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Market round-up: Europe turns hedge fund hot spot

LiveMint logoLiveMint 01-08-2017 Livemint

Europe is on a mini streak with hedge-fund investors as the prospect of faster economic growth and fading political risk help restore confidence in the region. Money pools investing across Europe attracted additional capital for the second straight month in June, following a 12-month stretch in which almost $16 billion was pulled out, according to data compiled by eVestment. The continent’s success contrasts with Asia and the US, where investors have pulled money from hedge funds. Hedge funds focused on European equities, including Engadine Partners and Rye Bay Capital, have raised money this year, while billionaire Dan Loeb’s Third Point described the region as a “bright spot” last week and told investors that its exposure there is the highest since 2010.

The revival comes as a relief for a region that has seen more hedge funds closing down than starting up over the last 10 quarters because of poor performance, a lack of capital flows and rising regulatory and compliance costs. The trouble started during the debt crisis, which sparked years of political and macroeconomic uncertainty and poor corporate earnings growth. Bloomberg

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Alan Greenspan warns of bond market bubble

Equity bears hunting for excess in the stock market might be better off worrying about bond prices, Alan Greenspan says. That’s where the actual bubble is, and when it pops, it’ll be bad for everyone. “By any measure, real long-term interest rates are much too low and therefore unsustainable,” the former Federal Reserve chairman, 91, said in an interview. “When they move higher they are likely to move reasonably fast. We are experiencing a bubble, not in stock prices but in bond prices. This is not discounted in the marketplace.”

While the consensus of Wall Street forecasters is still for low rates to persist, Greenspan isn’t alone in warning they will break higher quickly as the era of global central bank monetary accommodation ends. Deutsche Bank AG’s Binky Chadha says real Treasury yields sit far below where actual growth levels suggest they should be. Bloomberg

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Chinese take advantage of container prospects

As the outlook for global container port demand growth turns more optimistic, Chinese firms are aggressively pursuing inorganic growth, says a note prepared by maritime and shipping industry consultant Drewry. Last year, more than half of the acquisitions by global/international terminal operators have been made by Chinese firms. Deals so far this year were also driven by Chinese companies.

According to Drewry, Chinese companies are typically prepared to pay premium valuations. “The Chinese players are more comfortable with risk than the established international operators right now, and have a geo-political strategy rather than a purely financial one. They are snapping up assets and opportunities and have the appetite and financial clout to take many more in the coming years,” Neil Davidson, Drewry’s senior analyst for ports and terminals said in a statement.

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