent financial advice firms nationally, managing approximately $750 million of their client funds. To build on this strong adviser presence, the bank is now actively seeking to specifically provide financial solutions for advisers themselves.

According to Investec Australia’s head of IFA distribution, Gareth Bird, the focus on financial advisers will incorporate flexible lending practices similar to those offered to other niche market segments such as medical, dental and accounting practitioners.

“Financial advisers are a unique group of clients with a distinct set of banking requirements. The ability to offer a bespoke range of products to this market segment follows many years of working alongside them and their clients, so we’re already familiar with their financial needs.

“To date, there have been very few banking solutions developed to specifically help financial advisers effectively and efficiently manage their own personal finances. We have a strong track record in providing bespoke solutions across professional services and by understanding specific needs of financial advisers we are able to provide niche banking services in one convenient bundle,” he said.

Investec Australia is now offering financial advisers the following products:

• Residential mortgages and investment property – including the ability to borrow up to 90% for residential and 85% for investment loans with no Lenders Mortgage Insurance, and up to 70% LVR for commercial property within a SMSF
• Car loans – including finance available for new or used vehicles and the ability to use an Investec credit card to buy a new car and earn Qantas Points on the purchase as well as rolling the expense into a fixed term contract with Investec and earn more Qantas Points on the monthly repayments.
• Premium credit cards, including Visa Signature and Platinum credit cards – including no cap on how many Qantas Points can be earned and complimentary travel insurance
• Investec One Account provides an unparalleled bundled offer incorporating a high interest savings account, an optional overdraft facility up to $30,000, a debit card, online and mobile banking functionality, and around-the-clock personalised service.
• Foreign exchange expertise – including access to experts who can help with conversions, overseas transfers and quotes on live exchange rates, same day transfers with no minimum value, competitive rates, and access to currency deposits in USD, EUR, JPY and GBP
• Competitive savings account – including a range of term deposits which have been awarded
• ‘Best Value Term Deposit’ 2012 and 2013 by Canstar, commended for it’s high interest, flexibility and innovative features

Mr Bird said the move by Investec Australia to offer financial advisers a tailored personal banking service which is out of the ordinary, is designed to provide a more responsive and flexible offering than major financial institutions.

“In their own dealings with clients, financial advisers strive to give a streamlined process with exceptional client service. We now have the capability to offer this value proposition to the advisers themselves, who – by virtue of their own knowledge and experience – seek financial solutions that are tailored, relevant and competitive,” he said.

The post Investec Australia launches new financial adviser offering appeared first on AdviserVoice.

• The number of retail foreign exchange (FX) traders in Australia held up well despite a fall in market volatility compared to 2011
• The Australian FX market remains fragmented
• Two in five current FX traders use social media in the trading context
• Social trading (following other traders’ movements) is still to take root in Australia

The number of retail foreign exchange (FX) traders in Australia is relatively large compared to other countries
53,000 Australians traded FX at least once in the 12 months to December 2012, which is similar to the level seen in 2011 (54,000).

The Investment Trends 2012 Australia FX Report is the second iteration of the in-depth study on the use of FX, based on a survey of 13,459 conducted between November and December 2012.

Pawel Rokicki, Senior Analyst at Investment Trends said: “The Australian FX trader numbers have held up remarkably well, despite a 26% fall in market volatility compared with 2011 (and 41% compared with the second half of 2011) as measured by the average value of the VIX index.”

On a global stage, the Australian market is large compared to other countries studied. Australia has more currently active FX traders than Germany (29,000) and France (15,500) combined. Relative to the adult population, the level of adoption of FX trading in Australia is twice as high as in the UK and six times higher than in the US.

The Australian FX market is intensely competitive
The FX market in Australia is fragmented. In contrast to many other investment markets analysed by Investment Trends, none of the providers has more than 20% market share of primary relationships. The top two providers control 29% of primary relationships – compared with 58% in the Australian CFD market and 66% for online share trading. This low level of concentration has remained broadly unchanged since 2011, when 28% of primary relationships were controlled by the top two FX providers.

The top five providers by primary relationship were:

• Four out of ten FX traders embrace social media in the context of trading, but most prefer to make their own trades rather than following others
• 2 in 3 (67%) FX traders rely on technical analysis and charts when deciding on what trades to make, and one in five uses automated trading signals. We see an increase in the use of business and economic news in traders’ decision making process when choosing FX trades (37% in 2012 compared to 32% in 2011)
• 40% of current FX traders use social media in relation to investing. These traders mainly use social networks for analyst commentary (47%), market trends (44%) and current events (42%).

