Deutsche Bank launches Emerging Markets FX indices to track 21 EM currencies
Deutsche Bank announced the launch of a new set of Foreign Exchange indices to track 21 Emerging Markets (EM) currencies, reflecting the growing importance of EM as an asset class.
The set of four new non-tradable foreign exchange indices were developed by Deutsche Bank’s EM research team to help investors more comprehensively track performance of emerging markets currencies.
Global Head of EM Research, Sameer Goel said, “Asia’s economic growth, particularly China, is tipping the scales of economic influence and changing the investment landscape. In recent years, Emerging Markets fixed income assets (credit and currencies) have been growing in volume and prominence, therefore tracking EM FX performance has become more important than ever for investors in emerging markets.”
The Deutsche Bank research team highlight four key aspects of investment growth in emerging markets.
1) Significant shifts in the relative size of emerging markets from an economic and investment point of view. For example, the inclusion of China in various global bond indices, including the FTSE World Government Bond Index scheduled for later this year. Deutsche Bank strategists expect cumulative global investment inflows of just under USD600bn into China local currency fixed income in the next 5 years.
2) Issuance of a growing proportion of government debt in emerging markets in local currency. Total government debt issuance has more than doubled in the last decade, with the majority denominated in local currency.
3) Growth of benchmarks and passive investing in emerging market debt. The number of countries in benchmark bond indices has grown from 11 to 19 since 2002.[1] Foreign holdings of local currency government bonds in EM have increased from USD 800bn in 2004 to almost USD 2 trillion in 2019.[2] This has increased the need for investors to track EM FX to help with the decision on whether to hedge their currency exposure on underlying bond holdings.
4) Significant increase in the volume of transacted EM FX. The share of EM in OTC FX turnover has increased from 12% in 2007 to 25% today, particularly in derivatives.[3]
Deutsche Bank EM strategist Oliver Harvey said, “The new indices track both spot and carry performance of 21 emerging market currencies, serving as a comprehensive set of barometers for EM investors tracking FX.”
“We developed the new Deutsche Bank EM FX indices to better reflect the growth and development of EM fixed income. The indices capture a much wider currency universe, 21 currencies in total. Indices also reflect transparent and dynamic weights, and both spot and carry performance, since carry is a significant trading strategy for EM investors,” Harvey said.
Available on Bloomberg terminals, the non-tradeable indices were designed to track EM currency performance. The indices build on existing EM FX indices in four ways: 1) reflect a wider universe (21 currencies); 2) apply relevant and transparent weights; 3) shift weight dynamically over time (3 years), and 4) capture both spot and total return performance.
The indices are:
For further information please contact: Deutsche Bank AG Media Relations Sarah Stabler Email: sarah.stabler@db.com Phone: +65 9116 9970
[1] According to IMF [2] According to BIS Shrapnel [3] According to the BIS triennial survey
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of 20 March 2020 under the heading “Risk Factors”. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir.
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Deutsche Bank announced the launch of a new set of Foreign Exchange indices to track 21 Emerging Markets (EM) currencies, reflecting the growing importance of EM as an asset class.
The set of four new non-tradable foreign exchange indices were developed by Deutsche Bank’s EM research team to help investors more comprehensively track performance of emerging markets currencies.
Global Head of EM Research, Sameer Goel said, “Asia’s economic growth, particularly China, is tipping the scales of economic influence and changing the investment landscape. In recent years, Emerging Markets fixed income assets (credit and currencies) have been growing in volume and prominence, therefore tracking EM FX performance has become more important than ever for investors in emerging markets.”
The Deutsche Bank research team highlight four key aspects of investment growth in emerging markets.
1) Significant shifts in the relative size of emerging markets from an economic and investment point of view. For example, the inclusion of China in various global bond indices, including the FTSE World Government Bond Index scheduled for later this year. Deutsche Bank strategists expect cumulative global investment inflows of just under USD600bn into China local currency fixed income in the next 5 years.
2) Issuance of a growing proportion of government debt in emerging markets in local currency. Total government debt issuance has more than doubled in the last decade, with the majority denominated in local currency.
3) Growth of benchmarks and passive investing in emerging market debt. The number of countries in benchmark bond indices has grown from 11 to 19 since 2002.[1] Foreign holdings of local currency government bonds in EM have increased from USD 800bn in 2004 to almost USD 2 trillion in 2019.[2] This has increased the need for investors to track EM FX to help with the decision on whether to hedge their currency exposure on underlying bond holdings.
4) Significant increase in the volume of transacted EM FX. The share of EM in OTC FX turnover has increased from 12% in 2007 to 25% today, particularly in derivatives.[3]
Deutsche Bank EM strategist Oliver Harvey said, “The new indices track both spot and carry performance of 21 emerging market currencies, serving as a comprehensive set of barometers for EM investors tracking FX.”
“We developed the new Deutsche Bank EM FX indices to better reflect the growth and development of EM fixed income. The indices capture a much wider currency universe, 21 currencies in total. Indices also reflect transparent and dynamic weights, and both spot and carry performance, since carry is a significant trading strategy for EM investors,” Harvey said.
Available on Bloomberg terminals, the non-tradeable indices were designed to track EM currency performance. The indices build on existing EM FX indices in four ways: 1) reflect a wider universe (21 currencies); 2) apply relevant and transparent weights; 3) shift weight dynamically over time (3 years), and 4) capture both spot and total return performance.
The indices are:
For further information please contact:
Deutsche Bank AG Media Relations
Sarah Stabler
Email: sarah.stabler@db.com
Phone: +65 9116 9970
[1] According to IMF
[2] According to BIS Shrapnel
[3] According to the BIS triennial survey
About Deutsche Bank
Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.
This release contains forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about our beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Deutsche Bank. Forward-looking statements therefore speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. A number of important factors could therefore cause actual results to differ materially from those contained in any forward-looking statement. Such factors include the conditions in the financial markets in Germany, in Europe, in the United States and elsewhere from which we derive a substantial portion of our revenues and in which we hold a substantial portion of our assets, the development of asset prices and market volatility, potential defaults of borrowers or trading counterparties, the implementation of our strategic initiatives, the reliability of our risk management policies, procedures and methods, and other risks referenced in our filings with the U.S. Securities and Exchange Commission. Such factors are described in detail in our SEC Form 20-F of 20 March 2020 under the heading “Risk Factors”. Copies of this document are readily available upon request or can be downloaded from www.db.com/ir.
Further links on the topic
Deutsche Bank Research
Deutsche Bank in Asia Pacific
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