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August 2006

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  • Do the US capital markets require rating agencies to continue to be regulated? It’s a question raised by legislation recently passed by the US House of Representatives and working its way to the Senate.
  • Acquisition financing can always run into difficulties, as Axa found out to its cost last month when it printed its €2.25 billion equivalent hybrid debt deal at the high-water mark of volatility. The deal, which financed the purchase of Winterthur from Credit Suisse, was adversely affected by weak equity markets, high hybrid supply and by a surprise announcement by Generali that it would borrow an addition €1.2 billion of hybrid for an acquisition.
  • Building materials company Lafarge has become the first French issuer to issue an SEC-registered deal for five years. But despite the ease with which it did this it seems unlikely many will follow its example.
  • Electronic options market to open cash equity business in the third quarter.
  • We mentioned earlier this year how Marcus Browning, former co-head of FX trading at Merrill Lynch, had engineered a move to Citi, purely, if rumours are to be believed, to get some sustained training for this year’s Etape du Tour. Unfortunately, Browning failed again this year to get the gold standard handed out to high finishers in the event. Having finished a splendid 820th out of more than 7,500 starters, Browning has every right to feel slightly aggrieved.
  • When three industry trade bodies join forces to issue a joint statement in response to regulatory proposals it’s clear that they are taking the matter very seriously.
  • According to TaraCapital’s summer barometer of European investors, demand for long/short equity strategies, particularly those offered by Japan and Europe funds, has fallen. More investors plan to reduce than increase their exposure to European long/short equities. Instead, investor appetite is growing for relative value, CTA and multi-strategy hedge funds.
  • Recent events surrounding the future ownership of Hong Kong fixed-line carrier PCCW [see Hong Kong: Wrong connections] offer evidence that Asia’s private equity market might be overheating. The zeal with which Texas Pacific Group and Macquarie have pursued an acquisition of the key assets of the group suggests that they might be struggling to find suitable investments in the region.
  • Investors who might have hoped that their allocations to hedge funds would have provided some relief from falling equity markets in June must have been disappointed. The Hennessee Hedge Fund Index underperformed the broad equity market that month, falling 0.23 percentage points, a performance that was slightly worse than the 0.16 point fall in the Dow Jones Industrial Average over the same period, and much worse than the 0.14 point rise in the S&P500.
  • 73 the percentage of retail investors who expect the FTSE 100 to end the year higher than its present level, according to a survey conducted by share-trading website ADVFN.
  • About a third of sell-side analysts could lose their jobs over the next two years as fund managers do more of their own research and independent providers gain market share.
  • Users of the EU’s clearing and settlement systems would like to see a firmer hand on the tiller.
  • EFG Private Bank has bought English traditional private client stockbroker Harris Allday, adding £2 billion in assets under management for the UK and Channel Islands. Harris Allday’s 27 client relationship officers will be absorbed into EFG but will trade as EFG Harris Allday.
  • Despite grumblings from hedge fund managers about the way they are treated by the media, a survey by Horizon Cash Management shows that not all of them are unhappy with the coverage. Forty seven percent of hedge fund managers surveyed considered press coverage of the sector to be unfair, but 46% thought it was pretty neutral.
  • Our congratulations to Elaine Bridge, a PA at HBOS Treasury Services in London, who won the prize draw for participants in our revamped Business Travel poll (go to page 85 to see what investment bankers consider the best hotels, airlines and restaurants in the world).
  • Complacency can lead to extinction according to Goldman Sachs’s key principles. The extent to which its bankers take that tenet to heart was amply demonstrated at Euromoney’s inaugural Asia Awards for Excellence in July [see Asia awards 2006 for more on the event]. As guests arrived for the pre-dinner cocktail reception, one sharp-eyed Goldman banker spotted an unfamiliar but evidently important dignitary entering the room, accompanied by an impressive entourage of aides and hangers-on.
  • HSBC becomes the first private banking client to sign up to SEI’s global wealth service. SEI has spent three years developing front-to-back-office products and services to aid wealth managers and individual high-net-worth clients.
  • Outstanding achievement award: Tan Sri Dato’ Sri Dr Teh Hong Piow, Public Bank, Malaysia
  • The latest GDP figures from China make startling reading. First-half 2006 GDP grew 10.9%, with second-quarter growth accelerating to 11.2%, the fastest pace since 2003 when China’s economy last overheated. The news has reignited concerns that China’s economy is out of control.
  • You always need seat 1A, unless you’ve got a private jet. Your hotel room has to be just so. You’ve got a British Airways black card. Then you’re a travel diva, as Abigail Hofman knows only too well.
  • The results of Euromoney’s inaugural structured credit poll provide an invaluable insight into what is often an impenetrable sector of the capital markets.
  • Following the recent appointment of Robert Taylor as CEO, Kleinwort Benson Private Bank and Kleinwort Benson Channel Islands are amalgamating and will become known simply as Kleinwort Benson. The bank has also begun an expansion of its regional office network in the UK.
  • One year on from its prototype of efunding, Ekportfinans has launched the full version of its electronic funding platform, an innovative approach by the Norwegian export financing agency to operating its structured medium term note funding operation.
  • Anyone investing in private equity now is making a bet that the business cycle has been abolished. Caveat emptor.
  • Almost non-existent a decade ago, Peru’s capital markets have flourished over the past five years, with the government and big companies such as US copper miner Phelps Dodge finding ample demand for bonds. Now the new government of president Alan García, which took office on July 28, aims to develop the markets further. There are plans to allow smaller companies to raise cash, develop a secondary mortgage market to unleash new funds to redevelop slums, and encourage pension funds to invest in productive industries, not just in sovereign bonds. “Deepening the local market in soles is going to be one of the pillars of our economic policy,” says García’s chief economic aide, Enrique Cornejo. “Our resources aren’t being put to work via the markets.” The barriers to smaller Peruvian businesses are daunting. Because many companies cannot meet the listing requirements of the Bolsa de Valores de Lima, Peru has launched only four initial public offerings with a total value of $40 million in the past 15 years, despite strong economic growth. The business sector is severely undercapitalized, with a total of $7.5 billion in debts, or around 10% of Peru’s GDP. A change in that situation is crucial to Peru’s long-term development, as small and medium-size companies generate 40% of GDP and three-quarters of all jobs in the country. However, these companies’ financing costs are up to 2.5 times those of big corporations.
  • Inaugural mortgage securitization is sign of a fast-developing market.
  • Mexico will issue its first 30-year peso-denominated bond in Q4, reflecting renewed confidence in the Mexican economy. Initially an auction of Ps1 billion ($92 million) is planned.
  • Bahrain is experiencing a mutual fund boom, according to the Bahrain Monetary Authority, which says assets under management by BMA-authorized mutual funds have grown by 55% to $8.3 billion in the past year.
  • Slovenia is set to become the first of the new EU member countries from central and eastern Europe to adopt the euro, after EU finance ministers cleared its entry. Slovenia will take up the currency on January 1 2007, bringing the number of eurozone countries to 13. An exchange rate of Tr239.64 to the euro has been set.
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