In new statements on the extent of greenwashing in the fund management industry, Desiree Fixler highlights some uncomfortable truths about sustainable investing.
The three indicators, part of a planned suite of eight, will cover appreciation pressures on the renminbi, the initial public offering and debt capital markets. While data from a traditionally opaque market will be provided by Shanghai-based Xinhua, the overlying information will be produce by the Milken Institute, a publicly-funded economic think tank.
The trio will be followed next year by launches covering the banking sector, mergers and acquisitions, privatizations and joint ventures, corporate governance and trade openness.
Of the new indices, the Renminbi Pressure Indicator will consider appreciation pressure relative to the US dollar using a combination of exchange rate, foreign exchange reserves and data. According to calculations using Xinhua data and Milken metrics, the last renminbi revaluation in July last year û a 2% reduction in the YuanÆs value û was based on an increase in appreciation pressure of 14.6%. Since then, the move would appear to have done the trick, reducing revaluation pressure to 9.4%.
The calculation of ChinaÆs increasingly busy IPO calendar, which is proving a significant boon to its ailing pensions system, is calculated using market capitalization data. Based on an average 102 new issues between December 1997 and August this year, the market has appreciated some 80% in value. This figure notably excludes last monthÆs flotation of Industrial and Commercial Bank of China, and the frequency of IPOÆs is set for a massive uptick in the next few years.
Back data on the debt capital market suggests that ChinaÆs companies are significantly underleveraged when compared to other jurisdictions. It is calculated using a debt-to-equity ration using market value, and revealed that between 2001 and Q1 of 2006, the outstanding market debt of Chinese listed companies grew by a massive 236% to 22.2% for every dollar, albeit from a globally unique low base of just 6.6%.
According to Fredy Bush, chief executive officer of Xinhua finance, these new indicators will serve to support the development of ChinaÆs FX, corporate bond, equity and derivatives market.
ôThe indicators will benefit a wide set of market participants,ö says Michael Klowden, president of the Milken Institute. ôThey will be effective tools to judge and assess market circumstances in support of investment decision making.ö
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Actively managed funds were also not found to have better odds of higher returns than more passive funds.