April 2002

Credit research poll 2002: Credit analysts get back to fundamentals

Euromoney April 2002

Interviews with the front-runners in this year's Euromoney credit poll indicate a market in flux and efforts on the part of credit research teams to adapt to this. At a time when equity activity is subdued, the credit market stands out as lively but also highly volatile throughout the rating spectrum. This means that the top firms are doing their best to find new ways of presenting research to their varied customer base. Timeliness, focus and independence in their reports are crucial but they must produce this with staffing levels that are generally substantially lower than those of their equity colleagues.

Declarations of independence

Research teams are ruined if they lose their reputation. Read what some of the top analysts say about how they maintain independence from sales teams.

How many analysts do you need?

Merrill Lynch has merged its high-grade and high-yield research teams. So has JP Morgan. They say it provides quality coverage, especially for fallen angels. But is it really just cost cutting in a bear market?

Credit research poll 2002 - HIGH GRADE

Credit research poll 2002 - HIGH YIELD

BNP Paribas

It's time to throw caution to the wind

Euromoney April 2002

When Banque Nationale de Paris bought Paribas in 1999, sceptics said the combination would never work. Labelled a merger of equals, it was clearly a takeover by BNP of its smaller rival. In the aftermath of the deal, the bank lost large numbers of staff as doubters tired of the chaos and jumped ship. Two years and a creditable set of annual results on, it seems that they were wrong. But there's a huge hole in CEO Michel Pébereau's plan - investment banking. Time is running out for him to do something about it.

Turkey

A Japanese-style recession but without the wealth

Euromoney April 2002

Although Bulent Ecevit’s ruling coalition has signed up to an impressive programme of reforms, it will be years before they will be implemented or show their full effect. Meanwhile, with the banking bubble burst, Turkish companies find themselves bereft of capital. Rescue money from the IMF will mainly go towards paying off foreign debt.

Central & eastern Europe

Rate cuts prompt a public falling-out

Euromoney April 2002

The usually understated tensions between finance ministries and independent central banks have taken on a more vociferous tone in Poland, where finance minister Marek Belka is insistent that the National Bank of Poland is being tardy in cutting interest rates, thus perpetuating a period of economic stagnation.

Building Ferraris in Lada land

Euromoney April 2002

UniCredito Italiano is expanding fast in the EU accession candidate countries of central and eastern Europe, where it seeks local banks with good management.

Privatization takes a slower route

Euromoney April 2002

A point of increasing concern for Poland and its foreign investors is the extent to which the new government is committed to the rapid pace of privatization that characterized the country's successful early transformation into a market economy. On present form doubts are emerging about its willingness to press ahead with the rest of the job, particularly in strategic sectors and where the already high unemployment rate is likely to be increased.

Mol looks towards a regional role

Euromoney April 2002

Hungarian oil and gas company Mol has set its sights on regional expansion and rationalization, with its current programme including bids for Polish companies and an offloading of its domestic gas interests. Both deals have, however, been disrupted by political factors.

Russia

Capital crunch sets in as the business cycle takes its toll

Euromoney April 2002

Russia took off on high oil prices and the export advantages of a weak rouble. Consumers latched on and the government began institutional reform designed to sustain and broaden growth sectors. So far, so good. But reform – particularly the crucial development of banking and capital markets – is incomplete and a capital-starved economy is hitting capacity ceilings.

Asian Development Bank

Banker to half the world’s people

Euromoney April 2002

Asian Development Bank presidents have always been Japanese, appointed unchallenged by Japan’s finance ministry. Recently they have hardly shone as leaders. Tadao Chino seems to have broken with that pattern, quietly building consensus within the bank and focusing on direct poverty alleviation rather than grand infrastructure projects.

China

Brokerage joint venture partners take to the floor

Euromoney April 2002

China's securities markets seem to be on the verge of opening up to foreign houses working in joint ventures with local partners. The foreigners are divided on whether they should go for market share by taking on big partners or seek out smaller firms that bring the licences they need but are likely to have fewer skeletons in the cupboard.

Taiwan

Banks fail to face up to NPL crisis

Euromoney April 2002

Taiwan’s banking sector has a burgeoning non-performing loan problem that invites comparison with Japan’s. Swift and decisive action has been thin on the ground. Without it Taiwan may head down the same self-destructive path as its former colonial master.

Fund management

Outsourcing gains followers but still demands leap of faith

Euromoney April 2002

Outsourcing is still a utopian dream for many investment houses. The idea that a fund manager can offload all of its back-office responsibilities and concentrate on investment performance alone remains an enticing aim, particularly in tough markets. However, so far only a few full outsourcing deals are actually being undertaken, with varying success, while one or two of the biggest custodians have yet to get their products off the ground. This stuttering start has left the investment community uncertain of its next step. If outsourcing really is investment nirvana, fund managers will still want to pursue it. However, the pain endured by those already on the path has made them wary. Will faith help to silence the doubters?

Pfandbriefe

Uneasy times for a market that was built on certainty

Euromoney April 2002

The uncertainty that has permeated the Pfandbrief market in the past two years persists. Investors are getting more choosy about issues, competition is intensifying in the underlying lending businesses and new regulations are adding their own challenges, some of which offer opportunities for diversification as well as restrictions.

Equity markets

Beware of biotech

Euromoney April 2002

Even after the dot com bubble burst, US investors continued to snap up the IPOs of another group of companies characterized by non-existent profits and total dependence on unproven new technology. Now many investors are regretting their enthusiasm for healthcare and biotech stocks.