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Emerging market debt opportunities

In this week's episode of Dolfin Discussions Geoff Wan, Fixed Income Analyst at Dolfin, is joined by Richard Briggs, Investment Manager, Emerging Market Debt at GAM Investments and Bennett Lim,...

Licensed to spill

Not all spies look like James Bond. Corporate espionage is a growing concern for many organisations, denting profits and undermining trust. We look at how firms can combat it.

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Glossary of terms

Investment outlooks / Q2 2020
  • bps, or basis points, are a unit of measure to describe the percentage change in the value or rate of a financial instrument, where one basis point is equivalent to 0.01 per cent
  • BTP, Buoni del Tesoro Poliannuali, a debt security (bond) issued by the Italian Government
  • Bund, a debt security (bond) issued by the German Government
  • CoCo bonds, a contingent convertible bond (or enhanced capital note, ECN) is a fixed-income instrument that is convertible into equity if a pre-specified trigger event occurs
  • Consumer Price Index (CPI), is a measure of the change in selling prices paid by domestic buyers of goods and services and as such is a popular measure of inflation
  • Dividend yield, the most recently announced gross dividend, annualised based on the dividend frequency, then divided by the current market price
  • Duration, the measure of sensitivity of the price of a bond to a change in interest rates, expressed in number of years
  • Earnings Per Share (EPS), the portion of a company’s profit allocated to each share of common stock. Earnings per share serve as an indicator of a company’s profitability.
  • EBITDA margin, measured in percentage, calculating the relation of earnings before interest, taxes, depreciation and amortisation to revenue. Calculated as: EBITDA/revenue * 100
  • EV/EBITDA adjusted, enterprise value to adjusted earnings before interest and taxes value. Adjusted EBITA excludes the effect of abnormal items. Calculated as: enterprise value/adjusted trailing 12-month operating income
  • Fallen Angel, a bond which has been reduced from investment grade rating to junk bond status due to the weakening financial condition of the issuer
  • Federal Open Market Committee (FOMC), the branch of the Federal Reserve bank that is in charge of short and long-term monetary policy decisions
  • FRN, Floating Rate Notes or FRNs are bonds that have a variable coupon
  • Global Financial Crisis (GFC), the financial crisis between 2007-2008
  • Gross value added (GVA): is the measure of the value of goods and services produced in an area, industry or sector of an economy. In national accounts GVA is output minus intermediate consumption
  • Harmonised index of consumer prices (HICP), an indicator of inflation, harmonised across EU member states
  • Idiosyncratic risk is a risk that affects only a small number of assets or single asset and is sometimes referred to as non-systematic risk
  • Ifo, is the Ifo Institute for Economic Research and is a Munich-based research institution
  • Institutional Brokers Estimate System (IBES) is a database that gathers and compiles the different estimates made by analysts on the future earnings for publicly listed companies
  • Institute of Supply Management (ISM), a professional supply management organisation providing PMI data in the US
  • Interest on Excess Reserves (IOER), the Federal Reserve Banks pay interest on required reserve balances and on excess reserve balances
  • Japanese Government Bond (JGB), a debt security (bond) issued by the government of Japan
  • LTRO, or the long-term refinancing operation, is a loan scheme for European banks that was announced by the European Central Bank (ECB) towards the end of 2011 in a bid to help ease the eurozone crisis
  • Macro, Valuation, Sentiment, Technical (MVST) Model, a proprietary model utilising the aforementioned factors to assess market conditions
  • Main Refinancing Operations (MRO), the Eurosystem’s regular open market operations consist of one-week liquidity-providing operations in euro
  • Markowitz Mean Variance Optimisation, creation of portfolios that have the maximum mean (expected return) for a given variance of return (or standard deviation of returns) or the minimum variance of return for a given mean (expected return)
  • Monetary Policy Committee (MPC), central committee of the Bank of England which takes monetary policy decisions
  • Mortgage-Backed Securities (MBS), a type of asset-backed security that is secured by a mortgage or collection of mortgages
  • Nominal Interest Rates, the interest rate before adjusting for inflation
  • Natural Interest Rates, the rate that would keep the economy operating at full employment and stable inflation
  • Okun’s Law, a relationship between the U.S. economy’s unemployment rate and its gross national product (GNP). It states that when unemployment falls by 1%, GNP rises by 3% when the unemployment rate is between 3% and 7.5%
  • Open Market Operations (OMO), refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system
  • Personal consumption expenditure index (PCE), an indicator of inflation used by the US Federal Reserve
  • PE next year, price earnings ratio calculated on next year earnings per share estimates. Calculated as: last price/expected next year earnings
