(ZH) How Hedge Funds Closed Out 2016, And Why Hopes For A 2017 Rebound May Disap

How Hedge Funds Closed Out 2016, And Why Hopes For A 2017 Rebound May Disappoint

2016 was a year most hedge funds would be happy to forget. And while the same goes for 2015, 2014, 2013, 2012, 2011, and 2010, in fact virtually every year since the financial crisis in which the vast majority of the two and twenty crowd have failed to generate alpha, in 2016 - a year many said would mark a renaissance for active managers - the "flash hedge fund return" according to a report by BofA's Paul Ciana from Friday was a paltry 3.34%, which as BofA conveniently calculated meant they "underperforming the S&P500 index by 6.2%" at which point your average underperforming hedge fund manager complains that they shouldn't be benchmarked against the S&P, even as the redemption notices flood in and the AUM gets ever smaller.
Not everyone did poorly: credit related strategies lead HF performance, including Distressed Credit, Convertible Arbitrage and Event Driven strategies. On the other end, predictably, dedicated Short Bias was down 5.10%
Looking at specific names, the following HSBC table breaks out the best and worst hedge funds as of the last week of December 2016:
In recent weeks there has been a fresh burst of hope that 2017 will be better for the HF community as a result of the recent collapse in cross-asset correlation; it is hoped that the resulting returns dispersion will make it easier for hedge funds to stand out in a world in which due to central bank intervention, correlations had been abnormally high following the financial crisis.
But is that an accurate description of events? To a great extent, the answer is no.
While correlation between diversified HF performance and S&P 500 price return declined from the May 2016 high (Chart 1), the 1-year correlation (83.7%) was slightly above the 3-year correlation (83.0%) as of the end of November. Overall, correlation remained far higher than it has been historically. Which as BofA redundantly explains, means that "when S&P 500 declines, performance of HFs with higher positive correlation is expected to suffer."
Not all "hedge" funds have such a high correlation, however. The correlation relationship with S&P 500 varies substantially among different HF strategies. Short Bias and Merger Arbitrage offer negative correlation or most diversification effects. Equity focused HF strategies, including Equity Market Neutral and Long/Short, has decreased correlation to the S&P 500 compared to longer term relationship (3-year and 5-year). On the other hand, Distressed Credit, Convertible Arbitrage and Event Driven have increased positive correlation (Chart 2).
Yet, while there are some notable exceptions, the rule generally is that as the market goes, so goes the average hedge fund. Which is why some of the world's wealthiest billionaires are pleading that Trump does not disappoint and manages to keep pushing the S&P to ever higher records on nothing but hope of a "fiscal stimulus" which may well never come.
* * *
That said, how did hedge fund close out 2016? Here is the answer based on the latest weekly CFTC data:
  • Buy-side net long in WTI Crude was near record high (99.4%-tile). However, trend remains bullish absent a move below 44.1/42.2 (50-week SMA and chart support).
  • Institutions added to their long in 30-year Treasury future to the highest since July 2015; HFs added to their short in 30-year to the most since Feb. 2015. Technical bias favors a bullish rebound of the 30-year Treasury.
  • Buy-side was most short JPYUSD since December 22, 2015. However, net position was 42% less than the short seen in Jan. 2007. Although JPY strengthened during the past 2-weeks, the longer term trend favors further depreciation against USD absent a move below 114.97/114.74.
Notable flows last week (12/20/2016 to 12/27/2016):
  • Institutions sold $5.5bn S&P 500, $0.7bn Russell 2000 and $0.6bn MSCI EM futures last week. HFs sold $0.4bn MSCI EM and $0.3bn Russell 2000, but bought $4.7bn S&P 500 and $1.1bn NASDAQ 100.
  • Institutions bought $9.8bn 10-year and $2.3bn 30-year Treasuries, while selling $1.9bn 2-year. HFs sold $10.1bn 10-year and $2.7bn 30-year, but bought $3.9bn 2-year.
  • HFs increased their shorts in EURUSD and JPYUSD, by $0.1bn and $3.2bn, respectively. Institutions added -$0.2bn to JPYUSD shorts, and sold $0.7bn of their longs in EURUSD.
  • CTAs/CPOs sold $1.2bn Gold and $0.3bn Silver, but bought $0.6bn WTI Crude.
The key fufutres categories, visualized:
Equities: S&P500
Equities: Nasdaq
Equities: Russell
Equities: Emerging Markets
Treasurys: 30Y
Treasurys: 10Y
Currency: Euro
Currency: Yen
Commodities: Gold
Commodities: WTI
Source: BofA

