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Feb 08, 2019

The week in IR: Investors pull $25 bn from US ETFs, and QSE-listed companies to appoint an IRO under new rules

This week’s investor relations stories from around the web

The Wall Street Journal reported that investors pulled a record $25 bn from US exchange-traded funds (ETFs) in January, despite the market climbing. It described the departure – the first in nearly a year – as a symptom of heightened wariness after December 2018’s rout. According to the newspaper, shares have since recovered due to stronger-than-expected earnings and signs the Federal Reserve will be patient in its bid to raise interest rates.

According to Bloomberg, Federal Reserve chairman Jerome Powell said: ‘The US economy is now in a good place.’ He spoke at an event with teachers at the Fed’s headquarters in Washington. ‘At the moment, unemployment is low [and] prices are near 2 percent inflation, so we’re in a good place now.’ Bloomberg said the Fed had in recent weeks taken a decidedly more dovish stance, signaling it will be patient before deciding how next to adjust interest rates. That contrasts sharply with the central bank’s stance in December when officials penciled in two hikes for 2019.

All companies listed on the Qatar Stock Exchange (QSE) will be required to appoint an investor relations officer, detailed the Gulf Times, adding that there must be a dedicated IR section on their website as part of promoting the profession’s practice to boost investments. The rule will also require companies to hold at least one investor call conference and submit a yearly report to the QSE on their compliance with the IR rules and requirements.

Wall Street is about to see its first profit decline in three years, CNN reported, suggesting that shares were growing due to investors caring a lot more about corporate profits on Wall Street than any drama in Washington. But it highlighted that company earnings could soon take a turn for the worse. Citing FactSet Research figures, CNN noted that profits for S&P 500 companies are expected to fall nearly 1 percent during the first quarter of 2019, compared with the same period last year. If that happens, it would be the first overall drop in earnings since the second quarter of 2016, CNN said.

Investment & Pensions Europe commented that S&P Global Ratings is taking steps to explain how ESG considerations feed into its credit analysis. ESG sections will be included in the credit rating agency’s corporate rating reports in phases. The publication noted that S&P started doing this for the oil & gas and utilities sectors and is now rolling it out to all major companies across every sector. The agency will also roll it out to smaller companies in the sectors most exposed to ESG factors that may be relevant to ratings.

According to Bloomberg, the $1.5 bn Matthews India Fund has a bit of advice, considering that national elections are set to potentially shake up Indian markets this year: don’t buy small caps or stocks that are easily influenced by the government. ‘Large-capitalization stocks currently represent the most attractive part of the Indian stock market as valuations are broadly in line with historical averages and expectations for future growth are achievable,’ said Peeyush Mittal, a co-manager of the fund based in San Francisco.

Citing data from industry tracker Morningstar, Reuters reported that a total of 382 ‘socially conscious’ mutual funds and ETFs were launched by asset managers last year, taking the overall figure to 3,160. The publication described this as a ‘record number’. Collectively, these funds manage $1.2 tn in assets, double the $622 bn (£480 bn) managed in 2009, noted Reuters. It said total flows into the funds were $39 bn, down from the previous year’s $72 bn, partly due to a weaker investor sentiment that saw a global stock market sell-off on fears tighter central bank monetary policy could hit economic growth.

UK regulator the Financial Conduct Authority (FCA) has urged asset managers to cut jargon they use and be more transparent about their objectives and performance, the Financial Times revealed. The publication noted that the rules were designed to improve value for money by giving investors a better idea of what their funds are designed to achieve and whether or not they are justifying their fees.

Britain is facing its weakest outlook since 2009 because of Brexit, Reuters said, citing the Bank of England. But it noted that interest rates will rise if an EU divorce deal is done. While other major central banks have said they will hold off on raising borrowing costs, the BofE said gradual and limited rate rises eventually lie ahead for Britain as long as – in just 50 days’ time – a no-deal Brexit is averted. According to BofE governor Mark Carney ‘the fog of Brexit’ is causing tensions in the world’s fifth-biggest economy.