LatAm Investor
How long can Latin America resist higher inflation and interest rates?
So far this year Latin America's economies have proved surprisingly resilient. Pollyanna De Lima, from S&P Global crunches the latest data and forecasts to explore the economic outlook for the region...
Overview
Latin American nations displayed considerable economic resilience during the second quarter of 2022, according to S&P Global’s PMI data, despite significant global headwinds. The outlook remains cloudy, however, as the war in Ukraine and sanctions imposed on Russia continue to exacerbate price pressures, thereby underpinning monetary policy tightening. Other challenges include ongoing disruptions to supply chains and political uncertainty, while the cost-of-living crisis and rising interest rates are expected to restrict consumption and investment.
In the opening quarter of the year, gross domestic product in Brazil, Colombia and Mexico all expanded by 1.0% from the preceding period, with only Mexico having failed to see a return to pre-pandemic levels. Since then, our timelier indicator — the Purchasing Managers’ Index (PMI) — strengthened and thereby signalled a more robust performance for the second quarter.
Despite a challenging global economic environment, and in line with stronger PMI results for Q2, our full-year forecasts for 2022 have been revised higher. GDP growth is expected to hit 6.2% in Colombia and 1.5% in both Brazil and Mexico. Included in the forecast assumptions are expectations of a slowdown in growth towards the end of the year, as higher borrowing costs and surging inflation dampen consumption and investment. On the monetary policy front, we anticipate year-end policy rates of 13.5%, 8.5% and 9.5% in Brazil, Colombia and Mexico respectively.
Substantive Research LTD
After 5 years of no-action letters and extensions, the SEC has announced that from July 2023 US providers will no longer be able to accept hard dollar payments from asset managers for research (with the exception of those registered as investment advisors)
SEC Staff Pulls Rug Out From Under ‘Hard Dollar’ Research Arrangements
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The Long and Winding Road to Financial Reporting Standards
2022 Review of Shareholder Activism
Mary Ann Deignan is Managing Director; Rich Thomas is Managing Director and Head of European Shareholder Advisory; and Christopher Couvelier is Managing Director at Lazard. This post is based on a Lazard memorandum by Ms. Deignan, Mr. Thomas, Mr. Couvelier, Emel Kayihan, Antonin Deslandes, and Leah Friedman.
Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism (discussed on the Forum here) by Lucian Bebchuk, Alon Brav, and Wei Jiang; Dancing with Activists (discussed on the Forum here) by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch; and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System (discussed on the Forum here) by Leo E. Strine, Jr.
Observations on Global Activism Environment H1 2022
Activity Slows vs. Q1 but Remains Robust
- Despite a challenging investing environment in 2022, activity remains elevated—Q2 was the second most active quarter in the past five quarters
- Global campaign activity for Q2 (53 campaigns) down 27% vs. Q1, in line with Q1/Q2 pattern of recent years
- Regionally, the decline was most acute in the U.S., where activity materially declined by 50%
- By contrast, Europe saw a strong Q2 with a 33% increase over Q1 levels
Technology Repositions as the Most Active Sector
- Technology companies accounted for 1 out of every 4 activist targets in Q2, resulting in Technology being the most targeted sector in H1
- Software, Services and Internet were the most active subsectors
- Primary activist objectives in Technology campaigns are in line with key themes across other sectors, with M&A, strategy and capital allocation dominating the narrative
First Timers Break Records and Diversify the Field
- First time activists accounted for 37% of all activists launching campaigns in H1, the highest level in recent years
- In addition, campaigns were more dispersed across the universe of activists, with the top 5 most prolific activists accounting for 19% of all campaigns in H1, which is below the concentration levels observed over the past 5 years
- The H1 top activists feature a broad range of investor types including established global players, regional and sector focused funds, and increasingly active ESG specialists and occasional activists
Financial Regulation, Corporate Governance, and the Hidden Costs of Clearinghouses
Paolo Saguato is Assistant Professor of Law at George Mason University Antonin Scalia Law School. This post is based on his recent article, published in the Ohio State Law Journal.
Recent financial market events have splashed onto the front pages of newspapers the often-overlooked plumbing found in those markets: the clearinghouses that handle trillions of dollars’ worth of securities and derivatives trades. During the Robinhood and GameStop events, the National Securities Clearing Corporation, a securities clearinghouse, played a critical role when it required Robinhood to provide collateral to guaranty its open positions. And recently, FTX US Derivatives, a cryptocurrency exchange, brought further attention to the clearing business and the critical risk mitigation and containment function it provides to the financial system when it applied to the Commodity Futures Trading Commission to offer clearing services for non-intermediated margined crypto derivatives.