Reuters - How ties to an 'equestrian princess' landed Samsung at center of a sca


Samsung Electronics Co's (005930.KS) sponsorship of the equestrian-athlete daughter of a long-time friend of President Park Geun-hye has helped to land South Korea's top company in the center of the country's influence-peddling scandal.

Samsung agreed last year to pay $18 million to Core Sports International GmbH, a consulting firm controlled by Park's friend Choi Soon-sil, who is in jail and faces charges of abuse of power and fraud in a criminal trial that began this month.

A South Korean court has also issued an arrest warrant for Choi's Germany-based horse-riding daughter, 20-year-old Chung Yoo-ra – who has been the main beneficiary of the sponsorship – for alleged criminal interference related to her academic record, and other unspecified charges.

The sponsorship deal is being examined by prosecutors as they try to ascertain whether Samsung, which was also funding and chairing the Korea Equestrian Federation (KEF), sought favors from Choi and President Park in return for funding initiatives backed by them. In particular, they are looking at whether favors included the National Pension Service' support for Samsung’s founding family in a shareholder vote last year.

"A crucial part of our investigation is to look into why Samsung and the KEF supported Choi Soon-sil and her daughter Chung Yoo-ra and transferred funds to companies set up by Choi or involved with Choi," an official at the special prosecutor's team told Reuters by phone. He declined to be identified because he is not authorized to speak with the media.

Park has been impeached by parliament over her role in a wide-ranging influence-peddling scandal linked to Choi, and now awaits a Constitutional Court review of that decision, which if upheld would make her the first democratically-elected South Korean leader to leave office in disgrace.

A HORSE NAMED VITANA V

Reuters has reviewed a copy of Samsung Electronics’ August 2015 contract with Core Sports to sponsor the team at a German facility in Biblis, a small town south of Frankfurt. Neither party announced the sponsorship.

"Samsung wishes to develop an Equestrian Team, including overseas training of athletes to prepare for 2018 Asian Games and World Equestrian Games," the consulting agreement says.

Samsung Electronics ended up spending about 8 billion won ($6.6 million) on the team, which went to support Chung, according to testimony by Samsung Group's de facto head, Jay Y. Lee, during parliamentary testimony earlier this month.

A more precise accounting, including whether some of that funding supported her coach and fellow rider, Park Jae-hong, was not available.

The team was meant to include six riders with 12 horses, Samsung's contract says, but never grew beyond Chung and her coach, according to lawmakers on a parliamentary committee investigating the presidential scandal.

Reuters was unable to determine why the team did not expand beyond the two riders.

Samsung's outlay included the 1 million euros ($962,000) purchase of a horse to be used by Chung named Vitana V, according to Lee.

He told the hearing there was a reason the group felt compelled to fund the equestrian team, but did not say what that was.

"I was told there were inevitable circumstances ... But I admit that the deal was done in an inappropriate way and regret that I didn't look into it more thoroughly," Lee testified. He didn't elaborate further.

Chung was not available for comment and her lawyer, who also represents her mother, did not return multiple requests for comment. Choi, who has denied legal wrongdoing, told lawmakers on Dec. 26 that she had not sought the sponsorship from Samsung. Reuters could not reach Park Jae-hong for comment.

Samsung Electronics declined to comment for this story.

Sung-Kwan Park, a Frankfurt-based lawyer who was Core's managing director, declined to discuss details of the deal when approached by Reuters, citing attorney-client privilege.