The relatively new phenomenon of social trading, where traders can follow in the footsteps of trading leaders is still to gain popularity in Australia. Only six per cent of current FX traders say they follow other traders on social trading sites.  OpenBook (eToro) is the most widely used network.

The top five social trading sites:
1. OpenBook (eToro) 35%
2. ZuluTrade 27%
3. myFxBook 16%
4. Currensee 9%
5. Tradency 8%

The post Investment Trends releases FX research appeared first on AdviserVoice.

Businesses that rely on importing goods or services are being urged to consider hedging strategies in the first quarter of 2011 to make the most of the current high Aussie dollar – and mitigate against any adverse impact of expected decreases in the value of the Aussie later in the year.

“We see the Aussie continuing to perform strongly for the early part of the 2011, but there is a feeling that it is heavily overvalued and may start to run out of steam from the second half of the year onwards,” said Joe McKenna, head of corporate foreign exchange at specialist brokers World First.

“For example, we are predicting $0.98 to the US Dollar in three months’ time, which isn’t a significant change on current rates, then $0.95 to the US Dollar in six months and $0.90 this time next year.

“What we would say to businesses is don’t get complacent and consider protecting yourself against future currency movements. Hedging is definitely something for businesses to consider in the early part of 2011, and we are seeing a lot of companies hedge on a three to six month basis to protect a certain margin,” he explained.

Mr. McKenna believes there are a lot of factors that could have a negative impact on the value of the Australian dollar in 2011 – most obviously, the flood disaster.

“A number of industries, from commodities to agriculture to financial services, have been heavily affected by the flood crisis and this has already had some impact on the dollar.

“In the medium-to-long term, however, continuing economic recovery in other parts of the world and a possible slowdown in the Chinese economy may start to show more significant effects on the value of the dollar from the middle of 2011.

“If the Chinese economy is performing well, demand for commodities remains robust, which has positive implications for the Australian economy. However, we know that China is looking to increase interest rates and reduce lending to prevent their economy from overheating, and we expect this will have a negative impact on our economy during 2011,” he explained.

“There are also signs that economies like the US and UK are beginning to play catch-up and starting to show green shoots of recovery, and this will make the major currencies like the US dollar stronger in the long run against the Aussie.”

Mr. McKenna recommended that SMEs who don’t need to pay for items up-front consider taking out forward contracts, meaning they can lock in a contract to secure today’s rate for a future date anywhere up to two years ahead.

But he also advised business owners to shop around for the best rates on their foreign exchange as offerings can vary massively between providers.

“Corporate day rates with some of the banks range up to 1.5% away from the market rates. If, for example, your business imported $2 million worth of goods in a year, that’s $30,000 Australian dollars paid unnecessarily every year.”

The post Hedge now, gain later appeared first on AdviserVoice.

Key points

• The sub-par recovery in the US, Japan and Europe and constrained fiscal policy most likely means that we will see another round of global policy reflation, centred on quantitative easing (or printing money).
• This will be bad news for G3 currencies, but good news for Asian currencies and gold. And it will likely also help stimulate the next asset price bubble.
• The $A is likely to head higher as Japan and the US boost their money supplies and the RBA continues to raise Australian interest rates.

Global Reflation Mark II

Another round of global monetary reflation is likely getting underway with the US Federal Reserve and the Bank of England indicating that they are now considering additional monetary easing and Japan undertaking its own easing in moving to push the value of the Yen lower. This has major implications for foreign exchange markets, the gold price and the next asset price bubble.

The key driver is the sub-par nature of the recoveries in the US, Japan and Europe and the inability of fiscal policy to respond further given already high public debt levels. With interest rates at or close to zero, central banks look to be turning to another round of quantitative easing. Technically this involves expanding the size of the central bank’s balance sheet and basically involves using printed money to buy securities, so as to increase the quantity of money in the system. Increase the supply of something and its price normally falls!

• Following its September meeting the US Federal Reserve has indicated that it is considering more monetary easing if needed to support the economic recovery and push inflation back up to levels more consistent with price stability. And since the Fed Funds rate is close to zero this effectively would mean another round of quantitative easing (or QE2), which would involve using printed money to buy Treasury bonds. With US growth now below the level necessary to stop unemployment from rising (which is at least 2.5% pa) and the Fed likely to revise down its 2011 growth forecasts, it’s likely to engage in quantitative easing following its November meeting. Market speculation is that the Fed is considering undertaking another $US1 trillion of asset purchases (which is the equivalent of 7% of US GDP). Coming on the back of $US1.3 trillion in Fed asset purchases in 2008-09 this would result in a further sharp rise in the size of the Fed’s balance sheet (see the chart below) and another big increase in the supply of US dollars.

