Chinese property companies rose in early trading on Tuesday after the country’s central bank governor announced a cut to downpayments for second homes, part of a raft of measures aimed at boosting growth.

Pan Gongsheng said downpayments for first and second homes would be “unified” at 15 per cent. Previously the minimum downpayment on second homes was 25 per cent.

The Hang Seng Mainland Properties index, which consists of large Chinese property companies listed in Hong Kong, rose as much as 5.8 per cent in early trading. KE Holdings, China’s largest online property transaction platform, led gains as it jumped more than 13 per cent.

The broader Hang Seng index rose 2 per cent, leading gains among major regional indices for the day.

Shuttterstock / ComicsansThere is often a point during job interviews where the candidate is asked if they have any questions to put to the employer.

This part of an interview can be overlooked during preparations — but asking the right questions can help a prospective employee decide if the role is a good fit for them, while showing the employer that the candidate genuinely wants a career in advice.

So, what are the best questions to ask?

I’d want to understand how a firm embraced technology to assist its clients and how it provided exceptional client service

Nobody wants to feel like the proverbial fish out of water in a new job, which is why understanding a company’s culture is so important.

When people talk about company culture, they are referring to things such as shared values, attitudes and behaviour that shape how a business operates.

“Company culture is becoming more important to candidates, with 45% of employees and business leaders ranking this as the most important factor when looking for a job,” says Equilibrium Financial Planning culture and recruitment manager Kelly Eyton-Jones.

By asking about trending topics — such as the Consumer Duty — candidates can show a genuine interest in the industry

She believes that asking questions around team dynamics and work-life balance can be helpful for job seekers in assessing whether the work environment aligns with their preferences and values.

Financial services recruiters often find that, when hires don’t work out, it is due to a misalignment of culture and values. These experts say asking questions up front, during the interview, can help to avoid this.

“Questions around ethics, continuous professional development, targets for report writing and the firm’s own plans for growth are always good areas to focus on,” says recruiter Fram Search’s director of financial services, Kelly Biggar.

Recruiter Exchange Street’s director, Andy Taylor, says candidates need to find out what it is really like to work at the company in question.

Ask things like, ‘What is the most important thing you would want me to achieve?’ You can then take a view on whether it’s achievable

“Asking, ‘What is the culture like here?’ is a weird question, so I’d break it down. Ask questions like, ‘What characteristics do people who do this job well seem to share?’” he says.

“One that’s a bit more challenging is, ‘What would the people in the team say it’s like to work here?’ That can draw the interviewer out to talk about any issues the firm has faced and what it is doing about it.”

Candidates will be able to ask more probing questions around culture if they have done a bit of digging beforehand.

“Do your research — and that shouldn’t stop at the company website,” says Succession Wealth recruitment manager Charlotte Turner.

“Look at employee and company content on LinkedIn and social media. Check out what awards the company has been nominated for or won, events they’ve been involved with, and really get a sense of what’s important within the company culture. Then ask questions related to those aspects you identify with.”

Enquiring about how the changes in the Consumer Duty have impacted the business shows they have undertaken thorough research

Another subject candidates may want to ask about is the firm’s compliance culture.

Karishma Galaiya, senior manager of investments at compliance consultant Thistle Initiatives, says showing an interest here demonstrates that the candidate understands the sector and the importance of delivering positive consumer outcomes.

“Enquiring about the organisation’s implementation of the Consumer Duty may also offer insight into how consumers are treated,” she says.

Training and development

We have all heard cautionary tales of people joining a firm but not progressing, or being given unrealistic targets. To avoid this at the start, commentators recommend asking questions about training and development during the job interview.

Eyton-Jones suggests finding out about the qualifications or exams that must be completed in the first year, or the types of client they may expect to work with.

“These questions not only help to manage candidates’ expectations but also provide them with valuable insights into their potential long-term work,” she says.

Questions around ethics, continuous professional development, targets for report writing and the firm’s own plans for growth are always good areas

For Taylor, tactful questions such as, ‘What will the first 12 months look like?’ and, ‘How will you train me?’ can determine whether a firm invests in developing its people.

“You can also ask things like, ‘How will you measure my performance?’ and, ‘What is the most important thing you would want me to achieve?’ You can then take a view on whether it’s achievable,” he says.

“If the business sounds great but expects you to do too much — well, nobody can do that.”

Industry trends and topics

Employers want to hire genuinely enthusiastic people — not someone who simply wants a job. So, anything that shows that a candidate has done their homework on the firm and the profession will go down well.

“By asking about current events and trending topics, candidates can demonstrate a genuine interest in the industry,” says Eyton-Jones.

