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December 1997

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  • 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.
  • Now that the high profile equity and corporate finance advisory parts of BZW have been sold, members of the surviving debt markets division, Barclays Capital, have a tricky time ahead. They must convince their customers that the advantages of dealing with a fully integrated investment bank - advantages which they loudly proclaimed for the 11 years in which Barclays spent £750 million ($1.2 billion) trying to build such a creature - are bunk. Now they must argue that the best type of investment bank to deal with is one focused on its chosen strengths. But the question persists: does Barclays Capital have any strengths beyond sterling bonds and syndicated loans? Even while peddling their new line, those at Barclays Capital must privately question how deep is their own parent's commitment to its new-form investment bank.
  • It is hard to judge which was the worst piece of news to hit the Malaysian stock market and corporate community in the last few months. Was it the remarks made by prime minister Mahathir Mohamad blaming international speculators for the Asian meltdown?
  • No one expects to spend their whole career with one employer, but the ability to move from one job to another with relative ease is taken for granted. But what if your career suffers because you've been made the target of defamatory rumours, or because your company is found to be engaged in disreputable behaviour? A decision in the British House of Lords last month could help, as it now entitles employees to sue for damages called stigma compensation.
  • If there's ever been a better reason to begin or renew your subscription to Euromoney, this is it. We're told that the Bank of Japan only found out about Yamaichi's off-balance-sheet losses the Saturday before the securities house went into liquidation last month.
  • When Jan McCourt fell victim to staff trimming at Dresdner Kleinwort Benson this summer, his first reaction was to look for another City job. He then had a change of heart, and left his 14-year career in finance, to run a small farm in the heart of England. He specializes in providing naturally reared meats, with the motto: "You may not be interested in the life history of a piece of meat on your plate. Well you should be!"
  • The first investment-management company in the Gulf region managed by ladies for the benefit of ladies will be inaugurated in January 1998. The Qatar Ladies Investment Company is the brainchild of 28-year-old managing director and shareholder Sheikha Hanadi Al Thani who saw a need to fill the very large gap in women's finance in her country.
  • There could yet be one beneficiary from the collapse of Yamichi: Frank Partnoy, author of recently published FIASCO, subtitled Blood in the Water on Wall Street. The former emerging-markets derivatives trader at Morgan Stanley exposes the aggression and greed that drove derivatives teams to take advantage of naive clients during the mid-1990s.
  • Investors who bought shares in Ionica at £3.90 ($6.40) during the innovative UK telephone company's public flotation led by SBC Warburg Dillon Read in June, have soon regretted that decision. Just four months later in November, Ionica issued a warning of a slowdown in sales. It announced a first-half loss of £77.2 million. Worryingly, problems of insufficient base station capacity, a delay in implementing a crucial software programme as well as the company's own imposition of new credit controls on customers, had together slowed its drive to sign up new paying subscribers. The news sent the share price tumbling to £1.56.
  • Issuer: UPM-Kymmene
  • The global bear market has started. It will knock the stock markets of the mature economies back 20% off their peaks, and emerging-market debt and equity by much more.
  • 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.
  • ...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.
  • 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.
  • 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.
  • Okura Hotel,
  • 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.
  • Asia may be crumbing, and rumours of losses on several investment banks' proprietary trading desks are beginning to do the rounds, but that doesn't appear to be hampering the desire to splash out on lavish Christmas parties.
  • 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.
  • 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.
  • 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.
  • After the emerging-markets crisis, which countries remain creditworthy?
  • 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.
  • 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.
  • When Brazil's stock and bond markets lost a third of their value in late October as part of the Asian contagion, the country's central bank intervened quickly to defend the real against currency speculators, raising interest rates from 21% to 43%.
  • Investing in the Indian capital market is sometimes called the great paper chase. Share certificates come in tiny lots of 50 to 100 shares, clean deliveries are uncertain and the process of transfer can take up to a year at the end of which an investor may discover that his shares are fake, stolen or lost.
  • The world is facing its worst economic crisis since the 1930s and no-one has a solution to the problems, least of all the IMF.
  • Simon Meadows is known for striking terror into CSFB traders at the bank's Canary Wharf headquarters in London. But this particular Friday morning he is relaxed, smiling and talkative. Perhaps it's because he is about to go scuba diving in Grenada. Or perhaps it's because he can look back on a good year, having added Russia, Lebanon, Turkey, Slovenia, Croatia and Romania to his list of sovereign clients.
  • Issuer: Matav
  • In the week that South Korea sought IMF assistance and Yamaichi announced bankruptcy, it was easy to miss the tiny column inches devoted to Jardine Fleming's flagging results. The latest figures show a continued decline in the Hong Kong-based investment bank's profitability. In the first half of 1997 it made a net profit of $29 million, meaning its contribution to parent Robert Fleming's profits had reached an all-time low of 16% of the Scottish bank's earnings. This is down from 28.8% last year, and well short of the target 25% to 33% Fleming wants.