NEWSLETTER of August 26, 2022

The following content has been added at finexpert:

Capital Group
ESG GLOBAL STUDY 2022
Many investors are contemplating how to integrate environmental, social and governance (ESG) issues into their investment decisions. In this, our second ESG annual study, we surveyed more than 1,100 global professionals, including advisors, consultants and intermediaries. The result is a comprehensive report providing in-depth ESG insights, thoughts on ESG trends and views regarding ESG regulation. >more

KfW Research
INNOVATIONSFINANZIERUNG IM MITTELSTAND: SELBST DIE EXTERNE FINANZIERUNG WENIG ANSPRUCHSVOLLER VORHABEN IST SCHWIERIG
The study compares the financing of innovation projects with that of material investments. The key finding is that even less sophisticated innovations are hardly financed with the help of bank loans - even though the general financing climate is historically favorable. The reason for this is the specific characteristics of innovation projects, which stand in the way of financing with bank loans in particular. >more

KfW Research
GERMAN VENTURE CAPITAL BAROMETER Q2 2022
A historic interest rate hike by the FED in the USA and expectations of a tighter course by the ECB have sent sent sentiment in the German VC market further downhill in the second quarter. The business climate indicator for the early-stage segment fell by 26.0 points to -18.5 balance points. Business expectations have deteriorated more sharply than the business situation. The indicator for the current business situation fell to -7.6 balance points (-20.6), while the indicator for business expectations lost 31.4 points to -29.4 balance points. >more

Rothschild
MONTHLY MACRO INSIGHTS – AUGUST 2022
Global slowdown has intensified amid a combination of surging inflation, tightening financial conditions and sliding sentiment. In fact, it is likely that world GDP shrunk in Q2 2022 – for the first time since the 2020 pandemic related decrease – owing to economic downturns in China, Russia and the US. Is bad news truly good news? >more

INVESTING IN DEFLATION, INFLATION, AND STAGFLATION REGIMES
Guido Baltussen, Laurens Swinkels, and Pim van Vliet
2022
We examine asset class and factor premiums across inflationary regimes. As periods of high inflation and deflation are relatively uncommon in recent history, we use a deep sample starting in 1875. Moderate inflation scenarios provide the highest returns across asset class and factor premiums. During deflationary periods, nominal returns are low, but real returns are attractive. By contrast, real equity and bond returns are negative during a high inflation regime, and especially so during times of stagflation. During these ‘bad times’ factor premiums are positive, which helps to offset part of the real capital losses. >more

COUNTRY RISK: DETERMINANTS, MEASURES AND IMPLICATIONS - THE 2022 EDITION
Aswath Damodaran
2022
As companies and investors globalize, we are increasingly faced with estimation questions about the risk associated with this globalization. When investors invest in China Mobile, Infosys or Vale, they may be rewarded with higher returns, but they are also exposed to additional risk. When Siemens and Apple push for growth in Asia and Latin America, they clearly are exposed to the political and economic turmoil that often characterize these markets. In practical terms, how, if at all, should we adjust for this additional risk? We will begin the paper with an overview of overall country risk, its sources and measures. We will continue with a discussion of sovereign default risk and examine sovereign ratings and credit default swaps (CDS) as measures of that risk. We will extend that discussion to look at country risk from the perspective of equity investors, by looking at equity risk premiums for different countries and consequences for valuation. In the fourth section, we argue that a company’s exposure to country risk should not be determined by where it is incorporated and traded. By that measure, neither Coca Cola nor Nestle are exposed to country risk. Exposure to country risk should come from a company’s operations, making country risk a critical component of the valuation of almost every large multinational corporation. In the final section, we will also look at how to move across currencies in valuation and capital budgeting, and how to avoid mismatching errors. >more