Wednesday, December 28, 2016
Emerging markets to stay relevant in 2017; Madrid bans half of cars to fight pollution; 'Bosses don't deserve big pay packets'
1 Emerging markets to stay relevant (Jim O’Neill in Gulf News) Casual observers might think that 2016 was a disappointing year for so-called emerging markets. In fact, some of these countries have delivered the year’s best investment returns, while certain developed-country markets have fared poorly.
Right now, the prevailing emerging-market outlook predicts that under Donald Trump’s administration the US will expand its fiscal-stimulus policies, and that the Federal Reserve will tighten monetary policy. This, in turn, will strengthen the dollar, which could create widespread problems in emerging markets.
But there are four reasons to doubt the conventional wisdom. For starters, while markets have performed well in the weeks since Trump’s election, investors should be wary of any apparent consensus. No one can confidently predict what shape Trumponomics will actually take.
Second, while the decades-long rally in government bonds might finally be coming to an end, it is not obvious that the dollar will remain strong indefinitely, even if it does appreciate relative to other currencies in the near term.
A third consideration for 2017 is that fiscal expansion in the US could benefit commodity-producing countries, by strengthening cyclical and global growth. If commodity prices rise, as they have in recent weeks, emerging-market currencies could appreciate as their terms of trade move in a positive direction.
Finally, any forecast must account for China, the emerging-market juggernaut. The rise of the Chinese consumer is surely the single most important economic trend in the world today, and trade-bashing populists in the West, such as Trump, would do well to pay attention.
2 Madrid bans half of cars to fight pollution (The Guardian) Madrid has ordered half of most private cars off the roads on Thursday to tackle worsening air pollution, a first in Spain. The restrictions will operate between 6.30am and 9pm and will be re-evaluated daily depending on pollution levels.
The measure is activated when levels of harmful nitrogen dioxide in the atmosphere go above 200 microgrammes per cubic metre in at least two measuring stations for two days running, and if the air is unlikely to clear imminently. There are exceptions to the ban, such as for mopeds, hybrid cars, those carrying three people or more or used by disabled people. Buses, taxis and emergency vehicles are also exempt.
With 3.2 million residents and 1.8m cars, Madrid often suffers from bad bouts of pollution. The move to ban half of cars is level three on a scale of four anti-pollution measures. Level four bans taxis from the city, except those that are hybrid cars.
3 ‘Bosses don’t deserve big pay packets’ (BBC) The link between what bosses are paid and a company's financial performance is "negligible", new research finds. The median pay for chief executives at Britain's 350 biggest companies was £1.9m in 2014 - a rise of 82% in 11 years - the study by Lancaster University Management School found.
However, performance as measured by return on capital invested was less than 1% during that period. The report's authors said the findings suggested a "material disconnect". The study said the increase in executive remuneration was largely driven by performance-based pay.
It also said the metrics typically used to gauge company performance, such as total shareholder return and earnings per share growth, were too short termist. The research suggested the need for "a more refined discussion about the type of performance measures employed" rather than remuneration levels and performance-related pay arrangements alone.
Prime Minister Theresa May said she wanted to stop an "irresponsible minority" of companies acting badly and ensure "everybody plays by the same rules". Among the measures under consideration are pay ratios, which would show the gap in earnings between the chief executive and an average employee.