Company culture is becoming more important to candidates, with 45% of employees and business leaders ranking this as the most important factor

“For instance, enquiring about how the changes in the Consumer Duty have impacted the business shows they have undertaken thorough research and have a sincere interest in the industry.”

Asking about a firm’s approach to technology is also a good idea.

“If I were starting out, I’d want to understand how a firm embraced technology to assist its clients and how it provided exceptional client service,” says Twenty7tec chief executive James Tucker.

“If a company is getting these things right, it’s very likely to be a great environment to learn in and develop a long career.”

This article featured in the September 2024 edition of Money Marketing. 

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Good morning. Some worrisome news to start the day: Paris has asked Brussels for another delay in submitting its budget plans, and investors are taking note: French debt prices are rising and converging with Spain’s on heightened consternation about the state of the country’s public finances.

Today, our Balkans correspondent interviews Kosovo’s leader on the anniversary of deadly clashes near its tense border with Serbia, and our Warsaw correspondent reports on Poland’s government weaponising a report into its predecessor’s cash-for-visa scandal.

Unhappy anniversary

One year after an armed stand-off shook Kosovo, Prime Minister Albin Kurti has warned of continued threats to stability in the region in an interview with Marton Dunai.

Context: A year ago today, paramilitaries connected to the Serb government clashed with special police units from Pristina, leaving four people dead and undermining western efforts to pacify the region through compromise.

“Since [the] terrorist attack in Banjska a year ago by this paramilitary group led by the notorious Milan Radojcic, the amount of information that we’re getting about illegal activities is enormous,” Kurti said.

He added that activities by “different criminal elements” and Serb groups had increased over the past year, compared with the years before.

For years under an international protectorate, Kosovo unilaterally declared independence from Serbia in 2008, a move Belgrade has never accepted and still resists with the support of the likes of Russia and China.

Violence erupted on September 24 last year, when a convoy of heavily armed paramilitaries entered Kosovo and holed up in a Serb monastery in the village of Banjska, with stockpiles of heavy weapons. Kosovo police shot three of the insurgents — and lost one officer — before the attackers escaped to Serbia.

Radojcic, a former gangster and politician from Serb-majority northern Kosovo, later acknowledged to have led the attack, but remains free in Serbia.

Kosovo, in turn, has intensified efforts to root out Serb influence on its territory despite a growing pressure from the west to adhere to a previous compromise agreement with Belgrade.

Measures include a phaseout of Serb-issued vehicle licence plates and personal IDs, cracking down on smuggling between the neighbours and a ban of the Serbian dinar commonly used in Serb areas instead of the euro, which Kosovo unilaterally introduced. 

Kurti said that “it has become illegal not to act” on Serb influence. “We want a rule of law in place not to endanger peace and security.”

He added that his government’s measures had been “completely on the right side”, although Serbs have denied any malicious activities.

One year after Banjska, a compromise deal seems very far off.

Chart du jour: Dither and deliver

Potentially allowing Ukraine to use long-range missiles on targets in Russia is the latest in a series of “salami tactics” taken by western allies as they seek to assist Ukraine’s defence while avoiding escalation with Moscow. Here’s our read into how Kyiv navigates the Kremlin’s red lines — and western indecision.

Border control

Poland’s Prime Minister Donald Tusk yesterday seized upon a report about illegally acquired work visas to accuse the previous rightwing government of having undermined the country’s security, writes Raphael Minder.

Context: Last October, Tusk’s coalition defeated the ruling Law and Justice (PiS) in elections, held only one month after the government got engulfed in a major scandal over Polish visas allegedly sold for cash via its consulates across the world.

Since taking office, Tusk’s government has continued to present PiS as a party that talked tough on immigration but failed to protect Poland’s borders, as showcased by its illegal visa scheme.

In contrast, Tusk in May rejected the EU’s reform of its migration system, saying that “the EU will not impose any migrant quotas on us”.

Tusk’s government also recently announced tighter rules for student visas to stop people misusing them to work in Poland.

Yesterday, Tusk said a draft report from state auditors questioning how 366,000 visas were granted under PiS to people from African and Middle Eastern countries “confirmed our worst suspicions”.

“While Polish soldiers and border guards were risking their health and lives to protect us from the wave of illegal migration organised by [Russian President Vladimir] Putin and [Belarusian President Aleksandr] Lukashenko, the PiS government let in 366,000 people from Asia and Africa, also for bribes,” Tusk said.

Jan Grabiec, who heads Tusk’s chancellery, separately claimed that this figure was higher than the number of migrants Belarus and Russia had been trying to smuggle across the Polish border.

At a time when Germany and others are also increasingly critical of immigration, expect Tusk’s Poland to stay at the front of the pack.

