Against a background of wide variations in asset returns in 2002 (the FTA World Equity Index fell by 20%, whilst JP Morgan's EMBI+ index rose by 14%) the LTP Trade Finance Index™, which measures the total return on a representative basket of trade finance assets, returned a solid 5.03% overall in 2002.
Whilst this was lower than 2001's performance, when the Index returned 8.4%, it was nevertheless better than putting your money on a rolling deposit (which returned 3.14% in US Dollars in 2002), and the volatility of the Trade Finance Index (which measures the riskiness of the returns achieved) was just 0.84%, compared to a volatility of over 16% on emerging markets bonds as measured by the EMBI+.
|
|
31-Dec-02 |
Month on Month Change |
Year to Date Change |
|
Total Return |
1,196.93 |
0.66% |
5.03% |
|
Av Spread (bps) |
198.83 |
(8.31) |
2.49 |
|
LATAM |
1,172.49 |
0.96% |
5.06% |
|
Av Spread (bps) |
436.75 |
(19.52) |
148.38 |
|
EMEA |
1,238.67 |
0.65% |
6.31% |
|
Av Spread (bps) |
164.58 |
(9.76) |
(106.90) |
|
ASIA |
1,184.64 |
0.47% |
4.17% |
|
Av Spread (bps) |
57.58 |
(0.39) |
(26.16) |
In the Month of December the LTP Trade Finance Index™ rose by 0.66%, the second largest monthly gain for the year. Almost half of this return was a result of the 0.28% fall in LIBOR from 1.728% to 1.445%, and the balance came from a contraction in credit margins of 0.08% plus a healthy accrual of 0.31%.
Within the Index Latin America was the main area of change. Brazil continued to be an active mover and, due to its relatively large weight within the Index, was the main driver in the contraction of margins in LATAM. Indeed, Brazil's move more than offset losses from the sell off in Venezuela which has a smaller Index weighting. In Europe modest improvements were seen in Turkey and Croatia, resulting in the average credit margin tightening by almost 0.10% for this region.
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 |
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% |
Further information on the LTP Trade Finance Index™ can be obtained by contacting:
Tel: (+44) 020 7292 7963