Given the magnitude of the trades crisscrossing clearinghouses every day, these vital market infrastructures warrant more scrutiny than they have received. My article calls for policymakers to focus on the existing governance and financial structure of clearinghouses and urges them to seriously address a critical open issue in their organization: the misaligned incentives across clearinghouses’ main stakeholders—particularly their shareholders and their members—and how that misalignment might affect clearinghouses’ risk profile and financial resilience.
Clearinghouses are, in fact, corporations with a unique financial structure. Clearing members are financial institutions that access clearing services. While such members are the ultimate risk bearers of the business, they lack any formal governance rights over the firm. Instead, clearinghouses are controlled by their shareholders, who are large publicly-listed for-profit financial infrastructure groups. These shareholders retain all governance rights, yet have extremely limited financial skin in the game.
Delaware M&A Developments
Andre Bouchard, Kyle Seifried and Jaren Janghorbani are Partners at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul, Weiss memorandum by Mr. Bouchard, Mr. Seifreid, Ms. Janghorbani, Laura C. Turano, and Ross A. Fieldston, and is part of the Delaware law series; links to other posts in the series are available here.
In Totta v. CCSB Financial Corp., the Delaware Court of Chancery, in an opinion by Chancellor McCormick, held that a charter provision that gave the board “conclusive and binding” authority to construe the charter’s terms did not alter the standard of review applicable to fiduciary duty claims related to those board decisions. The applicable charter provision prohibited a stockholder from exercising more than 10% of the company’s voting power. In the face of a proxy contest, the board adopted a new interpretation of that voting limitation allowing the board to aggregate the holdings of multiple stockholders that the board determined to be acting in concert. Relying on that new interpretation, the board instructed the inspector of elections not to count any votes above the 10% limit submitted by the insurgent, its affiliates or its nominees. This instruction was outcome determinative and the insurgents brought suit to invalidate the board’s instruction to the inspector of elections. The company argued that the court was required to uphold the instruction based on the board’s “conclusive and binding” interpretation of the charter provision. The court rejected that argument, reasoning that a corporate charter (unlike an alternative entity’s organizational documents) cannot modify the standards by which director actions are reviewed, and that the board’s self-serving and new interpretation of the voting limitation in the face of a live proxy contest was inequitable because the board did not have a “compelling justification” under the Blasius standard of review for their interference with the election. Because the board’s actions were inequitable, the court ordered the inspector of elections to disregard the board’s instruction and count the insurgent’s votes that had previously been excluded.
ESG Investing
WEBINAR | CFA ESG Exam Tips and Strategies
A Short Introduction to GRI Standards
The foundation of sustainability reporting is for an organization to identify and prioritize its impacts on the economy, environment, and people - to be transparent about their impacts.
https://www.globalreporting.org/media/wtaf14tw/a-short-introduction-to-the-gri-standards.pdf
Martin Hakker joins Marco Polo Exchange as Chief Revenue Officer
Martin Hakker joins Marco Polo Exchange as Chief Revenue Officer
NEW YORK, July 20, 2022 /PRNewswire/ -- Marco Polo Exchange (MPX), a US-headquartered financial services and technology firm dedicated to breaking down the barriers to cross-border investment and capital raising, with a special focus on catering to the ESG marketplace, today announces the appointment of Martin Hakker as Chief Revenue Officer.
Martin joins MPX with over 30 years of experience in the Financial Services industry. Prior to MPX, Martin spent 25 years at Fidessa, holding roles of Executive Vice President, Head of Americas, and Chief Executive Officer at Fidessa Canada. During his tenure at Fidessa, Martin used his entrepreneurial skills to lead Fidessa's growth to the industry-leading standard in the US, Canada, and LATAM.
Before Fidessa, Martin was a principal at TCAM Systems, where he and TCAM were at the forefront of automating stock exchanges throughout the globe. His roots in capital formation, lowering entry barriers through cutting-edge technology, and automation led to important disruption across products and solutions for the industry. Martin's leadership and expertise will be essential in building long-term partnerships with MPX's growing client base, developing new cross-functional partnerships, and promoting a culture of engagement, collaboration, and innovation with the growing talent at MPX.