What to watch today

1. Italian Prime Minister Giorgia Meloni, Belgian premier Alexander De Croo and other world leaders address the UN General Assembly in New York.

2. EU general affairs ministers meet.

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Good morning. If Intel is sold — Qualcomm is circling — it will be a blow to the view that tech oligarchs are forever. It took 15 years or so, but the mobile and AI revolutions took a company that had a stranglehold on computer processors and turned it into a second-tier player. What is the parallel scenario that unseats Google, Nvidia, Apple, Microsoft or Meta? And how long does it take? Email us possible futures: robert.armstrong@ft.com and aiden.reiter@ft.com.

Central bank epiphenomenalism

We asked a few weeks ago whether Jay Powell was lucky or good: whether smart Fed policy caused, or merely coincided with, the rapid decline in inflation over the past two years. If you think Powell and the Fed have mostly been lucky — and plenty of economists think they have been — one is tempted to push the scepticism further. What if the central bank rate policy is always a meaningless or near-meaningless sideshow in economies and markets? What if policy rates are (to use the vocabulary of the pretentious philosophy graduate student I was 25 years ago) mostly epiphenomenal — that is, accompanying important changes, rather than causing them?

Today, “heretical” is almost exclusively an honorific people bestow on their own beliefs, to mean “unique and wonderful”. But on Wall Street the view that Fed policy is epiphenomenal is heretical in the old-fashioned sense. If it is true, a lot of what investors, analysts and pundits say, do and believe are just elaborate rituals honouring a deity that doesn’t exist. 

Serious people take this view. Aswath Damodaran of New York University (who will be familiar to Unhedged readers from our interview with him) recently updated his defence of Fed epiphenomenalism on his blog. He argues that:

• The federal funds rate, set by the Fed, is a single, short term rate that does not determine in any significant way the important interest rates — on mortgages, car loans, credit cards, corporate bonds or business loans, and so on. 

• While both the federal funds rate and important interest rates follow the same very long-term trends, over shorter (but nonetheless meaningful) periods, the relationship between changes in the federal funds rates and the “real world” rates is all over the place. Sometimes one rises and then the other falls, or the reverse, or there seems to be no relationship at all. Consider the federal funds rate and the triple-B bond yield, for example. Between the spring of 2004 and the summer of 2006, the Fed rate rose by more than 4 percentage points. Triple B’s moved by less than 1 per cent. The market all but ignored a very aggressive Fed.

• There may be some casual power in Fed signalling: markets might incorporate the belief that the Fed knows something about the economy that others don’t, or that the Fed actually can control interest rates somehow. But outside of crisis situations, these effects are mild. 

• In sum, “the Fed is acting in response to changes in markets rather than driving those actions, and it is thus more follower than leader”. Nominal interest rates have two fundamental drivers, neither of them under central bank control: real rates (which vary with expected economic growth) and expected inflation. For example, rates were not so low during the pre-pandemic decade because the Fed suppressed them, but because growth was weak and there was no inflation in sight.

Damodaran is not alone. Last year, the Financial Times’ own Martin Sandbu, in a piece entitled “What if there is nothing central banks can do about inflation?” argued that

[T]here is solid analysis that can account for virtually all the behaviour of both US and Eurozone inflation as just what the temporary repercussions from sector to sector of a series of large supply shocks would look like . . . [If] this is in fact the true explanation of events . . . there was nothing monetary policy could have done to prevent the bursts in inflation of the past two years, and that current monetary policy is contributing nothing to inflation coming back down.

Sandbu doesn’t go all the way to policy epiphenomenalism. He thinks that rate policy can have effects, but that this time around they will be “exclusively harmful” because they will weaken the economy when inflation is already dead. But it is easy to see how his argument might be extended to other inflationary incidents that followed supply shocks, and perhaps beyond.

Over in The Wall Street Journal, my former colleague Spencer Jakab makes a similar point in the context of the stock market, comparing chair Powell to the Wizard of Oz: 

The great and powerful man behind the central bank curtain, Jay Powell, really can’t do as much as people think to keep their portfolios from shrivelling if the wheels are already starting to come off the economy

He uses the example of the rate cut in 2007, which initially triggered a surge in stock prices, but could not — even when reinforced by many further cuts — stop a recession from starting a few months later. Even in less extreme moments, Jakab argues (citing work by David Kostin, Goldman’s chief US equity strategist) economic momentum, not Fed policy, has been decisive for markets during rate-cutting cycles. Jakab doesn’t go as far as Damodaran, who argues that rate policy is pulling on a lever that is not connected to anything. But his argument points very clearly in that direction.