Source: US Federal Reserve, AMP Capital Investors

Market expectations of QE2 in the US and a resultant increase in the supply of US dollars have seen renewed downwards pressure on the $US.

• The Bank of England has also indicated that it is considering more quantitative easing.
• Tiring of seeing the Yen move ever higher in response to a weakening $US, Japan has responded by starting to buy US dollars and by leaving the increased supply of Yen in the economy in what is called unsterilized intervention. As such it has essentially engaged in quantitative easing itself. Currently it has only spent Yen2 trillion but purportedly has Yen35 trillion available, which would be about 7% of its GDP and hence roughly match the potential US easing.
• So far Europe has merely complained about the Bank of Japan’s intervention and it is still reaping the benefits of the weaker euro seen over the December to May period. But with the euro rising sharply again in response to a weaker $US and fiscal tightening likely to impact next year there is a good chance that it will also be forced into quantitative easing next year.

The end result is likely to be an increase in the supply of US dollars, Yen, British pounds and euros and a race down in each of these currencies, with the $US leading the charge.

Such “beggar thy neighbour” policies or “competitive depreciations” will no doubt result in worries about all sorts of things, in particular inflation and trade tensions. Inflation is a risk but as with QE1 it isn’t going to happen until people start spending and spare capacity, evident in circa 10% unemployment in the US and Europe and idle factories, is used up. Right now the bigger risk is deflation, so G3 central banks can afford to take risks with printing more money.

Another obvious issue is: will it work?

Quantitative easing operates by injecting more cash into banks, lowering mortgage rates and corporate borrowing rates (as government bond yields fall) and pushing the exchange rate lower (at least against countries not doing the same). But so far US banks have not leant much of the cash out from the first round of quantitative easing (ie the money multiplier remains low) and mortgage rates are already at record lows. The counter of course is that QE1 probably did prevent a worse outcome, banks will be able to further rebuild their balance sheets, further falls in mortgage rates will allow more US homeowners to refinance their loans at lower rates and the $US will at least fall against non-major currencies providing a further boost to its exports. And Fed Chairman Ben Bernanke feels that he at least has to try!

So what will it all mean?

There are several implications from another round of monetary easing.

First, it means another boost to global liquidity which should at least support growth, if not provide an additional boost to growth going forward.

Second, it will likely be positive for share markets and other listed growth assets as it was through last year following QE1.

Third, it will be bad for G3 currencies – first the $US, but also the Yen and ultimately the euro as its economy lags the US and it is forced to do the same.

Fourth, Asian and other emerging market currencies are likely to remain key beneficiaries as their central banks engage in tightening and the relative supply of their currencies falls relative to US dollars, Yen, British pounds and euros. China’s move last week to allow a faster appreciation in the Renminbi will likely help accelerate the rise in Asian currencies.

Source: Bloomberg, AMP Capital Investors

Fifth, the increase in the supply of US dollars, Yen, British pounds and euros (the latter next year) will be good for gold as investors seek a safe haven from falls in major paper currencies. This explains why gold has recently broken out to a new record high, even though inflation remains benign. The chart below shows that while the gold price has come a long way over the last decade it is still well below its inflation adjusted peak of 1980, when gold rose above $US2,000 an ounce. It will likely head up to a similar level over the next few years.

Source: Global Financial Data, AMP Capital Investors

Sixth, commodity currencies such as the Australian and Canadian dollars are also likely to be key beneficiaries. Talk of an additional boost to the supply of US dollars via quantitative easing is coming at a time when the RBA is signalling more interest rate hikes and commodity prices are strong all of which are positive for the $A. All the talk of QE2 in the US is helping propel the $A back to parity against the $US. The chart below showing the value of the $A since 1901 serves as a reminder that the post float period of the $A which saw it slip below parity is an aberration. The norm up until early 1982, was for the $A to trade above parity. This includes the early 1950s when the terms of trade was about as strong as it is now. Back then one Australian dollar bought $US1.12.

Source: Thomson Financial, RBA, AMP Capital Investors

Finally, another surge in global liquidity will help fertilise the next asset price bubble, the seeds of which have already been sown in the bursting of the last. This could well be in emerging markets or commodities. And to the extent that emerging market countries intervene to resist appreciation in their currencies it will only add to the boost in global liquidity.

The post Global Reflation Mark II, gold and the Australian dollar appeared first on AdviserVoice.

