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April 2002

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  • Credit Fund Management
  • India
  • Recent post-Enron SEC statements confirm that public companies in the US will soon have to undergo far greater scrutiny than ever before.
  • Novelty names for special purpose vehicles in structured finance have all but disappeared thanks to Enron.
  • There's a game played by pretty well every banker who frequents development bank meetings. It could be called "What's the Mood?" Delegates look back on the chaos of the IMF annual meetings in September 1999, when Ecuador defaulted, or the unleavened pessimism of the IMF meetings a year earlier, held in the shadow of the disastrous Russian crisis. This year's Inter-American Development Bank (IDB) meetings can be summed up by the word "malaise".
  • Now hardly seems the time for Americans to be making pronouncements on European corporate governance. Yet Peter Clapman, chief counsel at TIAA-Cref, the US teachers' pension fund, has done just that.
  • 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 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.
  • Issuer: General Electric Capital CorpAmount: $11 billionLaunched: March 15 2002Lead managers: Citigroup/SSB, JPMorgan, Lehman Brothers
  • So, Deutsche Bank is buying Merrill Lynch. No, hang on, it's merging with UBS. Actually, Lloyds TSB wants to buy Deutsche. And if none of that works, Deutsche wants to buy PaineWebber from UBS.
  • I have just got back from a visit to Korea. It's booming. National output rose 3% in real terms last year. Economic growth is accelerating. It grew at an annual rate of 3.7% in the past quarter and I reckon it's got further to go. Something near 6% this year looks likely.
  • 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.
  • 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?
  • 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.
  • Following Argentina's default the Washington Consensus seems completely devalued as there seems to be precious little correlation between the degree to which a country embraces reform and the likelihood of its economic success.
  • 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.
  • 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.
  • Governor of the Bank of Greece
  • 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.
  • Online Foreign Exchange
  • Russia
  • UniCredito Italiano is expanding fast in the EU accession candidate countries of central and eastern Europe, where it seeks local banks with good management.
  • 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.
  • The US is in a flap about the transparency of company accounts. Maybe it should look at Germany, where far bigger liberties are taken with figures. CEOs of German corporates sometimes proudly draw analysts' attention to their methods of bumping up numbers.
  • 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?
  • 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.
  • Best in high-grade telecoms
  • 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.