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The IMF is worried about overheating in some Latin American economies, thanks to an “excessively stimulative environment”.

Although the institution is reluctant to label current conditions in the region’s largest markets bubbly, when it comes to credit growth the IMF acknowledges that concerns are rising about whether loan growth is becoming “excessive and eventually unsustainable.” Equity prices are also showing signs of “stretched valuations” in places like Chile, Colombia and Peru.

Despite being one of the region’s most active users of “macroprudential” measures to cool its economy, Peru stands out from the pack due to its rapid recent credit growth and, especially, sky-high equity valuations.

Today, Standard & Poor’s announced a new equity index based on the CIVETS countries. The moniker, coined by the Economist Intelligence Unit a few years ago, describes a group of sizeable emerging markets—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa—with appealing conditions for sustained high growth. Although not yet part of common parlance like the BRICs (Brazil, Russia, India and China), the CIVETS are generally the most-discussed markets in the next tier of emerging economies.

For its part, S&P describes the group as characterised by “dynamic, rapidly changing economies and young, growing populations.” Back-testing its new index, the CIVETS-based construction has recently outperformed indexes based on the BRICs as well as emerging markets in general. But this is not to say that shares in the CIVETS countries are uniformly buoyant: since the start of 2008, Colombian large caps have risen by more than 60% while large Egyptian stocks have shed more than 50% of their value. The group is an eclectic mix of political and economic systems, with financial markets of widely varying maturities. Thus, an index built from the CIVETS offers exposure to a targeted yet diversified basket of important emerging economies.

The recent performance of CIVETS shares will attract adventurous investors seeking outsized returns, much like intrepid coffee lovers who covet a rare, expensive type of bean harvested with the help of the civet, a cat-like mammal. In a less auspicious omen, civets were also linked to the spread of the deadly SARS virus.

Saudi Arabia’s benchmark equity index soared by more than 7% in trading on Saturday, its largest daily gain in more than two years. The index has added another 4% in trading since.

Still, the oil-rich kingdom’s market is among the worst performing in the region so far this year; before the recent gains the index touched a two-year low after falling for 13 consecutive sessions. Investor unease stems from the popular unrest gripping the Middle East and North Africa, with particularly pronounced selling in Saudi Arabia last week as violent protests took place in neighbouring Bahrain and Oman.

The recent rally in Riyadh is attributed to opportunistic buyers, including official investors like the country’s public pension agency. Comments from finance minister Ibrahim al-Assaf over the weekend also helped: given attractive share prices, “I seized the opportunity to buy some shares,” he said. Some US$36bn in new spending on housing and unemployment programmes was pledged by the kingdom last month, with a view to warding off potential unrest. Speculation that further reforms may include passage of a long-delayed mortgage law has seen banks’ shares lead the recent rally.

The shares of Athens-listed banks leapt by more than 8% today following a flurry of good news. Greece’s ten-year sovereign bond spread dropped below 800 basis points over German bunds. Equity strategists upgraded their opinion of the country’s shares. Finally, and perhaps most importantly from a psychological standpoint, Piraeus Bank managed to raise just over €800m in a rights issue.

These are all encouraging developments, but conditions for Greek lenders remain dire. The ten-year government bond yield, at around 11%, remains unsustainable. The equity upgrade, by Credit Suisse, was merely from “underweight” to “benchmark”, hardly a ringing endorsement. And despite Piraeus Bank’s capital-raising success and today’s surge in banks’ shares, the lenders still trade at deep discounts to book value; markets rate Piraeus Bank’s assets at only 35 cents on the euro.

The Cairo bourse is only open for four hours each trading day. It was a particularly eventful four hours today, with the benchmark EGX 30 index shedding more than 6%, mostly within the first few minutes of trading.

Yesterday was declared a “day of rage”, with tens of thousands of Egyptians taking part in violent protests reminiscent of the Tunisian uprising earlier this month. (The stock market was closed for a public holiday on Tuesday.) As the clashes continued today, investors took flight. The Egyptian equity benchmark index is now down by nearly 12% year-to-date, making it the worst performer among major bourses in developed and emerging markets. Today’s slide pushed the index lower than the previous bottom dweller: Tunisia.