There is a longer argument to be had about whether central bank epiphenomenalism is true. To prove the case, one would have to describe, and refute, the standard theory of how policy rates control other interest rates. But let’s assume that epiphenominalism is a possibility. The interesting question for investors is: what would you do differently if you know the Fed followed, rather than led, markets and the real economy? 

For one thing, you would be a lot less worried about “Fed mistakes” — specifically Fed over-tightening that leads to recession. Recall that many people, Unhedged among them, were very worried about this in 2022, and were probably underexposed to risk entering the glorious year of 2023 as a result. But if investors had ignored the Fed’s tightening, and looked instead only at the economic fundamentals and company cash flows, might they have stayed bullish instead? 

One good read

On the US balance of payments.

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China’s central bank has unveiled a major package of measures aimed at reviving the country’s flagging economy.

People’s Bank of China (PBOC) Governor Pan Gongsheng announced plans to lower borrowing costs and allow banks to increase their lending.

The move comes after a series of disappointing data has increased expectations in recent months that the world’s second largest economy will miss its own 5% growth target this year.

Stock markets in Asia jumped after Mr Pan’s announcement.

Speaking at a rare news conference alongside officials from two other financial regulators, Mr Pan said the central bank would cut the amount of cash banks have to hold in reserve – known as reserve requirement ratios (RRR).

The RRR will initially be cut by half a percentage point, in a move expected to free up about 1 trillion yuan ($142bn; £106bn).

Mr Pan added that another cut may be made later in the year.

Further measures aimed to boost China’s crisis-hit property market include cutting interest rates for existing mortgages and lowering minimum down payments on all types of homes to 15%.

The country’s real estate industry has been struggling with a sharp downturn since 2021.

Several developers have collapsed, leaving large numbers of unsold homes and unfinished building projects.

The PBOC’s new economic stimulus measures come just days after the US Federal Reserve lowered interest rates for the first time in more than four years with a bigger than usual cut.

In Asia afternoon trading hours, major stock indexes in Shanghai and Hong Kong were more than 3% higher.

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Halloween is still over a month away, but here’s a scary chart of Bloomberg’s US Government Securities Liquidity Index.

The higher the score, the less liquid the $27tn Treasury market is. So according to this index — which is derived from how dispersed Treasury prices are from a smoothed yield curve — the US government bond market is now less liquid than it was at the peak of the March 2020 chaos.

FT Alphaville has been keeping an eye on this measure because it shows a radically different picture from what analysts and officials are saying, and what the headline data seems to indicate. August was the first month in history when the average daily notional of Treasuries being traded went over $1tn, up 37 per cent year-on-year, according to Coalition Greenwich. Treasury futures trading is up by a similar amount.

Which is why this annual check-up of the Treasury market’s liquidity from the New York Federal Reserve is so timely.

The tl;dr is that bid-ask spreads remain modest — and not nearly where they were in March 2020 — while market depth remains reasonable, if subdued after the Fed’s interest rate hikes.

As a result, the estimated price impact of a $100mn Treasury trade is also un-alarming. Big trades make a bigger splash than they used to, but the deterioration seems mostly caused by higher interest rate volatility, which is now coming down a bit.

The author — Michael Fleming, the head of capital markets studies at the NY Fed’s research group — does explore the discrepancy between these measures of liquidity and that shown by the Bloomberg’s index, but mostly shrugs it off:

While the Bloomberg measure has recently risen, it remains far below its peak during the GFC. Moreover, it remained far below its GFC peak in March 2020 even when direct liquidity measures approached GFC levels and the Fed unleashed massive asset purchases to address the dysfunction then roiling the market. It follows that the recent behavior of the Bloomberg index seems less notable when examined in a longer historical context. The reasons behind the disparate performances of the different measures are an interesting area for future research. 

This research should probably focus on the Bloomberg index’s underlying composition. Barclays analysts have previously noted that the Bloomberg index might have been artificially boosted this summer because of the inclusion of some very old 30-year Treasuries, which are for motley reasons trading extremely rich to what the shape of the yield curve would normally indicate.

FTAV has another, admittedly more speculative take. These kinds of price-dispersion-versus-fair-prices indices supposedly measure liquidity conditions because a lot of wonky prices indicate that there’s insufficient capital in the market to take advantage of them.

But this would seem to be a better measure of fragility rather than liquidity?

In other words, Treasury market liquidity might be basically fine and perhaps improving, but the underlying fragility of the market is increasing, as banks devote less and less balance sheet to lubricating it? In which case we won’t really know how healthy it is until the next shock hits.

Further reading:
— The bond market liquidity ‘trilemma’ (FTAV)
— People are worried (again) about bond market liquidity (FTAV)