The Fintech Ecosystem

via businessinsider

As of today,no one could live cut off from internet things.E-bank,e-finance,e-trading,e-WMP(wealth management product) are changing our daily lives.

We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.

No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new financial technology (“fintech”) revolution.

The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world:  The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:

  • Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
  • Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
  • Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.

As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.

bii top fintech adoption rates_12.23.15

BII The Fintech Ecosystem

These new players above have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:

  • Retail banking

  • Lending and Financing

  • Payments and Transfers
  • 
Wealth and Asset Management

  • Markets and Exchanges

  • Insurance

  • Blockchain Transactions


Changing is constant.

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China Wall Street’s Insanity

None of us will ever forget commodity futures market fantasy yesterday in mainland China,that commodities such as Iron ore, Rebar, Copper, and Steel prices have all gone crazedly  to to 15-month highs since  Dec 23rd 2015 when the US imposed a 256% tariff on Chinese steel imports,despite billionaire George Soros’s warning,as Bloomberg reports he bombards that “China resembles US in 2007-8”.

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So soaring prices were certainly not a signal of soaring demand after all as Credit Suisse explains:

“see, we were right that commodity prices were just up on liquidity recently pumped into the system rather than real demand, China is telling us that with this move.”

Faced with collapsing exports and a lack of domestic demand (and surging inventories) along with zombie steel mills on the verge of bankruptcy and desperately in need of cash flow or else China’s whole red ponzi would fail, the central planners unleashed a trillion dollars of new credit in Q1… As shown on the chart below, this was an all time high in dollar terms.

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The sky-high credit expansion obviously lead massive  amount of speculative money rushing into the commodity futures market,creating unbelievable turnover shocking eyeballs.Yesterday saw main  Rebar contract RB1610 reaching historic high of  RMB605.6 billion,equivalently the transaction  volume is far more than whole country’s annual production of 200 million tons .

Money matters,no doubt.Whom god will destroy, the first made mad,China Wall street has told the story inside the economy.

After decades of spectacular expansion,China is facing the difficult task of managing a soft economic landing.China is emphasizing  its “supply-side” reforms since last November,that is a shift from export and investment -driven growth to a model based on domestic services and household consumption.Rome was not built in a day,the ambitious ideal seems developed fully,but the reality of economy slowdown from double-digit growth  to about 6 percent annually,is actually skinny.

pain

The academic debate on “supply-side” restructuring is annoying.China remains gripped by deflation, with prices and output in a downward spiral,the economy’s major demand-side driver, real-estate investment, is declining more rapidly,for instance,by the end of 2015, real-estate investment growth dropped almost to zero.Real-estate investment accounts for more than 10% of China’s GDP, the impact on overall economic growth is certainly  considerable. Perhaps China realized that the policy of ” deleverage,de-stocking,de-capacity”,enabling its zombie firms to produce at record output levels (as credit markets begin to shut) may have unintended consequences(such as hard landing and social disorder etc.) after all – i.e. a bigger glut, especially compared to ‘real’ demand,in which make it return to “the old normal” path to stabilize the economy.

That contributed to , among other things, the so-called “iron rooster”-stimulus program as Bloomberg reports:

Mills now have their order books filled till July or onward,” said Li Qibao, an analyst at Changjiang Futures Co. in Wuhan, who predicts that prices will go on rising.There are “unmistakable signs of recovery in demand, with the help of an ‘iron rooster’-style construction boom that has come back at full speed,” Li said, referring to a nickname for China’s previous growth model as the Chinese pronunciation of the phrase translates as ‘railroad, highway, infrastructure.’

However, there is a dark side to all this credit-fueled malinvestment...as Reuters reports, despite pressure to curb  output and relieve a global glut, China said on Tuesday its production actually hit a record high last month as rising prices, and profits, encouraged  firms that had been shut or suspended to resume production.The China Iron & Steel Association (CISA) said March steel production hit 70.65 million tonnes, amounting to 834 million tonnes on an annualized basis.

 “The big rise in steel prices has led to a rapid reopening of capacity that had been shut or suspended … a large rise in output will not be good for the gap between market demand and supply,” the CISA said.

So that’s why Steel, Iron Ore, The Baltic Dry are all surging – Yet another (record in fact) credit-fueled malinvestment boom enabling zombie firms to survive amid totally artificial demand for an already over-supplied and over-capacity industry.

 “Given time, output will be raised to a level that tips the market back into oversupply,” said Xu Xiangchun, chief analyst at Mysteel Research. “China’s steel industry remains in severe overcapacity, so a glut will return.”

GDP growth is generated via the interaction between the supply side and the demand side of the economy. For example, investment in human capital enables innovation, the products of which create demand and, in turn, economic growth. Demand-side policy and structural adjustment are not mutually exclusive. In aggregate terms, growth of supply determines growth potential, and growth of demand determines the use of that potential. To change the economic structure and growth pattern, first the structure of demand must be changed.Structural adjustment remains absolutely critical to China’s future, and the country should be prepared to bear the pain of that process.China’s history provides reason to believe that its leaders will make the right choice to lay more concentration on structure reform to upgrade quality and productivity, inducing financials to the real demand streets and innovative sectors.

China Wall Street’s gambling should get to be curbed.

Will Draghi surprise?