SPORT FOR THE ELITE

Samsung Electronics' support for Choi-backed initiatives also included 1.6 billion won to a foundation run by Choi's niece Jang Si-ho, and another 20.4 billion won, funding shared with the company's affiliates, to two foundations set up by a major business lobby to support Park policies. Prosecutors say in their indictment of Choi that they suspect that she controlled the foundations, including choosing staff.

Jang has said the foundation she ran was established to support young athletes and that Choi had asked her to set it up. Her lawyer told a court hearing on Thursday that Jang put pressure on Samsung to sponsor the foundation, but said it was not clear that was the reason for Samsung's backing.

Lee told lawmakers Samsung's contributions to the two foundations backing Park's initiatives were not made with any quid pro quo expected.

Samsung's offices have been raided twice by prosecutors but none of its officials have been charged with any wrongdoing.

The Samsung Group, which has been a major sponsor of the Olympic Games, has also funded a range of sports in South Korea in the past 20 years, including soccer, baseball, basketball, and volleyball. While those sports have mass appeal, equestrian, as in many countries, is seen as a sport for the wealthy elite – there were just 251 registered equestrian riders in the country in 2014, according to the KEF.

The conglomerate and its founding family have a long-term relationship with the sport. The 48-year-old Lee, grandson of the group's founder, is an accomplished horseman and represented South Korea at international events, winning medals in various competitions in the late 1980s and early 1990s.

FAKE DOCUMENTS

In 2010, Samsung pulled out of sponsoring the KEF only to return to the sport in March 2015 when Samsung Electronics President Park Sang-jin took over the chairmanship of the KEF.

That was at a time when the KEF was being accused by lawmakers and local equestrian federations of granting Chung undue favors, including selection to the national team, because of her mother's perceived influence with Park.

In 2014, Chung was labeled the "Equestrian Princess" by South Korean media, though she partially answered her critics by winning a group dressage gold medal at the 2014 Asian Games.

The KEF declined to comment, citing the ongoing investigation by prosecutors.

Park Jong-so, a veteran rider and former national team head coach, said many in the country's equestrian community were puzzled when Samsung resumed its leadership of the federation.

Samsung gave 2.6 billion won to the KEF between resuming the sponsorship and August this year, according to a document it filed to parliament and shown to Reuters by a lawmaker.

The country's culture ministry, which oversees sports, said in a December audit report that the KEF signed fake documents provided by Chung to excuse her absences from high school and gain credit for volunteer activities she never did.

The saga has left equestrian sports in South Korea in a state of flux. Some local media have reported that Samsung has canceled the contract with Core, which has been renamed Widec Sports GmbH. Samsung declined to comment.

Hwang Young-shik, who won two 2014 Asian Games gold medals, including one with Chung in the group dressage, and now trains young riders at his own farm, said the whole saga has been embarrassing for the sport in South Korea.

"Young riders are frustrated over this," he told Reuters, adding that everyone in the equestrian world now "knows who Chung Yoora is."

>>> How a United Iran, Russia and China are Changing The World - For the Better

How a United Iran, Russia and China are Changing The World - For the Better


The two previous articles have focused on the various geopolitical theories, their translations into modern concepts, and practical actions that the United States has taken in recent decades to aspire to global dominance. This segment will describe how Iran, China and Russia have over the years adopted a variety of economic and military actions to repel the continual assault on their sovereignty by the West; in particular, how the American drive for global hegemony has actually accelerated the end of the 'unipolar moment' thanks to the emergence of a multipolar world.

From the moment the Berlin Wall fell, the United States saw a unique opportunity to pursue the goal of being the sole global hegemon. With the end of the Soviet Union, Washington could undoubtedly aspire to planetary domination paying little heed to the threat of competition and especially of any consequences. America found herself the one and only global superpower, faced with the prospect of extending cultural and economic model around the planet, where necessary by military means.

Over the past 25 years there have been numerous examples demonstrating how Washington has had little hesitation in bombing nations reluctant to kowtow to Western wishes. In other examples, an economic battering ram, based on predatory capitalism and financial speculation, has literally destroyed sovereign nations, further enriching the US and European financial elite in the process.

