The rise in the Index was driven by a reduction in overall credit margins (leading to a capital gain in the basket of assets represented by the Index). However this was partially offset by a 0.08% rise in underlying interest rates. Notwithstanding this move upwards in underlying funding costs, 2003 has generally been characterized by stable LIBOR rates, and an examination of the futures curve for US Dollar LIBOR suggests that interest rates are currently expected to remain fairly stable for the remainder of the year.
Equity markets have rallied significantly from their lows over the last couple of months, and some commentators have been calling the end of the bear market in equities. It is instructive to see how the return on trade finance assets has compared to equities over the last one year and two year periods. The table below shows the return to be made from investing in the basket of trade finance assets represented by the LTP Trade Finance Index over those periods, compared to an investment in the MSCI World Index for equities over the same periods:
|
1 year: 30-Apr-02 to 30-Apr-03 |
2 years: 30-Apr-01 to 30-Apr-03 |
|
| MSCI World Index |
-16% |
-28.54% |
|
LTP Trade Finance Index |
+4.77% |
+11.74% |
Coming back to April, the overall performance of the Index and its regional components was as follows:
|
30-Apr-03 |
MoM Change |
YTD Change |
|
|
Total Return |
1,211.65 |
0.30% |
1.23% |
|
Av Spread (bps) |
193.77 |
(10.86) |
(5.06) |
|
LATAM |
1,201.87 |
0.66% |
2.51% |
|
Av Spread (bps) |
369.02 |
(32.92) |
(67.73) |
|
EMEA |
1,248.47 |
0.31% |
0.79% |
|
Av Spread (bps) |
199.57 |
(11.63) |
34.99 |
|
ASIA |
1,192.27 |
0.04% |
0.64% |
|
Av Spread (bps) |
66.58 |
4.32 |
9.00 |
The credit margin tightening in Brazil continued to be the main factor driving the market. Latin America also saw gains in Colombia. The Europe Middle East and Africa (EMEA) regional component of the Index benefited from more modest gains in Egypt and Turkey, whilst in Asia there was a small widening of the credit margin in China.
The following table breaks down the performance for the Total Return Index between capital appreciation and interest accrual (note that, because of compounding effects, the constituents may not sum to the total):
|
Accrual |
Capital |
Total Ret |
|
|
January 2002 |
0.35% |
0.00% |
0.36% |
|
February |
0.32% |
0.21% |
0.53% |
|
March |
0.33% |
-0.50% |
-0.17% |
|
April |
0.40% |
0.35% |
0.75% |
|
May |
0.36% |
0.09% |
0.45% |
|
June |
0.31% |
0.19% |
0.50% |
|
July |
0.35% |
0.07% |
0.43% |
|
August |
0.30% |
0.24% |
0.55% |
|
September |
0.30% |
0.07% |
0.38% |
|
October |
0.31% |
0.06% |
0.37% |
|
November |
0.28% |
-0.16% |
0.12% |
|
December |
0.31% |
0.35% |
0.66% |
|
January 2003 |
0.28% |
0.05% |
0.33% |
|
February |
0.25% |
0.09% |
0.34% |
|
March |
0.27% |
-0.02% |
0.25% |
|
April |
0.27% |
0.04% |
0.30% |
Further information on the LTP Trade Finance Index™ can be obtained by contacting:
Tel: (+44) 020 7292 7963
