Global Markets: World shares slip, dollar nurses losses as US payrolls loom European shares opened lower, Treasuries held on to gains and the dollar was nursing heavy losses on Friday ahead of U.S. non-farm payrolls data, the next big test for investors looking for more signs of a rates policy shift from the Federal Reserve. Data overnight including falling U.S. job openings and contracting U.S. manufacturing activity, raised fresh hopes of easing cost pressure and added to evidence that Fed rate hikes may have cooled the economy. Bruno Schneller, managing director at INVICO Asset Management, said while stocks have risen recently, the most important factor was quantitative tightening — a process in which Fed winds down the bonds on its balance sheet. “Global markets have been hyperfocused on the Fed’s pace of hikes,” said Schneller. “We think the damage is not done yet. All the central bank liquidity that has gone in and out of the economic system has a 70% correlation to equity market returns and the liquidity drain will be hard to fight.” Also Read: US Stocks: Futures slip ahead of November jobs report Schneller expected stock markets to be 10% lower by year-end and to tumble further by the end of the first quarter of 2023. European stocks slipped, with London’s FTSE down 0.3% , German stocks rose by just over 0.3% while France’s blue-chip the CAC 40 fell 0.31%. U.S. futures indicated a flat open for Wall Street shares . U.S. shares ended mixed on Thursday after a big rally the day before, buoyed by comments from Fed Chair Jerome Powell that did not sound as hawkish as some had feared. NON-FARM PAYROLLSEconomists polled by Reuters expect data out at 1330 GMT to show the U.S. economy created 200,000 new jobs in November, the smallest number since December 2020. Payrolls rose by 261,000 in October. Alan Ruskin, macro strategist at Deutsche Bank, said if the nonfarm payrolls increased by 50,000-150,000 in November, that would be favourable for bonds and equities and keep the U.S. dollar trading lower. Futures fully price in 50 basis points rate hike at the Fed’s December policy meeting, while rates are now expected to peak around 4.75% to 5% by mid next year, compared with 5% to 5.25% previously. Investors were also watching for more signs that China is easing its zero-COVID policy, and whether China would contribute more to global growth next year amid a looming global recession. Sources told Reuters that China is set to announce an easing of its COVID quarantine protocols in the coming days and a reduction in mass testing, a marked shift in policy after anger over the world’s toughest curbs fuelled widespread protests. In bond markets, Treasury yields fell for a third straight day. The yields on benchmark 10-year Treasury notes fell to 3.51%, near lows not seen since turmoil in UK markets in September pushing yields in other major bond markets higher. The two-year Treasury yield, which rises with traders’ expectations of higher Fed fund rates, fell to its lowest level in almost two months at 4.204% and was last down around 5 basis points on the day. And in currency markets, the U.S dollar wallowed near five-month lows against a basket of other major currencies. It was set for a 1.4% weekly drop. The euro hit a fresh five-month high just above $1.05, while the Japanese yen scaled a new three-month high against the U.S. dollar. In the oil market, prices seesawed ahead of a key meeting of producing countries over the weekend. U.S. crude oil futures traded down to $81.07 per barrel, after surging to a two-week high of $83.34 in the previous session on a softer dollar. Brent crude futures also rose slightly to $86.90 per barrel. Spot gold rose to $1800.10 per ounce.
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In its consultation paper, Sebi has suggested that trustees of mutual funds should focus on market abuse by AMC, its employees and mis-selling by the AMC to increase the asset base.
Also, trustees should be responsible for fairness of fees and expenses charged by the AMC, compare its performance with peers and ensure that AMC’s sponsor is not getting any undue advantage.
In addition to the core areas, the trustees should be responsible for periodically reviewing the steps taken by AMCs for the folios which do not contain all KYC attributes with bank details.
Further, Sebi has suggested that trustees and their resource persons should independently evaluate the extent of compliance by AMC and not merely rely on AMC’s assurances.
To facilitate trustees’ supervision, AMCs should provide them with analytical information.
Presently, the trustees primarily rely on the AMCs for ensuring compliance with the applicable rules.
Under the rules, trustees hold the property of the mutual fund in trust for the benefit of the unitholders. The trustees appoint an AMC to float schemes for the mutual fund and manage the funds mobilised under various schemes, in accordance with the investment objectives.
“In view of the increasing scale and reach of the mutual fund industry, trustees’ role in respect of unitholders’ protection assumes even greater significance,” Sebi said on Friday.
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Over the past decade there has been a five-fold increase in the size of the mutual fund industry. The assets under management (AUM) has surged from Rs 7.93 lakh crore in November 2012 to Rs 39.89 lakh crore in December 2022.
To ensure that trustees devote time and attention to their core responsibilities, Sebi has suggested that for fulfilling other responsibilities, trustees may rely on professional firms such as audit firms, legal firms, merchant bankers for carrying out due diligence on their behalf.
The Sebi also listed some duties trustees can delegate to AMCs. This include ensuring that all systems are in place prior to the launch of any scheme by the AMC, and calculating any income in the mutual fund due to the fund and any income received in the mutual fund for unitholders.
The regulator has proposed to provide a one year time to existing trustees with board of trustee structure to convert into a trustee company, from governance point of view.
Presently, two structures for trustees are permitted — corporate and board of trustees structure. Moreover, there are a few mutual funds which have the board of trustees structure while the trustees of all other mutual funds have adopted the structure of a trustee company.
Considering the enhanced role of trustees over the period of time, Sebi has suggested to increase the minimum number of trustees to adequately perform their functions. Presently, the minimum number of trustees prescribed is four.
Also, it has been proposed that the chairperson of the trustee company should be an independent director.
Sebi has suggested that apart from the meeting of the audit committee of AMCs and trustees (which mostly comprises of independent directors), the board of AMCs and the board of trustees may be mandated to meet at least once a year to discuss the issues concerning the mutual funds.
The regulator proposed that the existing MF Regulations on AMC and its obligations may be amended to include additional clauses with respect to the obligations of the board of AMC.
The proposed amendment may include a clause which casts an obligation on the board of AMC to ensure that all the activities of the asset management company are in accordance with the provisions of these regulations.
The Securities and Exchange Board of India (Sebi) has sought comments from public till February 24 on these proposals.