Alliances to Resist

In the course of the last two decades, the relationship between the three major powers of the Heartland, the heart of the Earth, changed radically.

Iran, Russia and China have fully understood that union and cooperation are the only means for mutual reinforcement. The need to fight a common problem, represented by a growing American influence in domestic affairs, has forced Tehran, Beijing and Moscow to resolve their differences and embrace a unified strategy in the common interest of defending their sovereignty.

Events such as the war in Syria, the bombing of Libya, the overthrowing of the democratic order in Ukraine, sanctions against Iran, and the direct pressure applied to Beijing in the South China Sea, have accelerated integration among nations that in the early 1990s had very little in common.

Economic Integration

Analyzing US economic power it is clear that supranational organizations like the World Trade Organization, International Monetary Fund and the World Bank guarantee Washington’s role as the economic leader. The pillars that support the centrality of the United States in the world economy can be attributed to the monetary policy of the Fed and the function of the dollar as a global reserve currency.

The Fed has unlimited ability to print money to finance further economic power of the private and public sector as well as to pay the bill due for very costly wars. The US dollar plays a central role as the global reserve currency as well as being used as currency for trade. This virtually obliges each central bank to own reserves in US currency, continuing to perpetuate the importance of Washington in the global economic system.

The introduction of the yuan into the international basket of the IMF, global agreements for the Asian Infrastructure Investment Bank (AIIB), and Beijing’s protests against its treatment by the World Trade Organization (WTO) are all alarm bells for American strategists who see the role of the American currency eroding. In Russia, the central bank decided not to accumulate dollar reserves, favoring instead foreign currency like the Indian rupee and the Chinese yuan. The rating agencies - western financial-oligarchy tools -have diminishing credibility, having become means to manipulate markets to favor specific US interests. Chinese and Russian independent rating agencies are further confirmation of Beijing and Moscow’s strategy to undermine America’s role in western economics.

De-dollarization is occurring and proceeding rapidly, especially in areas of mutual business interest. In what is becoming increasingly routine, nations are dealing in commodities by negotiating in currencies other than the dollar. The benefit is twofold: a reduction in the role of the dollar in their sovereign affairs, and an increase in synergies between allied nations. Iran and India exchanged oil in rupees, and China and Russia trade in yuan.

Another advantage enjoyed by the United States, intrinsically linked to the banking private sector, is the political pressure that Americans can apply through financial and banking institutions. The most striking example is seen in the exclusion of Iran from the SWIFT international system of payments, as well as the extension of sanctions, including the freezing of Tehran's assets (about 150 billion US dollars) in foreign bank deposits. While the US is trying to crack down on independent economic initiatives, nations like Iran, Russia and China are increasing their synergies. During the period of sanctions against Iran, the Russian Federation has traded with the Islamic Republic in primary commodities. China has supported Iran with the export of oil purchased in yuan. More generally, Moscow has proposed the creation of an alternative banking system to the SWIFT system.

Private Banks, central banks, ratings agencies and supranational organizations depend in large part on the role played by the dollar and the Fed. The first goal of Iran, Russia and China is of course to make these international bodies less influential. Economic multipolarity is the first as well as the most incisive way to expand the free choice before each nation to pursue its own interests, thereby retaining its national sovereignty.

This fictitious and corrupt financial system led to the financial crisis of 2008. Tools to accumulate wealth by the elite, artificially maintaining a zombie system (turbo capitalism) have served to cause havoc in the private and public sectors, such as with the collapse of Lehman Brothers or the crisis in the Asian markets in the late 1990s.

The need for Russia, China and Iran to find an alternative economic system is also necessary to secure vital aspects of the domestic economy. The stock-market crash in China, the depreciation of the ruble in Russia, and the illegal sanctions imposed on Iran have played a profound role in concentrating the minds of Moscow, Tehran and Beijing. Ignoring the problem borne of the centrality of the dollar would have only increased the influence and role of Washington. Finding points of convergence instead of being divided was an absolute must and not an option.

