The euro sank to a two-month low in a nervous first reaction to a multibillion-dollar bailout for Ireland that European governments hoped would steady the under-pressure currency.
Finance ministers who sealed the 85-billion-euro (Dh415) deal at emergency talks in Brussels yesterday were anxious to reassure Asian markets and head off any moves on Portugal and Spain, which are considered the next most vulnerable economies.
But even as international financial leaders stepped forward to endorse the agreement, currency dealers in Tokyo gave their own verdict.
After early gains, the single currency slipped to 1.3181 dollars today, its lowest level since late September, before rebounding above 1.32 dollars in a volatile session.
Under the deal, Ireland's crippled banks will immediately receive 10 billion euros but will be subject to a "fundamental downsizing", the government said in Dublin.
They will be able to draw on a total of 35 billion euros out of 67.5 billion euros in external aid from the European Union and the International Monetary Fund.
But the first 17.5 billion comes from an Irish "treasury cash buffer and investments of the National Pension Reserve Fund," an EU statement said.
Irish Prime Minister Brian Cowen insisted he had got "the best deal available" for Ireland and its people, a day after mass street protests in Dublin against austerity cutbacks introduced to qualify for the bailout.
But opposition leaders denounced the deal, with Irish Labour Party leader Eamon Gilmore saying it amounted to "a national sell-out." Tens of thousands of protesters had already marched in Dublin Saturday to protest against the agreement.
Business leaders, however, welcomed the deal.
The governor of the Central Bank of Ireland, Patrick Honohan, said the international support "underpins a clear economic and financial policy path for Ireland."
Danny McCoy, head of the Irish Business and Employers Confederation (IBEC), said it provided "much-needed certainty".
And Bank of France governor Christian Noyer endorsed the plan today as he spoke to reporters at a financial forum in Tokyo.
"The package has been clearly designed by the IMF and the EU and you can rely on the multi-decade experience of the IMF to put in place plans which are totally credible," he said.
"There is absolutely no doubt that this plan will work."
IMF chief Dominique Strauss-Kahn said he had no doubt Ireland would keep up its end of the deal.
"Supported by substantial financing, this programme can underpin market confidence and bring Ireland economy back on track," he added in a statement yesterday.
Non-euro countries Britain, Denmark and Sweden will provide bilateral loans totalling around five billion euros.
As part of the deal, Ireland was given an extra year, until 2015, to bring its 2010 deficit of 32 per cent of gross domestic product back within the permitted three percent limit.
Ireland's coalition government unveiled a four-year plan last week that signalled spending cuts worth 10 billion euros and tax rises worth five billion euros, triggering the mass protests at the weekend.
Mr Cowen said he expected Ireland to pay an average interest rate of 5.8 percent a year on the loans, subject to market conditions.
"Without these loans the necessary tax increases and spending cuts would be far more severe," Mr Cowen insisted.
Brussels said it would also consider re-scheduling repayments on Greece's 110-billion-euro loans, as part of broader moves to convince bond buyers to keep interest rates at manageable levels.
Greece was the first recipient of a major EU-IMF bailout earlier this year.
The EU ministers also drew up rules for future rescues that, under stringent IMF terms, would hit government bond investors.
They agreed that the private sector would share the burden in future bailouts after an existing eurozone emergency fund worth 440 billion euros expires in 2013.
"Rules will be adapted to provide for a case-by-case participation of private sector creditors, fully consistent with IMF policies," said a statement.
THE SPECS
Engine: 3.5-litre V6
Transmission: six-speed manual
Power: 325bhp
Torque: 370Nm
Speed: 0-100km/h 3.9 seconds
Price: Dh230,000
On sale: now
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Founders: Michele Ferrario, Nino Ulsamer and Freddy Lim
Started: established in 2016 and launched in July 2017
Based: Singapore, with offices in the UAE, Malaysia, Hong Kong, Thailand
Sector: FinTech, wealth management
Initial investment: $500,000 in seed round 1 in 2016; $2.2m in seed round 2 in 2017; $5m in series A round in 2018; $12m in series B round in 2019; $16m in series C round in 2020 and $25m in series D round in 2021
Current staff: more than 160 employees
Stage: series D
Investors: EightRoads Ventures, Square Peg Capital, Sequoia Capital India
Banned items
Dubai Police has also issued a list of banned items at the ground on Sunday. These include:
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Political flags or banners
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Bikes, skateboards or scooters
Retirement funds heavily invested in equities at a risky time
Pension funds in growing economies in Asia, Latin America and the Middle East have a sharply higher percentage of assets parked in stocks, just at a time when trade tensions threaten to derail markets.
Retirement money managers in 14 geographies now allocate 40 per cent of their assets to equities, an 8 percentage-point climb over the past five years, according to a Mercer survey released last week that canvassed government, corporate and mandatory pension funds with almost $5 trillion in assets under management. That compares with about 25 per cent for pension funds in Europe.
The escalating trade spat between the US and China has heightened fears that stocks are ripe for a downturn. With tensions mounting and outcomes driven more by politics than economics, the S&P 500 Index will be on course for a “full-scale bear market” without Federal Reserve interest-rate cuts, Citigroup’s global macro strategy team said earlier this week.
The increased allocation to equities by growth-market pension funds has come at the expense of fixed-income investments, which declined 11 percentage points over the five years, according to the survey.
Hong Kong funds have the highest exposure to equities at 66 per cent, although that’s been relatively stable over the period. Japan’s equity allocation jumped 13 percentage points while South Korea’s increased 8 percentage points.
The money managers are also directing a higher portion of their funds to assets outside of their home countries. On average, foreign stocks now account for 49 per cent of respondents’ equity investments, 4 percentage points higher than five years ago, while foreign fixed-income exposure climbed 7 percentage points to 23 per cent. Funds in Japan, South Korea, Malaysia and Taiwan are among those seeking greater diversification in stocks and fixed income.
• Bloomberg
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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Us
Director: Jordan Peele
Starring: Lupita Nyong'o, Winston Duke, Shahadi Wright Joseqph, Evan Alex and Elisabeth Moss
Rating: 4/5
The specs
Engine: 2.0-litre turbo 4-cyl
Transmission: eight-speed auto
Power: 190bhp
Torque: 300Nm
Price: Dh169,900
On sale: now
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De De Pyaar De
Produced: Luv Films, YRF Films
Directed: Akiv Ali
Cast: Ajay Devgn, Tabu, Rakul Preet Singh, Jimmy Sheirgill, Jaaved Jaffrey
Rating: 3.5/5 stars