"I am excited to be part of such a fantastic team at MPX, executing the vision of lowering the cost of capital throughout the world by building a platform to enable global access to local financial products," said Martin Hakker. "I believe it can be a powerful catalyst in expanding the financing options of companies across the world. This current wave of data and blockchain technologies is enabling an exciting extension of market reach, something my generation of technologies began, but this generation promises to accelerate. A bold challenge is irresistible!"
"Our ambitions are large – we seek to build the leading global marketplace for financing SMEs as the world economy de-carbonizes and grows sustainably," said Steve Carlson, Chairman, Magellan Global Inc., parent of MPX.
"Martin brings over three decades of building and managing some of the premier electronic platforms in global financial markets. MPX takes him back to an early passion - bringing technologies to local capital markets. We are delighted to have the benefit of Martin's extraordinary leadership and expertise," said Vinode Ramgopal, Executive Chairman, MPX.
Marco Polo Exchange (MPX) is a Delaware-incorporated financial services and technology firm dedicated to expanding cross-border capital raising and investing. We leverage specialist regulatory licenses, blockchain, AI technologies, and ESG compliance to match global buyers with local issuance and investment opportunities. Our mission is to lower the cost of capital for SMEs around the world. Our broker-dealer, Marco Polo Securities, is the leading 15a-6 chaperone broker in the US markets.
For further information, please contact:
David Snyder, CAO
+1 347 745-6448
info@mpxchange.com
Financial Times
Britain’s asset management industry is pushing the government to establish a new class of fund employing blockchain technology, highlighting how financial firms are tapping the architecture that underlies the crypto market. The Investment Association, the trade body representing the UK’s asset management industry that oversees close to £10tn for clients worldwide, will call on Thursday for the government and City regulator to work “at pace” to approve blockchain-traded funds that will issue digital tokens to investors instead of traditional shares or fund units. Significant cost savings for end investors could be achieved by using the digital ledgers known as blockchain, to drive multiple efficiency improvements in the existing laborious processes involved in buying and selling mutual funds, according to the Investment Association. The group will also propose the creation of a new task force to examine how distributed ledger technology could accelerate the creation of new products and services as well as allowing more investors to customise their portfolios with holdings in private companies and cryptocurrencies.
Climate & Capital Media
“Standards setters are not competing with each other, they are competing with technology. But they don’t realize it.”
The following article originally appeared on GreenBiz.com as part of our partnership with GreenBiz Group, a media and events company that accelerates the just transition to a clean economy.
Whatever your take was on COP26, a key takeaway at the intersection of capital markets and climate was the formation of the International Sustainability Standards Board (ISSB). During the initial days in Glasgow, the IFRS Foundation announced the formation of the new board, an organization meant to develop a global baseline of sustainability disclosures for financial markets.
The formation has been widely celebrated in the sustainable finance community — a community that has grown substantially in the past decade and has swelled in the past year.
So what does the formation of the ISSB mean for the evolution and efficacy of ESG reporting? To answer that, I checked in with those who I thought would know better than most: Jean Rogers, founder of the Sustainability Accounting Standards Board (SASB) and, as of this month, global head of ESG at Blackstone; and Robert Eccles, founding chairman of SASB, professor of management practice at Oxford and a founder of the International Integrated Reporting Council (IIRC).
I found their insights on the ISSB to be unique and invaluable; promising, concerning and exciting alike. I think you’ll find their takes illuminating as well.
The following has been edited for clarity and length.
What most excites you about the newly formed ISSB and its ability to shift capital markets and the real economy to one that is clean and just?
Jean Rogers: Consolidation and maturing of the industry are essential. The opportunity to align global markets on an approach to ESG, while allowing jurisdictions to tailor standards to their priorities and point of view. For example, diversity in India is often interpreted as differing abilities rather than skin color. Decarbonization has a different meaning in Malaysia than in Canada.
Bob Eccles: Financial accounting standards and reporting requirements have created the deep and liquid capital markets we have today which have generated substantial wealth. But the information shaping these markets is now too narrow and too short-term for the capital markets to contribute to a sustainable society. Resource allocation decisions by companies and investors need to change, and the standards developed by the ISSB will give both the information they need to do so.
How G7 Could Help the Debt-Distressed Markets
How G7 could help the debt-distressed
This small and wealthy group with its outsize power is uniquely positioned to help low-income countries manage deteriorating macroeconomic conditions
Read more below...
https://lnkd.in/e2BR-v2V