A perfect example, explaining the failed American economic approach, can be seen in recent years with the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), two commercial agreements that were supposed to seal the economic trade supremacy of the US. The growing economic alternatives proposed by the union of intent between Russia, China and Iran has enabled smaller nations to reject the US proposals to seek better trade deals elsewhere. In this sense, the Free Trade Area of ​​the Asia Pacific (FTAAP) proposed by Beijing is increasingly appreciated in Asia as an alternative to the TPP.

In the same way, the Eurasian Union (EAEU) and the Commonwealth of Independent States (CIS) have always been key components for Moscow. The function these institutions play was noticeably accelerated following the coup in Ukraine and the resulting need for Russia to turn east in search of new business partners. Finally, Iran, chosen by Beijing as the crossroad of land and sea transit, is a prime example of integration between powers geographically distant but with great intentions to integrate vital structures of commerce.

The Chinese model of development, called Silk Road 2.0, poses a serious threat to American global hegemonic processes. The goal for Beijing is to reach full integration between the countries of the Heartland and Rimland, utilizing the concept of sea power and land power. With an investment of 1,000 billion US dollars over ten years, China itself becomes a link between the west, represented by Europe; the east, represented by China itself; the north, with the Eurasian economic space; the south, with India; Southeast Asia; the Persian Gulf and Middle East. The hope is that economic cooperation will lead to the resolution of discrepancies and strategic differences between countries thanks to trade agreements that are beneficiary to all sides.

The role of Washington continues to be that of destruction rather than construction. Instead of playing the role of a global superpower that is interested in business and trade with other nations, the United States continues to consider any foreign decision in matters of integration, finance, economy and development to lie within its exclusive domain. The primary purpose of the United States is simply to exploit every economic and cultural instrument available to prevent cohesion and coexistence between nations. The military component is usually the trump card, historically used to impose this vision on the rest of the world. In recent years, thanks to de-dollarization and military integration, nations like Iran, Russia and China are less subject to Washington's unilateral decisions.

Military deterrence

Accompanying the important economic integration is strong military-strategic cooperation, which is much less publicized. Events such as the Middle East wars, the coup in Ukraine, and the pressure exerted in the South China Sea have forced Tehran, Moscow and Beijing to conclude that the United States represents an existential threat.

In each of the above scenarios, China, Russia and Iran have had to make decisions by weighing the pros and cons of an opposition to the American model. The Ukraine coup d’état brought NATO to the borders of the Russian Federation, representing an existential threat to the Russia, threatening as it does its nuclear deterrent. In the Middle East, the destruction of Iraq, Libya and Syria has obliged Tehran to react against the alliance formed between Saudi Arabia, Turkey and the United States. In China, the constant pressure on South China Sea poses a serious problem in case of a trade blockade during a conflict. In all these scenarios, American imperialism has created existential threats. It is for this reason natural that cooperation and technological development, even in the military area, have received a major boost in recent years.

In the event of an American attack on Russia, China and Iran, it is important to focus on what weapon systems would be used and how the attacked nations could respond.

Maritime Strategy and Deterrence

Certainly, US naval force place a serious question mark over the defense capabilities of nations like Russia, China and Iran, which strongly depend on transit via sea routes. Let us take, for example, Russia and the Arctic transit route, of great interest not only for defense purposes but also being a quick passage for transit goods. The Black Sea for these reasons has received special attention from the United States due to its strategic location. In any case, the responses have been proportional to the threat.

Iran has significantly developed maritime capabilities in the Persian Gulf, often closely marking ships of the US Navy located in the area for the purposes of ​​deterrence. China's strategy has been even more refined, with the use of dozens, if not hundreds, of fishing boats and ships of the Coast Guard to ensure safety and strengthen the naval presence in the South and East China Sea. This is all without forgetting the maritime strategy outlined by the PLA Navy to become a regional naval power over the next few years. Similar strategic decisions have been taken by the navy of the Russian Federation. In addition to having taken over ship production as in Soviet times, it has opted for the development of ships that cost less but nevertheless boast equivalent weapons systems to the Americans carrier groups.

