Comment EM and The Cover

Thursday marks the UK’s deadline for reaching a Brexit trade deal with the EU, which according to the country's prime minister Boris Johnson means that it will begin to shift focus to preparations for leaving without one. A no-deal Brexit could be a disaster but nobody in capital markets seems to care.

The UK government’s sudden volte face this week about working from home may slow coronavirus infections but it betrayed a fundamental lack of strategic thinking and stability over the most pressing concerns. That should worry the City, which is in a fight for its future as a leading financial centre, as a result of Brexit.

The green bond market was conceived on a simple plan. A new class of green bonds would finance environmental projects, standing out from the grey mass of ordinary bonds.

Equity investors should be nervous about US tech valuations as the fabled FAANG (named for Facebook, Amazon, Apple, Netflix and Google) stocks look extremely expensive after reaping in the cash during the equity rally that followed the initial Covid-19 sell-off. With valuations at near-preposterous levels and the macro-economic environment worsening with rising Covid-19 cases and a bitter election around the corner, market moves down last week could be a sign of worrying times ahead.

September began with a bang for equity issuance, capped off on Wednesday by a mammoth €2.7bn share sale from Siemens Healthineers. However, the rush of deals is not just being driven by optimism. Bankers fear darker days returning.

If investors were a family, the activist hedge fund would be the brattish 20-something rich kid with libertarian opinions who relishes annoying everyone else. You wouldn’t expect this character to get on with the woke, vegan responsible investor who loves to hold forth on moral values.

Political interference in central bank business is rarely a smart move, especially for emerging market countries trying to win the respect of international markets. But it’s an even more reckless endeavour in the midst of a global crisis, especially for a debt-ridden country like Zambia.

Any investor in a market as international and broad as the Schuldschein deserves a healthy secondary market. This is emerging, but certain market grandees are resistant. They should embrace it.

Europe’s corporate bond market is back in action this week with new deals. But it will be no picnic for investors. The market is awash with cash and new issues in the months ahead will be painfully expensive.

Environmental, social and governance investors are taking an interest in companies' supply chains at last. It is important they do this in a sophisticated way and think deeply about the potential repercussions. Getting supply chains wrong could have devastating consequences.

Real money investors have historically avoided the reputational risk involved in participating in sovereign debt restructurings. But a truly socially responsible investor should embrace these situations — for the sake of both their clients and troubled emerging nations.

When the European Central Bank (ECB) is suggesting the additional tier-one market could cost the euro area up to 0.25% of GDP growth in the next year and a half, it is probably time to start thinking about reforming the asset class.