Few stock exchanges can claim to have had as eventful a 2011 as the Dhaka bourse. Following riots after a steep daily drop last month, the market has been no less fiery so far this year, with authorities suspending trading on Monday after a morning plunge of more than 9% in less than a hour saw investors (again) take to the streets. Just as dramatic, the exchange’s main index soared by more than 15% yesterday (and added another 2% today for good measure).

Following the demonstrations earlier this week, officials relaxed recently imposed rules on banks’ exposure to the stockmarket, a key driver behind Monday’s fall. But this risks re-inflating a dangerous-looking bubble; although down by 7% so far this year, the market gained more than 80% in 2010. Investors’ wild mood swings are unlikely to be tamed by the rather quaint advice issued by the bourse at the start of trading each day:

“Good morning hon’ble Investors; make your investment decision based on company fundamentals, technical analysis, price level, disclosed information; and avoid rumor based speculations.”

Given its home country’s troubles, it is not surprising that the National Bank of Greece tops the list of the worst-performing bank shares in 2010. But if a bank’s stock merely reflect its home economy’s performance, some of the other firms at the top and bottom of 2010’s performance charts are puzzling indeed.

After all, among the 150-odd shares in the Bloomberg World Banks Index, four of the ten worst performers in 2010 are Chinese and three of ten best performers are American, including second-ranked CIT, which filed for bankruptcy protection in late 2009. General economic prospects clearly play a part in a bank’s fortunes, but the factors driving an individual lender’s shares remain largely company-specific.

The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

The headquarters of the Caracas Stock Exchange (CSE) in the upmarket business district of El Rosal are big, imposing and comatose. On one recent day, December 10th, the market handled a grand total of 11 trades worth only US$72,526. Just four stocks changed hands: one fell in price slightly, while three were unchanged.

It was a typical, soporific day at the CSE. Of the 60 companies listed in the exchange, fewer than half see their stocks traded with any frequency. Some shares go months without a trade, making Caracas home to one of the least liquid bourses in the world. It is, in effect, a zombie exchange.

Read more at Financial Services Briefing: “The living dead” (December 16th)

“There is opacity around what fees are actually paid, to whom and for what.” This is one of the conclusions of a new report about rights issues in the UK by a group of institutional investors. The group, known as the Institutional Investor Council, bemoans the fees paid by companies to raise equity capital.

Underwriting fees should be expected to rise during times of stress, given the greater risk that underwriters expose themselves to when managing issues in choppy markets. However, the investor council claims that the average gross underwriting fee since 2007, 3.4%, is unjustifiably higher than the 2.0% average recorded throughout the 1990s. It cites a lack of transparency and limited competition as key factors contributing to the situation. It also notes the common perception among clients of banks and other professional advisors that low fees are a sign of low quality. It then provides this unflattering anecdote:

We were told that extreme pressure could be brought on issuers to pay additional costs, the need for which appeared to come to light only once the process had started. Indeed, one sought to protect itself at the outset from these risks by paying an additional fee dependent on ‘not being held to ransom’ after the process had started.

The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

By most measures, Brazil weathered the global financial crisis better than almost any other major economy. Amidst the economic turmoil in North America and Western Europe, Brazil saw its reputation enhanced among international investors. But when it comes to recent stock market performance, the São Paulo exchange is a laggard in comparison with some of its neighbours.

So far this year, investors have been richly rewarded in places like Chile, Peru, Colombia and even Argentina. In Bogotá, the IGBC index is up by 33% through early December. In Santiago, the IPSA has gained 39% over the same period, while the Merval in Buenos Aires has added 48%. But even these impressive performances have been surpassed by Lima’s red-hot IGBVL, up by 53% year-to-date. And it gets even better for investors looking for dollar returns, as local currencies in Latin America have been appreciating against the greenback.

Read more at Financial Services Briefing: “League leaders” (December 6th)

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