December 24, 2010

There’s less room at the trough for wind and solar lobbyists:

Investors pulled 931 million euros ($1.2 billion) in the first 10 months, already eclipsing the full-year withdrawals in 2008 when the global financial crisis spooked investors, according to data compiled by Lipper Inc. Last year clean-energy funds captured 1.3 billion euros of new money, Lipper said.

“The new-energy market and related stocks were significantly impacted by the credit crisis,” Robin Batchelor, manager of the $2.9 billion BlackRock New Energy Fund, said in an e-mail. Reduced demand for energy and “the fact that governments were perceived to have many new worries on their agenda combined to create a difficult environment,” he said. New York-based BlackRock is the world’s largest money manager.

U.S. investment slumped this year amid investor doubt about government energy policy, while the sovereign debt crisis has limited prospects for economic growth in Europe. Governments in Germany, Spain and Italy cut subsidies for photovoltaic panels.

China continues to push offshore yuan trading:

Hong Kong banks will be allowed to tap the 20 billion yuan ($3 billion) fund from next month should the city’s yuan clearing bank run out of funds set under a quarterly quota.

The Hong Kong Monetary Authority made 10 billion yuan available in October using a swap agreement with China’s central bank after an 8 billion yuan quota proved insufficient. Chinese Premier Wen Jiabao is allowing the currency to become more readily available beyond China’s borders to reduce reliance on U.S. dollars in trade and finance.

“They’re hurtling toward this now,” said Gavin Parry, managing director of Hong Kong-based Parry International Trading Ltd. “They’re really using Hong Kong as the settlement and clearing hub for offshore deposit and transactions” in yuan, he said.

Hong Kong aims to grow as an offshore center for yuan trading and HKMA Chief Executive Norman Chan said yesterday deposits totaled 280 billion yuan at the end of November, up from 220 billion yuan a month earlier. The city received 130 billion yuan in net trade payments from China in the first 11 months, he told reporters in Hong Kong.

That’s a lot more useful than whimpering about global resolutions to develop a new currency!

Together with the above, dim sum bond issuance is booming:

HSBC Holdings Plc and Standard Chartered Plc, the biggest foreign underwriters of yuan bonds sold in Hong Kong, say sales will double in 2011 as demand outstrips supply and the yuan appreciates.

New issues may increase to a record 80 billion yuan ($12 billion) next year, with as much as 30 billion yuan of sales in the first quarter, according to HSBC, the No. 2 underwriter of so-called dim sum bonds. Standard Chartered, the fourth largest this year, says sales could top as much as 100 billion yuan as Moscow-based United Co. Rusal and BP Plc plan issues. Offerings in 2010 total 40.7 billion yuan, data compiled by Bloomberg show.

The Bank of Canada has released a working paper by Kimberly Beaton, René Lalonde and Stephen Snudden titled The Propagation of U.S. Shocks to Canada: Understanding the Role of Real-Financial Linkages:

This paper examines the transmission of U.S. real and financial shocks to Canada and, in particular, the role of financial frictions in affecting the transmission of these shocks. These questions are addressed within the Bank of Canada’s Global Economy Model (de Resende et al. forthcoming), a dynamic stochastic general-equilibrium model with an active banking sector and a detailed role for financial frictions. We find that U.S. financial shocks, as well as real shocks, have important effects on the Canadian economy. Moreover, financial frictions on both the demand and supply sides of credit amplify the first round impact of all types of U.S. shocks on the U.S. economy, as well as the second round impact on Canada. Real-financial linkages also increase the persistence of the Canadian response to U.S. shocks. We find that the interaction between the endogenous response of commodity prices and U.S. financial frictions plays an important role in the propagation of U.S. shocks to the Canadian economy. Finally, real-financial linkages also help to generate the positive cross correlation between domestic demand in the United States and Canada observed in the data, which is difficult to explain with a model where the transmission of shocks between countries is only based only on trade.

Unsurprisingly enough, it was a sleepy foreshortened day on the Canadian preferred share market, but the rally managed to sputter along, with PerpetualDiscounts gaining 9bp and FixedResets basically flat.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0370 % 2,309.5
FixedFloater 4.81 % 3.52 % 30,357 18.97 1 0.0442 % 3,497.2
Floater 2.59 % 2.36 % 56,173 21.33 4 -0.0370 % 2,493.7
OpRet 4.80 % 3.43 % 68,340 2.37 8 -0.1773 % 2,391.4
SplitShare 5.35 % 1.36 % 845,675 0.95 4 -0.0050 % 2,444.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1773 % 2,186.8
Perpetual-Premium 5.70 % 5.51 % 154,661 5.34 27 0.0484 % 2,013.7
Perpetual-Discount 5.40 % 5.45 % 286,305 14.72 51 0.0886 % 2,022.6
FixedReset 5.22 % 3.39 % 342,492 3.12 52 0.0050 % 2,269.8
Performance Highlights
Issue Index Change Notes
TRP.PR.C FixedReset -1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 25.46
Evaluated at bid price : 25.51
Bid-YTW : 3.93 %
Maturity Type : Call
Maturity Date : 2011-07-30
Maturity Price : 25.25
Evaluated at bid price : 25.50
Bid-YTW : 3.62 %
IAG.PR.A Perpetual-Discount -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 20.88
Evaluated at bid price : 20.88
Bid-YTW : 5.54 %
Volume Highlights
Issue Index Shares
BAM.PR.R FixedReset 82,050 Nesbitt sold two blocks of 10,000 each to RBC at 25.60, then crossed 25,000 at the same price.
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 23.32
Evaluated at bid price : 25.63
Bid-YTW : 4.57 %
RY.PR.X FixedReset 41,249 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.60
Bid-YTW : 3.47 %
CM.PR.J Perpetual-Discount 11,772 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 21.42
Evaluated at bid price : 21.42
Bid-YTW : 5.25 %
MFC.PR.C Perpetual-Discount 11,600 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 20.73
Evaluated at bid price : 20.73
Bid-YTW : 5.47 %
BAM.PR.B Floater 11,022 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 18.41
Evaluated at bid price : 18.41
Bid-YTW : 2.85 %
BAM.PR.K Floater 10,800 Nesbitt crossed 10,000 at 18.20.
Maturity Type : Limit Maturity
Maturity Date : 2040-12-24
Maturity Price : 18.20
Evaluated at bid price : 18.20
Bid-YTW : 2.88 %
There were 1 other index-included issues trading in excess of 10,000 shares.

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