Analysis of Investment-Oriented Articles
ôWill Europe æSiftÆ Investors?ö reports on the aftermath of the investor rebellion at German stock-exchange operator Deutsche B÷rse AG, where shareholders had ousted top Deutsche B÷rse executives following hedge fund agitation. Attempting to balance shareholder democracy and the reluctant granting of voting rights, the German government is considering tougher control of hedge funds, possibly converting to granting voting rights on the length of time stock is held to hold short-term investors at bay. This tactic is currently in use in France, where the practice does not appear to be accomplishing its purpose; it tends to favor shareholders favorable toward management rather than those who are long-term holders (Reilly C16).
The issue that the article primarily addresses is that of short-term financial investors who do not invest foreign capital in Germany in a way that actually helps the economy. The hedge fund investors invest for a short term, then withdraw their money; this is speculative investing, and it does not generate growth. The purpose of permitting foreign investments is to use the money over the long term for creating jobs and building companies, but when the money investedùand counted onùsuddenly disappears, the opposite effect occurs. Jobs are lost and companies are weakened. Germany wants to restrict investments to serious investors whose money can be counted on.
ôAhead of the Tapeö provides a forecast of the market, with the column in May 16thÆs issue discussing last weekÆs unusual junk bond situation. Normally, when high-yield bond prices go up, emerging-market prices go up also; the two price ranges tend to correlate with each other. However, the article states that ôthe relationship between them has broken downö (Sender C1). Last week, emerging-market bond prices failed to rise as high as high-yield bond prices. With slowing economic growth and ...