Iran, China and Russia make efficiency and cost containment a tactic to balance the growing aggressiveness of the Americans and the attendant cost of such a military strategy.

The fundamental difference between the naval approach of these countries in contrast to that of the US is paramount. Washington needs to use its naval power for offensive purposes, whereas Tehran, Moscow and Beijing need naval power exclusively for defensive purposes.

In this sense, among the greatest weapons these three recalcitrant countries possess are anti-ship, anti-aircraft and anti-ballistic systems. To put things simply, it is enough to note that Russian weapons systems such as the S-300 and S-400 air-defense systems (the S-500 will be operational in 2017) are now being adopted by China and Iran with variations developed locally. Increasingly we are witnessing an open transfer of technology to continue the work of denying (A2/AD) physical and cyberspace freedom to the United States. Stealth aircraft, carrier strike groups, ICBMs and cruise missiles are experiencing a difficult time in such an environment, finding themselves opposed by the formidable defense systems the Russians, Iranians and Chinese are presenting. The cost of an anti-ship missile fired from the Chinese coast is considerably lower than the tens of billions of dollars needed to build an aircraft carrier. This paradigm of cost and efficiency is what has shaped the military spending of China, Russia and Iran. Going toe to toe with the United States without being forced to close a huge military gap is the only viable way to achieve immediate tangible benefits of deterrence and thereby block American expansionist ambitions.

A clear example of where the Americans have encountered military opposition at an advanced level has been in Syria. The systems deployed by Iran and Russia to protect the Syrian government presented the Americans with the prospect of facing heavy losses in the event of an attack on Damascus. The same also holds for the anti-Iranian rhetoric of certain American politicians and Israeli leaders. The only reason why Syria and Iran remain sovereign nations is because of the military cost that an invasion or bombing would have brought to their invaders. This is the essence of deterrence. Of course, this argument only takes into partial account the nuclear aspect that this author has extensively discussed in a previous article.

The Union of the nations of the Heartland and Rimland will make the United States irrelevant

The future for the most important area of ​​the planet is already sealed. The overall integration of Beijing, Moscow and Tehran provides the necessary antibodies to foreign aggression in military and economic form. De-dollarization, coupled with an infrastructure roadmap such as the Chinese Silk Road 2.0 and the maritime trade route, offer important opportunities for developing nations that occupy the geographical space between Portugal and China. Dozens of nations have all it takes to integrate for mutually beneficial gains without having to worry too much about American threats. The economic alternative offered from Beijing provides a fairly wide safety net for resisting American assaults in the same way that the military umbrella offered by these three military powers, such as with the the SCO for example, serves to guarantee the necessary independence and strategic autonomy. More and more nations are clearly rejecting American interference, favoring instead a dialogue with Beijing, Moscow and Tehran. Duterte in the Philippines is just the latest example of this trend.

The multipolar future has gradually reduced the role of the United States in the world, primarily in reaction to her aggression seeking to achieve global domination. The constant quest for planetary hegemony has pushed nations who were initially western partners to reassess their role in the international order, passing slowly but progressively into the opposite camp to that of Washington.

The consequences of this process have sealed the destiny of the United States, not only as a response to her quest for supremacy but also because of her efforts to maintain her role as the sole global superpower. As noted in previous articles, during the Cold War the aim for Washington was to prevent the formation of a union between the nations of the Heartland, who could then exclude the US from the most important area of ​​the globe. With the fall of the Iron Curtain, sights were set on an improbable quest to conquer the Heartland nations with the intent of dominating the whole world. The consequences of this miscalculation have led the United States to being relegated to the role of mere observer, watching the unions and integrations occurring that will revolutionize the Eurasian zone and the planet over the next 50 years. The desperate search to extend Washington's unipolar moment has paradoxically accelerated the rise of a multipolar world.

In the next and final article, I will throw a light on what is likely to be a change in the American approach to foreign policy. Keeping in mind the first two articles that examined the approach by land theorized by MacKinder as opposed to the Maritime Mahan, we will try and outline how Trump intends to adopt a containment approach to the Rimland, limiting the damage to the US caused by a complete integration between nations such as Russia, China, Iran and India.