  • Purchasing managers index (PMI), an indicator of the economic health of the manufacturing or services sectors. In the US, the PMI data is provided by the Institute of Supply Management. In the UK and Europe, the PMI is provided by Markit
  • Producer Price Index (PPI), is a measure of the change in selling prices received by domestic producers of goods and services and as such is a popular measure of inflation
  • Overnight Indexed Swap (OIS), a hedging arrangement in which a cash flow based on an overnight lending rate is exchanged for another predetermined cash flow
  • Quantitative Easing (QE), the introduction of new money supply in to a financial system by the central bank in order to increase liquidity – often via asset purchases
  • Quantitative Tightening (QT), a contractionary monetary policy applied by the central bank restricting the new money supply to a financial system
  • Real Interest Rates, the interest rate after adjusting for inflation
  • Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements. The RSIoscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.
  • Return on assets (ROA), an indicator of how profitable a company is relative to its total assets, expressed in percentage
  • Return on equity (ROE), a measure of profitability that calculates the net income returned as a percentage of shareholder equity
  • Risk Parity Portfolio, an approach to investment portfolio management which focuses on allocation of risk, usually defined as volatility, rather than allocation of capital
  • SAAR, the seasonally adjusted annual rate is a rate adjustment that attempts to remove seasonal variations in the data
  • Standard & Poor’s (S&P), a ratings agency that determines an issuer’s ability to meet payment obligations. A bond with a rating of BBB- or above is deemed investment grade. A bond with a rating of BB+ or below is deemed high yield
  • Seniority, the order of repayment in the event of a sale or bankruptcy of the issuer. Senior debt must be repaid before subordinated debt is repaid
  • Stochastics, a tool for estimating probability distributions of potential outcomes by allowing for randomvariation in one or more inputs over time. The random variation is usually based on fluctuations observed in historical data for a selected period using standard time-series techniques
  • Targeted Longer-Term Refinancing Operations (TLTRO), a cheap loan scheme for European banks that was announced by the European Central Bank (ECB) towards the end of 2011 in a bid to help ease the eurozone crisis.
  • UST curve, or the United States Treasury yield curve, shows the yields of bills, notes and bonds issued by the United States Treasury plotted on a graph vs. the year of maturity of each instrument
  • VIX, the Chicago Board Options Exchange (CBOE) Volatility Index, a widely-used indication of the stock market’s expectation of volatility implied by S&P 500 index options
  • WTI, West Texas Intermediate is a grade of crude oil used as a benchmark in oil pricing, particularly in the United States
  • Year-over-Year (YoY), a method of evaluating two or more measured events to compare the results with those of a comparable period on an annualised basis
  • Yield to worst (YTW), an estimate of the lowest yield that you can expect to earn from a bond when holding to maturity, absent a default.
  • CAGR – Compound Annual Growth Rate is a calculation that smooths annual gains in revenue, returns, customers, etc., over a specified number of years as if the growth had happened steadily each year over that time period.  It can be used to help investors compare growth rates over time between two investments, that would otherwise be difficult to compare due to volatility in year-to-year growth.
  • OAS – Option-Adjusted Spread measures the spread between a fixed income security and the risk-free rate of return, which considers how the embedded option in the fixed income security is likely to change the expected future cash flows and the present value of the security.
  • OECD – refers to The Organisation for Economic Co-operation and Development, which is an intergovernmental economic organisation comprising of 36 member countries.  It was founded in 1961 with the aim of stimulating economic and trade collaboration.
  • PIOTROSKI F SCORE – is a discrete score between 0-9 that reflects nine criteria used to determine the strength of a firm’s financial position. The Piotroski score is used to determine the best value stocks, with nine being the best and zero being the worst.
  • The AAII index – The American Association of Individual Investors Sentiment Survey is a weekly poll of its members’ opinion on where the market will be in six months, used to provide a measure of the mood of investors.
  • CSFB Fear index – Credit Suisse Fear Barometer measures investor sentiment for 3-month investment horizons by pricing a zero-cost collar.  The higher the level of CSFB, the higher the fear i.e. investors are willing to sacrifice potential upside by protecting their investments with hedges.
  • CNN Fear and Greed Index – tracks seven indicators of investor sentiment.
  • Price Target Ratio – upside potential for an investment comparing its price target to its current price
  • – R-squared is a measure used describe the portion of a security’s movement in the market relative to the movement of a related index.
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