Comment EM and The Cover

The long-standing boycott on investing in Portuguese bank debt has been noble, but it is unlikely to be effective.

Foreign ownership reform in the Chinese financial sector is not only a landmark in the country’s opening up, but also a strategic move to rebalance US-China trade. But recent guidelines curtailing banking sector liberalisation appear to be a case of one step forward, two steps back for China. Now more than ever, Beijing must not let its caution around financial risk take over and undo its strategy.

Once US Thanksgiving has passed, investment grade corporate bond bankers normally look to execute their last deals of the year before spending their days deciding what to buy their nearest and dearest for Christmas.

There are 15 minutes to go, your team is a goal ahead. The manager has the classic dilemma of throwing on another striker (or three if he is Kevin Keegan) to try and get a second goal to put the result beyond doubt, or replacing his flair player with another defender and trying to hold on to the lead.

Everyone would stand to gain if banks starting issuing green capital instruments.

China has long been cautious about opening up its capital markets as it learn from the lessons of other economies. But while such prudence has helped China avoid a crisis, it must not turn succumb to hubris and a wholesale rejection of the West’s experience.

In mid-2013, when the Federal Reserve started to reduce the rate at which it was buying bonds through its quantitative easing programme, bond investors panicked and a sharp sell off ensued. While the US bond market eventually realised the stimulus was no longer needed, that the US economy was expanding without it, and that tapering was the right decision by the then Fed chairman Ben Bernanke, it was a volatile six months.

Nobody really believes that €126bn of debt issued under English law will stop counting towards the minimum requirement for own funds and eligible liabilities (MREL) as soon as the UK leaves the EU. So why should European authorities pretend that it’s a risk?

This week, Esselunga, a 60 year old Italian supermarket chain issued its debut corporate bonds. It is rated Baa2/BBB-, the same as its own government.

Restricted tier one (RT1) bonds still do not make sense for Europe’s insurance industry and the asset class needs benchmark issuance before it can become a significant market in its own right. But the first deal in a major currency from ASR Nederland will be a very important line in the sand.

“Phew, you scared us there!” sums up the reaction of Europe’s equity capital market on Thursday, when Pirelli’s monster truck of an IPO, which had sagged by 2.8% from its launch price on its first morning of trading, perked up and began climbing as it ought.

Last Friday saw GlobalCapital launch our new twice-weekly email round-up of SRI and green finance news. Everywhere you turn in the bond markets, every bank or investor you speak to, it doesn’t take long before green bonds are mentioned.