(BofA-ML) Follow The Flow - Fund flows in 2016 - QE in the driving seat

2016 Flows = all about QE
QE drove fund flows in 2016, but the past two months has been all about reversing this trend. Even though high-grade and EM debt funds have been the main beneficiaries of QE-mania, recent developments have shifted momentum to the negative side. Equities have been the biggest loser in 2016, with outflows mounting to $100bn, as investors flocked to QE-eligible assets. HY funds closed the year on negative territory in terms of flows, despite the recent rebound. Commodities were the biggest winner for most of 2016, but rising rates reversed the strong inflow seen over the first part of the year.

(BoA-ML) The Flow Show - Hot Japan & Banks, Cooler US & Value

An end-year week of modest flows: stocks see $1bn outflows, $3.4bn inflows to bonds, tiny $0.1bn gold outflows, and moderate $16bn money market inflows. 2016 was the largest year of equity redemptions since 2008 (Chart 1); by contrast, bond inflows continued for an eighth consecutive year.

>>> Asset Class Flows
- Equities: $1bn outflows ($7.8bn mutual fund outflows vs $6.8bn ETF inflows)
- Bonds: $3.4bn inflows (breaks 8-week streak of outflows)
- Commodities: small $0.5bn outflows (7 straight weeks)

>>> Equity Flows
- Japan: big $2.4bn inflows (largest in 7 weeks)
- Europe: $40mm outflows
- EM: $2.5bn outflow (2 straight weeks)
- US: $1.6bn outflows, largest decline in 8 weeks
- By sector: 8 straight weeks of real estate outflows ($1bn); 14 straight weeks of inflows to financials ($0.7bn); 7 straight weeks of inflows to infrastructure ($17mm). Flow winners for 2016 are materials & financials; losers are healthcare & consumer goods.

>>> Fixed Income Flows
- $2bn inflows to HY bond funds (5 straight weeks)
- 8 straight weeks of outflows from EM debt funds ($0.2bn)
- $1.4bn inflows to bank loans (7 straight weeks)
- Tiny $76mn outflows from Govt/Tsy funds
- First inflows to IG bond funds in 8 weeks ($2.2bn)
- 9 straight weeks of outflows from muni bond funds ($1.5bn)

>>> What to look at today - 2nd of January 2017 - Happy New Year

US, UK, Swiss, Ireland, Australia, Hong Kong, Japan, New Zealand, Singapore, Canada are closed today.
Korea's Kospi the only major market open in the first trading session of the year; US and Europe remain closed in extended New Years holiday; FX majors also in extremely narrow ranges. China Dec official manufacturing PMI posts 5th straight expansion, though slower than expected; New export orders in expansion for 2nd straight month; Employment component remains in contraction at 48.9 v 49.2 m/m; Input prices at multi-month highs of 69.6 v 68.3 m/m. PBoC chief economist notes the new rules on cash transactions and overseas transfers are not capital controls after Chinese central bank increased controls on individuals' FX purchases to convert up to the equivalent of $50K. Recall late last week, PBoC also requested that banks report yuan trading over CNY50K vs CNY200K previously. Japan Coast Guard: Four China vessels entered into disputed waters near Senkaku islands.

2016 Yearly Performance
Dow +13.42% S&P +9.54% Nasdaq +7.50% Russell +19.48% Brazil +38.93% Mexico +6.20% EuroStoxx +0.70% FTSE +14.43% CAC +4.86% Dax+6.87% Ibex -2.01% MIB -10.20% SMI -6.78% Nikkei +0.42% Hang Seng +0.39% CSI -11.28% Shanghai -12.30%

Macro :
- China December Manufacturing PMI at 51.4; Est. 51.5
- U.K. Sets New Penalties for Enablers of Offshore Tax Evasion
- ECB to Start a Review of EU Banks’ Internal Models: Messaggero
- France Foiled 17 Attacks This Year, Prime Minister Tells JDD
- Einhorn’s Greenlight Fund Gains 9.4% in 2016
- Spain Wants Good Relations With U.K. to Continue, Rajoy Says
- Spain Bad Bank Sareb Exceeded EU1.5B in 2016 Institutional Sales