Most of the sell-side thinks not…

from Zero Hedge by Tyler Durden

Goldman Sachs (Dirk Schumacher)

  • ECB to keep rates unchanged, Draghi will express confidence that package unveiled in March will help steer CPI toward target
  • Draghi also likely to express ECB’s willingness to respond if downside risks to growth and CPI materialize
  • Draghi will also clarify that further rate cuts remain part of monetary toolbox after his comments in March were interpreted by many as closing the door for further rate cuts
  • Some further details on new CSPP may be published
  • Expects CSPP to be conducted in similar fashion to covered bond and asset-backed securities program, and purchases to take place in primary and secondary market; ECB will decide in discretionary way how much corporate debt to buy
  • Expects an extension of APP to Sept. 2017 from March 2017 currently

JPMorgan (Greg Fuzesi)

  • No action expected this week; see next round of easing to focus on extending QE program beyond March 2017
  • Chances of further rate cuts may be higher than initially thought
  • ECB concerned about pressure of negative rates on banks and about fueling currency war; that said, incremental deposit-rate cuts still seem possible, as does a tiered reserve charging system; Draghi is likely to clarify the message around this at this week’s press conference

BofAML (Gilles Moec, Athanasios Vamvakidis)

  • Expect Draghi to defend ECB this week; he could also remind markets that QE is open-ended and won’t stop as long as ECB is missing CPI target
  • Draghi also likely to clarify that another depo-rate cut remains available
  • Expect Draghi to sound dovish but do not see a sustained market impact
  • More sustained EUR weakness requires a critical mass of strong U.S. data and stable global markets allowing Fed to sound more confident
  • Continue to forecast EUR/USD at parity by end-2016, expecting two Fed hikes this year

BNP Paribas (Ken Wattret)

  • ECB should reiterate this week that it stands ready to take action to deliver on price-stability mandate
  • While expect the door to be left more open to further cut in policy rates than during Q&A session on March, there is limited room for maneuver
  • CSPP details possible but may take longer
  • Expect ECB to follow the template used for current asset-backed security and covered-bond purchase programs, suggesting no specific numeric target for monthly volume of purchases, buying in both primary and secondary markets, and opting for risk sharing

Citigroup (Guillaume Menuet)

  • Don’t expect any new measure this week
  • Look for more policy measures in coming months including a refi rate cut by 5bp each in Sept., Dec. and March 2017
  • Also expect a QE extension by another 6 months in Sept., adjustment to issue/issuer limit for PSPP to ~40% and 10bp depo-rate cut in March next year

HSBC (Karen Ward)

  • Draghi to convey the message that ECB can still do more
  • During Q&A, expect questions related to progress with Greece and IMF and on what might happen to Portugal’s access to QE if DBRS downgrades the country on April 29
  • Expects Draghi’s answers to be elusive

UBS (Reinhard Cluse)

  • Expects a debate on limits of monetary policy, ‘helicopter money’, corporate bond purchases and credit conditions at this week meeting
  • Base-case scenario remains that ECB is “done” now and that it won’t add more stimulus over coming months

Morgan Stanley (Elga Bartsch)

  • It might be too early yet to get full formal details on planned buying of corporate debt under new CSPP
  • Don’t expect any additional policy measures before 3Q
  • Expect another depo-rate cut of 10bp in 2H and see a near even chance of ECB upping and extending QE

Natixis (Johannes Gareis)

  • Draghi likely to address recent EUR strength by downplaying comments made at March meeting that policy rates may already have reached the lower bound
  • More details about future corporate-bond purchases and TLTROs in focus this week
  • ECB will take a wait-and-see approach over coming months; from a long-term perspective, CPI might be too weak for ECB to remain on hold; the most likely easing step is an extension of QE program beyond March 2017

UniCredit (Marco Valli)

  • ECB’s focus remains on implementing several measures already announced; expect a strong, open-hearted defense of ECB policies
  • This week’s meeting is unlikely to generate a meaningful impact on euro
  • ECB is very likely to be unhappy with stronger EUR; however, there is not much Draghi can do about it, at least for now

Commerzbank (Bernhard Gruenaeugl)

  • Probably too early to add substantial detail on CSPP with still about two months to go before the actual start of the program
  • The question of whether insurance corporations’ seniors could be bought or not should remain a matter of lively debate for now

Credit Suisse (Peter Foley)

  • ECB is likely to leave the door open to additional policy measures in future if economic situation deteriorates

Nordea (Aureljia Augulyte)

  • Keep long EUR/USD
  • Market is pricing close to a full 10bps cut in year ahead, so EUR needs a really big surprise to get knocked

ABN Amro (Nick Kounis)

  • Focus in April meeting will be on details of corporate- bond scheme; ECB will probably reveal a relatively large eligible universe of ~EU750b
  • It would include traditional non-financial corporates as well as “financial corporations other than credit institutions”
  • In this category, there are many funding entities of normal corporates, real-estate corporates and insurers
  • Expects ECB to also include floating-rate notes, bonds that mature within 1 year and those with an amount outstanding less than EU500m

ING (Petr Krpata)

  • Negative impact on EUR should be very limited as any strong pre-commitment to further easing should be absent
  • It’s increasingly difficult for ECB to materially weaken EUR
  • Despite no real action, there would probably be some dovish comments, whereby ECB stresses downside risks to economic outlook

BBVA (Roberto Cobo Garcia)

  • Draghi will likely stress that ECB keeps the door open to adopt further easing measures if needed; he will probably remark that further rate cuts aren’t out of the table
  • Expect ECB meeting outcome to be negative for EUR; also expect more details on CSPP

Credit Agricole (Manuel Oliveri, Valentin Marinov)

  • ECB may not mention EUR but will keep the door wide open to more accommodation
  • While EUR may recover in immediate aftermath, the longer-term risks for currency should be on downside

Finally we note that EURUSD did drop quite notably today…though still remains considerably stronger post-March meeting…

“The euro has looked a bit vulnerable,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “There has been some speculative selling ahead of the ECB on the view that Draghi will not do anything tomorrow policy-wise but might sound dovish, and could open the door to lower rates again.”