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Equities boom drives the franc, Swiss bank stands by

Stock market flows and overseas investment returns are emerging. This is because of the major drives for Switzerland’s currency in a shift. The Swiss National Bank (SNB) has intervened to prevent excessive franc appreciation. Last month as the franc rose to a nine-month high against the euro of 1.0694, there was no significant increase in banks’ sight deposits. The franc’s latest spurt reflects foreign investment flows into Swiss stocks.

The franc will be the focus of SNB, at its monetary policy meeting. At its monetary policy assessment, the SNB raised its inflation forecasts. The franc was described as highly valued. Analysts said that a shift in the drivers of franc appreciation towards equity investment has boosted inflows. High demand has been noted for such defensive shares. Switzerland’s stock exchange does not release flows data. Swiss balance of payments numbers for the first quarter of 2021 point to portfolio investment inflows of $12.2 billion. Karsten Junius, an economist at J.Safra Sarasin, noted that Swiss blue chips outperformed global equities by 6 percentage points. Junius said that Swiss multinationals had benefited from the business cycle shift.

Junius added that the Speculative flows into the franc is something we can fight. But in the economic cycle, this is a fundamental change. The SNB is having to accept this development, and decided to stay on the sidelines. Banks’ sight deposits rose by 3.75 billion francs in August. Another powerful driver of franc strength may come from the SNB’s own holdings. The SNB invests a significant amount in overseas equities and credit. The SNB’s top holdings include Apple, Microsoft, Amazon, Facebook and Alphabet.

Hedge fund Eurizon SLJ Capital said that as booming stocks and hefty dividends boost the value of the SNB balance sheet, it becomes harder for the franc to weaken. The franc is no longer a pure fiat currency. Stephen Jen and Joana Freire, analysts at Eurizon SLJ, wrote this in a statement. They added that the risks to the franc may be skewed to the strong side, i.e., it will strengthen again in risk-off but may not weaken that much in risk-on. The franc is 5% percent overvalued, on an inflation-adjusted basis. Gero Jung, an economist at Bank Mirabaud in Geneva, said that the SNB would probably prefer a weaker franc.

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Goldman banker hired by the Citi bank

Citigroup has hired Luisa Leyenaar-Huntingford from Goldman Sachs. This new hire is to co-head its global infrastructure franchise. Because, it seeks to win more business from cash-rich investment firms focusing on infrastructure deals. Leyenaar-Huntingford will be based in London. Responsibility will be shared with Todd Guenther in New York.

The pair will work closely with industry teams covering healthcare, industrials, natural resources and clean energy transition (NRCET), technology and communications. Leyenaar-Huntingford helped in the establishment of the Goldman’s infrastructure franchise in her time at the Wall Street bank. They will team up with Citi’s Iberia co-head of banking, capital markets and advisory (BCMA) Jorge Ramos will continue to be a senior member of the global infrastructure franchise.

The infrastructure sector is poised for further growth, according to the memo. The memo was released by Citi’s global co-heads of the alternative assets group Anthony Diamandakis and John Eydenberg, and its EMEA head of BCMA Nacho Gutierrez-Orrantia. There was significant private investment demand across the globe to deal with environmental, energy, transportation, waste, communication, digital and other social needs.

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Banks make slow progress on UK gender pay

Major banks in Britain made a slight dent in their gender pay gaps. Several insurers went backwards. Companies in Britain with more than 250 employees have been required to publish the difference between the pay and bonuses of their male and female employees. They got a reprieve due to the pandemic, last year. The financial services sector has shown one of the largest genders pay gaps in Britain. The lack of women in senior jobs is the main reason.

Pay gap data from 21 major financial institutions showed a narrowing in their average mean gender pay gap. This is just 0.4 percentage points. Banks alone had a pay gap which narrowed by one percentage point. Ann Francke, chief executive of the Chartered Management Institute said that the UK’s financial services industry has often been singled out. It really does have to get its house in order. Goldman Sachs had the widest gender pay gap in the year to April 2020. Goldman posted a gender pay gap of 51.8%. The bank told the staffs that narrowing the gap further was a critical priority. A spokesperson for banking lobby group UK Finance said, that there is clearly more still to be done.

FTSE 100 insurers Prudential, Legal & General and M&G reported a widening in their pay gaps. Prudential’s UK gender pay gap widened to 45.2%. M&G also reported a widening in its pay gap in the most recent year to 30.5%. The M&G spokesperson said that they are determined to narrow their gender pay gap and will do this by achieving better representation of women in all roles at all levels of our organization. Legal & General’s mean gender pay gap widened to 30.8%.

The insurer said that the legal & general is tackling the underlying causes of its pay gap. This is by creating a more diverse workforce and a more inclusive culture through sustained, long-term action. Admiral had a gender pay gap last year of 12.8%. The 21 firms surveyed were Barclays, HSBC, Lloyds, NatWest, Standard Chartered, Bank of America Merrill Lynch, Goldman Sachs International, JPMorgan, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, PGMS (a Phoenix unit), abrdn, Schroder Investment Management, St James’s Place, Legal & General, Prudential, Admiral Group, Aviva and M&G.

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BOJ to lower inflation target-Japan’s finance minister

Japan’s outgoing finance minister, Taro Aso, said that he had proposed lowering the central bank’s 2% inflation target. This is when the prices took a hit from plunging oil prices. He was the finance minister for nearly nine years. The slump in oil price was among the main reasons the government could not officially declare an end to deflation. In his final news conference as finance minister, Aso said that he proposed to Governor Kuroda that, with oil prices falling this much, it would be hard to achieve 2% inflation. Hence, the target must be lowered at some point. He stated this by referring to Bank of Japan (BOJ) chief Haruhiko Kuroda.

Aso also said that the governor said he would do his best to achieve the target. This is stated by adding that policymakers must scrutinise at some point, why the BOJ’s inflation target of 2% has not been met. The remarks highlight how the government and lawmakers distanced themselves from the BOJ’s target years ago, despite central bank reassurances that achieving the target was possible by maintaining or increasing stimulus.

Aso was deeply involved in negotiations with the BOJ. After Kuroda took over as governor, he deployed a massive asset-buying program. This is for pulling Japan out of deflation. Aso supported the BOJ’s stimulus efforts. He is a member of the cabinet. And also, had raised many doubts that monetary policy alone can reflate the economy out of the doldrums. New Prime Minister Fumio Kishida is set to form a cabinet.

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