Keep an eye :
- AF FP : Air France-KLM Debt to Jump 2017 on New Accounting Rules: Echos
- AI FP : Air Liquide Completes Aqua Lung Sale to Montagu Private Equity
- AAPL US : Apple to Slice IPhone Production 10%, Calculations Show: Nikkei
- AAPL US : Apple Suppliers Fall After Report on IPhone Production Cut
- BMPS IM : Paschi Plans Bonds for Jan., Feb.; Weighs ‘Bad Bank,’ Sole Says
- BMW GY : BMW to Rely on Combustion Engines for Decade, Krueger Tells BZ
- BP IM : Banco Popolare Holders to Get 1 Banco BPM Share in Merger
- BP IM : Banco Popolare: Got Interest Expressions on 178,859 Shares
- BPM IM : Banco BPM to Hold First Board Meeting on Sunday: Messaggero
- COFA FP : Coface Gets Pretax EU75m Gain for French State Export Guarantees
- CON GY : Continental AG CEO Sees Jobs Endangered by E-Car Trend: WamS
- CSGN VX : Tanzania Says Seeking $300m Loan From Credit Suisse: Reuters
- FCC SM : FCC delisting offer to run from 30 December 2016 to 13 February 2017
- FDR FP : Fonciere Des Regions Invests EU270m in Spanish Hotels
- IAG LN : Iberia Prepares to Negotiate More Job Cuts, Cinco Dias Reports
- ITV LN : ITV Said Preparing for Exit of CEO Crozier, Finance Head: Sky
- LIN GY : Linde to drop out of bidding for Daesung Industrial Gases because of antitrust issue- thebell.co.kr
- LLOY LN : Lloyd’s May Pay Record $50m on Fisher Claim: Insurance Insider
- LUPE SS : Lundin CEO Says Lower Operational Cost Trend to Continue: DI
- MC FP : Hengdeli Holdings to sell two business units to its chairman for CNY 3.5bn (MC owns 5.97% of Hngdeli)
- MC FP : LVMH’s Biver Says Smartwatches Still in Their Infancy: Blick
- MMT FP : TF1 Audience Fell to 20.4% in 2016, M6 Rose to 10.2%: Le Figaro
- MKS LN : M&S to Lift Some Prices 15% After Supplier Rebellion: S. Times
- UG FP : French New Car Registrations Rose 5.8% in Dec., 5.1% for 2016
- RNO FP : French New Car Registrations Rose 5.8% in Dec., 5.1% for 2016
- SAN FP : Sanofi, Boehringer Ingelheim Confirm Closure of Swap on Jan 1
- SAN FP : Sanofi, Merck End Joint Vaccines Business in Europe
- UHR VX : Hengdeli Holdings to sell two business units to its chairman for CNY 3.5bn (UHR owns 9.16% of Hngdeli)
- TEL NO : Cevian Capital sees Telia and Telenor as suitable merger partners - Dagens Naeringsliv
- TELIA SS : Cevian Capital sees Telia and Telenor as suitable merger partners - Dagens Naeringsliv
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>>> Cevian Capital sees Telia and Telenor as suitable merger partners (translate

Cevian Capital sees Telia and Telenor as suitable merger partners (translated)

Cevian Capital, the Swedish activist fund, sees the Swedish telco Telia and Norwegian Telenor as suitable merger partners, according to Dagens Naeringsliv.

The Norwegian business daily cited Cevian co-founder, Christer Gardell, who said he believes that a merger between Telia and Telenor would be a good fit despite the likelihood of disposals for regulatory reasons.

He added that synergies are more likely between market players within close geographical proximity.

He also said that he believes the European telecoms market will see further consolidation within the next five to ten years and that the Nordic region has a chance to lead.

Gardell declined to comment when asked if Cevian owns any Telia shares.

The item noted that Telia and Telenor earlier tried to create a joint venture in Denmark but the deal was halted for regulatory reasons.