June 2016

Finance sector innovations have cut costs and improved convenience but have not been transformative. Will bankers and treasurers—traditionally risk-averse players—ever brainstorm a revolutionary breakthrough?

The fast-growing nation is actively seeking FDI, but foreign investors must contend with endemic corruption and layers of bureaucracy.

Still finding its way onto the broader global stage, Islamic finance is expanding its reach and rising to new heights in delivering added value to consumer and business markets alike.

Tax Reporting & Compliance
The OECD’s “Base Erosion and Profit Shifting” principles are being incorporated into tax laws in some nations, requiring more transparency from corporate treasury departments.

Noor Bank focuses on select business segments and eyes the digital payment space that will offer some of the best opportunities over the next couple of years.

Retail demand for Islamic finance in the Kingdom of Saudi Arabia and the wider region keeps increasing.  Growth areas include structured hedging and investment products, project and aviation finance, equity-linked and greenfield project sukuk.

Global Finance magazine profiles the best Islamic Financial Institutions of 2016

QIB controls 43.5% of the Islamic banking market share in Qatar and 11.5% of the overall market and says that the long-term growth prospects remain promising.

Maybank Islamic is developing outside Malaysia, establishing a footprint in the region. With a return on equity of 16%, achieved despite a capital ratio of 17%, the trick will be to sustain the bank’s bullish approach to investing despite the country’s economic downturn.

Panama
The country has been a stellar performer in Latin America, but now a worldwide scandal about its massive offshore financial industry is putting Panama’s economic growth at risk.

Iceland
The Panama Papers’ revelation that Iceland’s prime minister had offshore interests, including claims on Icelandic banks, caused outrage in this naturally volcanic island state.

Singapore has overtaken Hong Kong as Asia’s top financial center and now ranks third globally behind London and New York. This is the key takeaway from the latest Global Financial Centres Index (GFCI), a ranking by British commercial think-tank Z/Yen Group.

Turkey
Every emerging economy has a tipping point beyond which investor sentiment turns negative, despite fundamentals.
 

China
When Alibaba announced in May that it was hiring former Goldman Sachs managing director Douglas Feagin to run the international unit of its finance arm, Ant Financial, many observers had a sense of déjà vu.
 

UK
The promise of London’s new mayor, Sadiq Khan,  to build 50,000 homes (half of them affordable) with a reasonable commute is being heralded but also questioned.

Brazil
Well known for his caution, Brazil Finance Minister Henrique Meirelles is well aware of the enormity of his nation’s fiscal hole. Brazil is likely to report a primary deficit of $36 billion this year, instead of the $6.8 billion surplus previously forecast.

Philippines
Investor unease over the future of the Philippines, one of Southeast Asia’s fastest-growing economies, has soared following Rodrigo Duterte’s landslide victory in the May presidential election.

Saudi Arabia
Known as the Minister of Everything, deputy crown prince Mohammad bin Salman, the favored 30-year-old son of the geriatric king of Saudi Arabia, is a man on a mission.

To thrive, banks will need to find creative solutions for their customers – both new and old; known and unknown.

Trends | Shadow Banking
Renaud Laplanche, Lending Club’s founder, chief executive and public face, resigned abruptly in mid-May. His resignation casts a pall over not only the peer-to-peer lender that claims to be the world’s largest online marketplace connecting borrowers and investors, but also the shadow banking industry as a whole.

Management | Corporate Culture
Several recent financial and corruption scandals have forced multinationals to develop comprehensive corporate conduct and compliance programs.

Management | Corruption
At the anticorruption summit held in London last month, world leaders pledged to fight tax dodging, boost transparency and redouble efforts to confiscate and repatriate stolen assets to many of the world’s poorest countries.

Capital Markets | Foreign Exchange
After years of bemoaning the negative effects of the strong dollar on their revenue and earnings, US-based multinationals are singing a different tune.

Capital Markets | Fixed Income
US companies are rushing to borrow in European bond markets. They’re taking advantage of low interest rates on euro-denominated issues after the European Central Bank’s decision to start buying investment-grade corporate bonds in June—part of its economic stimulus program. Last year already set a record for corporate borrowing in Europe’s bond markets, where rates are significantly lower than in the US.

Capital Markets | Sovereign Risk
Low energy and commodity prices and a global economy stuck in low gear have provoked a surge in sovereign ratings downgrades in the first three months of this year. And rating agencies anticipate another wave of downgrades if a wider global economic slowdown materializes.

Trends | Inversions
The US Treasury Department’s recent rules against corporate inversions are intended to stop “serial inverters.”

Trends | Emerging Markets
Emerging markets sovereigns and corporates will need to refinance up to $2 trillion of debt coming due in the next five years, as a result of extravagant borrowing earlier this decade when commodity prices were soaring and cheap financing was readily available.

Finance sector innovations have cut costs and improved convenience but have not been transformative. Will bankers and treasurers—traditionally risk-averse players—ever brainstorm a revolutionary breakthrough?

Still finding its way onto the broader global stage, Islamic finance is expanding its reach and rising to new heights in delivering added value to consumer and business markets alike.

Arthur Kroeber, head of research and founding partner of Gavekal Dragonomics, spoke with Global Finance about China’s politics, its markets and its future role in the global economy.