December 1997

When the world started to melt

Euromoney December 1997

Following currency devaluations and stock-market crashes, Asia now faces its biggest challenge: a full-blown credit crunch. No big bond issues will be done for the rest of the year, spreads on outstanding bonds have gone haywire and trading has ground to a halt. Local sources of credit have also dried up. Corporate borrowers can expect little help from their bankers; devaluation has blasted a hole in many local banks' balance sheets and they have no money to lend even if they wanted to. Peter Lee reports on the likely shape of things to come.

What will go wrong next?

Just about anything. China could launch economic warfare against the west, the US could start raising trade barriers against imports, South Korean banks could dump their Russian bonds, the IMF could run out of money, European monetary union could start amidst economic turmoil. Brian Caplen explores the financial shocks waiting to happen.

Asian research: Worth the paper it's printed on?

It's not just Asia's leaders that are in a state of denial. So too are the legions of economists and research analysts working at investment banks and brokerages across Asia. You might have expected some would have called the crisis that has crippled the region in the past six months. But whether because of political sensitivities or the sheer lack of talent in their ranks, Asian researchers failed to spot the impending crash. Steven Irvine reports.

Peregrine's still flying

When the Asian crisis struck this summer one investment bank was destined to appear more exposed than others - Peregrine. The Hong Kong-based firm employs 1,700 people in 15 Asian countries. After Asia's currencies began to slip in July so did Peregrine... at least if its rivals' rumours are to be believed. With confidence waning it looked as if the "fast and agile" bird had gone into a terminal tailspin. Then, as ever, its wily boss Philip Tose pulled something out of the bag. Steven Irvine reports on Peregrine's riposte to the gossip, interviews Tose about Zurich's new stake in the firm and looks into the unravelling of the firm's regional operations.

Hedge funds: You can run but you can't hide

A snowboarder in Utah says we're heading for a global liquidity squeeze: capital will self-destruct and the world financial system will need to reinvent itself, as it did after 1929, 1945 and 1971. He may be wrong. If he's right, what does it mean for the dealers and investors who grew rich and famous on global euphoria? David Shirreff reports.

Country Risk December 1997: It could be worse

After the emerging-markets crisis, which countries remain creditworthy?

Features

Europe's takeover boom gathers pace

Euromoney December 1997

It's a simple idea. You own most of a company so you control its fate. But this notion of shareholder value has been slow to reach continental Europe where governments often allow small groups of long-term shareholders to control public companies. Things are starting to change. Cross-border mergers - even hostile foreign bids - are becoming more common, debt-financed deals are supplanting stock swaps and companies are making big acquisitions using hybrid tradable loans. Michelle Celarier reports on the Americanization of European M&A.

Credit derivatives: You ain't seen nothin' yet

Euromoney December 1997

Credit derivatives will transform the way banks manage their balance sheets. Once banks adopt a true portfolio approach, they will create a fully liquid secondary market in credit risk. Before then, demand for loans, asset swaps and credit derivatives will surge as proprietary traders and hedge funds cut up the credit curve. Mark Parsley reports.

How Emu will change the bond market

Euromoney December 1997

There's going to be ferocious competition in the European bond markets post-Emu. Domestic players still have a stranglehold but global houses are making inroads. The best opportunities will be in countries where capital-market deregulation has been slowest, as Gavin Gray reports.

Let 300,000 companies bloom

Euromoney December 1997

It is one of the boldest economic plans of the century: China wants to sell or merge its state-owned enterprises - nearly half the country's economy. Jack Lowenstein reports on the difficulties ahead.

Liquidity, liquidity, liquidity

Euromoney December 1997

Outside Japan, Asian investors have become a rare breed in recent months. But they still exist, and the one thing they prize above all else is liquidity. Antony Currie reports on attempts to cultivate a group of investors whose importance can only increase.

Only the best will survive

Euromoney December 1997

Which are Asia's most sophisticated borrowers? This is the question Euromoney put to 16 heads of debt syndication in Hong Kong, Singapore and Tokyo. As spreads widen and credit ratings fall, these are lean times for Asian borrowers. Only the best - those who have spent the past few years developing an innovative approach and building up a good name - will be able to get their bonds away. By Nicholas Bradbury.

Mandate hunters turn asset keepers

Euromoney December 1997

They are two of Asia's premier fixed-income investors. They are also former investment bankers. Euromoney invited Brian Lippey of Tokai Asia and Albert Cobetto of Prudential Asia to dinner to chat about dressing down in Hong Kong, how it feels to switch to the buy side and which houses have survived the stock market crisis best. Steven Irvine poured the wine and asked the questions.

Latin America: Ten months good, two months bad...

Euromoney December 1997

...and what of 1998? Most of 1997 was a borrower's market in Latin America but the October market upheavals took the shine off bonds. Structured deals fared least badly and may prove the best way upwards in the new year. Michael Marray reports.

Bank capital: Turning away from common stock

Euromoney December 1997

Whether for acquisition, expansion or simply to meet regulations, banks are finding there are better ways to raise capital than straight equity issues. Innovations include issuing preference shares, step-up and call bonds and asset-backed securities. Jules Stewart reports.

Trade finance: Forfaiting for fun and profit

Euromoney December 1997

Trade finance used to be a less glamourous part of the business. But times have changed. Banks have seen there's money to be made if deals are intricately structured and widely traded. That means building teams with the required expertise. When a trade financier's phone rings now it could well be a headhunter offering a better package. Rupert Wright reports on the new dynamism.