In 2008, the UK was able to ‘get away with’ a 26% devaluation of its currency against the US dollar, and devaluations of 23% and a staggering 40% against the euro and the yen respectively. The UK economy is now in a better position as a result of the lower value of the pound; had it not cheapened the relative value of its debt, it is possible that the UK could have faced some serious funding issues.

The German economy, its exporters reaping the benefit of a weakening euro, has benefited from the troubles in the eurozone periphery. Those troubles have caused the euro to fall by 20% against the yen and by around 11% against the US dollar this year.

Could it now be the turn of the US dollar to endure a phase of currency weakness? If so, against what, and how, might it fall in value? There are significant difficulties associated with the devaluation of a global reserve currency, exemplified by the tensions inherent in the symbiotic relationship between the US and China.

The Chinese authorities would probably welcome the beneficial effect that an appreciating renminbi (versus the dollar) would have in reducing imported inflation. Such appreciation would, however, undermine the value of their foreign-exchange reserves, and would additionally affect China’s exporters, whose main trading partner is the US. China has amassed unprecedented levels of US government paper, and the US, with its growing budget deficit, is still reliant upon the readiness of the Chinese to buy its debt. A decline in the dollar would lead to diminished buying of US Treasuries, but at the same time Chinese exporters would suffer.

So, from both sides’ perspectives, there is a necessity either to maintain the status quo or, perhaps, to allow only a gradual adjustment in the relationship between the dollar and the renminbi. Given only a modest appreciation of the Chinese currency against the dollar since June, and the still-vast Chinese trade surplus (not to mention the high US unemployment rate), we would expect further ‘noise’ to emanate from US politicians in the run up to their mid-term elections in November. As a result, the trend of modest renminbi appreciation, which had stalled, is likely to resume.

A further fall in the value of the dollar against the yen seems unlikely, given the ticking time-bomb of Japanese indebtedness, which will only worsen, owing to the country’s demographic challenges. A meaningful devaluation of the US dollar against the euro also seems unlikely, in light of the significant eurozone debt challenges that persist.

However, there are a number of other candidates against which the dollar could lose ground.

There is a growing group of countries that appears to have weathered the 2008 storm better than the G3 nations (US, Japan and Germany), and which has started to raise interest rates in order to contain domestic demand. In this category we would include Sweden, Canada, Switzerland, Australia and a selection of Asian economies. The challenge presented is that, as rates rise, those countries attract significant inflows of ‘hot’ money, which pushes up their exchange rates. In some cases, this has led to foreign-exchange intervention by respective central banks. In other cases, however, the increase in the exchange rate can help bring about monetary policy tightening; this is especially likely in those countries where authorities fear the corrosive effects of imported inflation.

In Asia, we see countries (such as Singapore) using currency strength explicitly as a monetary tool. Indonesia has sought to resist the rise in its currency but, with the cost of imported food increasing, authorities there may be more inclined than before to let the currency appreciate against the dollar.

The dollar is the main currency in which commodities are priced. Commodity prices have remained elevated despite the fact that most of the Western economies appear to be, once more, on the brink of contraction. This is attributable to the perception that demand from China is insatiable, and also to some marked changes in weather patterns. For many developing nations, food is a much higher percentage of consumption than it is in the West and it tends, therefore, to have a significant impact on headline developing-world inflation figures. For central banks, this poses some problems, as higher interest rates (the conventional monetary tightening tool) do little to counteract imported inflation. Allowing the currency to appreciate against the dollar is one way to tackle this issue.

What about the effect of an appreciating currency on the value of a country’s reserves? This is less of an issue because many of the countries that would benefit from allowing some currency appreciation are not large holders of US-dollar debt, and the US Treasury does not rely upon them to help fund the deficit.

The following table shows, in the blue area, the largest holders of US debt, whose currencies we anticipate will move only modestly versus the dollar. In the yellow area are those countries which provide limited financing to the US and whose currencies, we believe, have greater scope for appreciation against the dollar.

If devaluation is one way to help an indebted country out of its difficulties, it is necessary to find a currency against which to devalue. Countries with strong domestic demand, and which are sensitive to imported inflation, could be prime candidates.

For now, we prefer to allocate our currency exposure to the growing band of currencies in countries where authorities either have a need to revalue or are less likely to intervene to try to weaken their currencies. We are maintaining underweight exposure to the ‘ugly three’ (yen, US dollar and euro). The list of ‘beautiful’ currencies is growing longer.

The post Currency jigsaw puzzle appeared first on AdviserVoice.