Liberalisation of ownership rules in China’s mutual funds market – around 50% of which consists of money market funds (MMFs) – will stimulate the sector’s growth in the coming months, according to Fitch. In a 17 August opinion, the rating agency points out that in April, Beijing removed a 51% cap on foreign ownership of investment firms. Since then, three international investment managers have applied for onshore licences, while a fourth has entered into the process of buying out its joint-venture partner.
“While no full licences have yet been granted,” Fitch writes, “the application case of one investment manager, BlackRock, was accepted on 31 July 2020, bringing [the firm] a step closer to being granted a full licence. Among China's 128 mutual-fund houses, 44 were joint ventures as of end-Q1, and these accounted for 54% of total mutual-fund assets.”
In parallel, Fitch notes, China’s largest MMF – Yu’e Bao – has grown “very rapidly”, driving growth in the wider sector. At the end of June, Yu’e Bao had assets under management of CNY1.2 trillion ($173bn), making it one of the world’s 10 largest MMFs. The other nine are US funds investing in government debt.
Earlier in August, Reuters reported that Chinese investors are swapping their bets in equities for safe-haven MMFs, as concerns over equity-based policy tightening and US-China relations continue to spawn stock-market volatility. Zhang Chengyu, vice general manager of Beijing-based Shiji Hongfan Asset Management Co, told the news agency: “Some investors, in particular those heavily leveraged, want to exit the stock market for the moment given the big uncertainties around the Sino-US tensions, and park their money in the MMFs.”
Coronavirus impacts on the world’s financial system during the second quarter forced market capitalisation in the banking sector to fall by 28% year-on-year, research from ForexSchoolOnline.com has found. The industry’s total market cap for the period settled at €5.3 trillion, slumping below levels seen in challenging times four years ago.
The research notes that in the first half of 2016, stock markets were on their “shakiest footing in years” amid concerns over global economic growth and the effectiveness of central banking policies. At the time, the global banking sector’s total market cap stood at €5.5 trillion. By the end of that year, it rose to €6.8 trillion. Over the next 12 months, it continued to grow and eventually hit €7.9 trillion in the fourth quarter of 2017. However, figures show that the industry finished 2018 with a €6.5 trillion market cap – a year-on-year drop of 18%.
Improvements came the following year, with the figure reaching €7.6 trillion in the fourth quarter, despite the global economic downturn and geopolitical tensions. However, COVID-19 changed everything, leading to the banking sector’s lowest quarterly value since the 2008 financial crisis. Indeed, data shows that in the first quarter of 2020, the global banking industry’s market cap slumped to €4.9 trillion, a year-on-year decline of 31%. As a result of this turbulence, the world’s five biggest banks – JPMorgan Chase, Bank of America, Industrial and Commercial Bank of China, Wells Fargo and China Construction Bank – saw a combined value loss of €350bn.
In a statement, ForexSchoolOnline.com wrote: “As the leading bank in the world, JPMorgan Chase has witnessed the most significant decrease in market capitalisation since the beginning of the year, with its value plunging by $142.6bn between December and July. The market cap of Bank of America – the second-largest financial institution in the world – stood at $215.5bn last month, a $101.2 drop since the beginning of the year.”
Issuance of bonds linked to green, social and sustainable projects totalled $99.9bn in the second quarter of 2020 – marking not just a 65% increase over Q1 volumes, but a quarterly record. Unveiled in a report from Moody’s Investors Service, the figures demonstrate how the rating agency is taking a segmented approach to such bonds, rather than grouping them all together under the ‘green bonds’ umbrella.
Moody’s analysis shows that Q1 issuance volumes “muted” by the impacts of COVID-19 gave way to improved performance the following quarter, as issuers responded with specially labelled bonds that resonated with aspects of the global health crisis. Sustainability bonds recorded total issuance of $19.1bn, while social bonds hit $33bn. Meanwhile, green bonds rebounded to $47.8bn, a 26% increase on Q1, but still relatively modest compared to the same period of 2019.
In its categorisation of these socially responsible bonds, Moody’s is following definitions set out by NASDAQ, which state that:
Moody’s analyst Matthew Kuchtyak said: “Combined social and sustainability bond volumes could now total $150bn for the year as coronavirus pandemic response efforts and heightened awareness of social issues related to healthcare and inequality continue to support issuance. We maintain our green bond issuance forecast – revised in May – of $175bn to $225bn for 2020.”
Criminals have exploited widely used email platforms to launch business email compromise (BEC) stings against thousands of firms this year, security specialists Barracuda Networks has found. In the company’s latest Threat Spotlight report, researchers noted that 6,170 malicious accounts working out of Gmail, AOL and other public email facilities were behind more than 100,000 BEC attacks affecting 6,600 organisations worldwide since the dawn of 2020. And since 1 April, those accounts have driven 45% of all BEC incidents detected.
In BEC attacks, cybercriminals typically set up malicious accounts to impersonate staff or trusted partners, and use those accounts to send highly personalised messages designed to trick other employees into leaking sensitive details, or transferring funds. Barracuda found that fraudsters’ top public email platform is Gmail, which accounts for 59% of email domains used in cybercrime. Yahoo! is the runner-up, accounting for 6% of malicious attacks.
From their analysis, the researchers concluded that the fraudsters behind this year’s spate of attacks often used the same email addresses to attack different companies. The number of organisations attacked by each malicious account ranged from one, all the way to a single, mass-scale attack that impacted 256 businesses – 4% of all the firms included in the research. Similarly, the number of attacks sent by malicious accounts ranged from one email to more than 600, with the average being 19.
Barracuda vice president of email protection Michael Flouton said that as email services such as Gmail are free to set up, “just about anyone can create a potentially malicious account for the purpose of a BEC attack”. He stressed: “Securing oneself against this threat requires organisations to take protection matters into their own hands. This requires them to invest in sophisticated email security… However, no security software will ever be 100% effective, particularly when the sender appears to be using a perfectly legitimate email domain.
“Thus, employee training and education is essential, and workers should be made aware of how to manually spot, flag and block any potentially malicious content.”
Only 25% of UK fintech founders think that the government has done a good job of supporting the sector through the COVID-19 crisis, according to research from industry events brand the Digital Finance Forum.
In a poll of 100 fintech start-up chiefs, nine out of 10 said that coronavirus has either a) already made it harder to raise finance for their ventures, or b) will make fundraising harder to achieve in the coming year. But despite those challenges, more than two-thirds of respondents don’t think that their collective voice is properly heard in UK policymaking or regulatory circles.
“More generally,” notes the survey report, “fintech founders are of the view that the government could do a lot more to ensure fintech start-ups are able to access early-stage capital.” Indeed, “numerous” founders pointed out that UK Enterprise Investment Scheme and Seed Enterprise Investment Scheme rules “specifically exclude investment in many types of financial services businesses”, and that the British Business Bank’s funding of venture capital funds excludes them from backing many financial services businesses. As such, the report says, fintech “is not on a level playing field” with other early-stage companies, in terms of access to capital.
In a response to the findings, economic secretary to the Treasury John Glen MP said: “The Digital Finance Forum’s results reinforce my commitment to ensuring the UK’s pre-eminence as a place for fintechs to do business. We have recently launched a major independent fintech review, which will consider how the UK can continue to foster innovation, maintain an ecosystem that supports growing firms, and promote the integration of new technologies across financial services.”