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December 2000

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LATEST ARTICLES

  • The $700 billion trade finance market is one of the few large pools of tradeable fixed-income assets that has not yet attracted institutional fixed-income investors. Changing that, and propelling the fragmented, illiquid trade finance market through the same developments that transformed emerging market debt in the 1980s, is the goal of bankers and traders who this month launched Internet Trade Finance Exchange (ITF).
  • Several banks are benefiting from the slew of former DLJ bankers who have decided that their new owners, CSFB, are not for them. Lehman and Salomon Smith Barney have done particularly well in the US, and UBS Warburg and Deutsche Bank are not far behind. But in Europe another name has joined the list, and it may be a surprise to some: Bank of America.
  • A three-way merger has created Mizuho, Japan’s and the world’s biggest bank by assets. If the deal works – and legal issues will postpone full integration for some time – the new leviathan may be a powerhouse. But is management up to the task? And will Japan’s notoriously difficult market let them do what they want?
  • It's hard to imagine a worse news flow for markets. As I write, the US is without a winner in the presidential elections. The lawyers argue in the courts about whether various counties in Florida can conduct manual recounts. And people spend their time giving opinions on chads - those little round bits of paper hanging by a thread from the punch hole on a Florida ballot paper.
  • The potential for internet growth in Latin American remains among the highest in the world, though that is not sufficient to support large numbers of start-up companies. Financing is hard to come by in both the public and private equity markets. But Latin American internet companies are about to show the rest of the world where the new economy is heading. The convergence of internet, traditional media and telecom businesses is at hand.
  • Banks around the world have browbeaten their regulators into accepting so-called hybrid tier one securities issued by special purpose vehicles. Now the investment bankers who arrange capital issues are looking for the next challenge of finding new issuers for these securities.
  • Contagion from US domestic corporate bond markets infected Latin American debt in the last months of the year, reversing earlier strong performance by Latin bonds that rallied on the improving credit fundamentals of Mexico and Brazil. It’s one of the downsides for Latin borrowers of having their foreign debt now predominantly owned by so-called crossover investors, not Latin specialists. These nervous buyers bring added volatility to a market where periodic panics, such as that recently surrounding Argentina, are a regular feature. They won’t even consider financing the region’s corporate borrowers, which must now hope domestic markets develop quickly. Danielle Robinson reports
  • A walk around Chicago can be a rewarding experience. It has its skyscrapers like most other US cities, including the tallest, the Sears Tower. But it also has stunning main shopping streets and there's a deceptive and disarmingly quiet pace to life in the Loop, the main financial district. Then there's the city's reputation as the home of blues music, and its overall location on the shores of Lake Michigan. All this gives the city a more balanced air than the bustling, cramped streets of Manhattan.
  • Hong Kong is undergoing a seismic cultural shift with the introduction of its compulsory savings scheme, the Mandatory Provident Fund. Its arrival will boost the local fund management industry through a consistent inflow of funds which employers and workers are legally obliged to maintain. Other Asian countries, most notably China, are scrutinizing its implementation to see what aspect of the Hong Kong model they can adopt. Julian Marshall reports
  • Whatever its rivals, and even its friends, say about its technology, one thing is certain about Swiss/German derivatives exchange Eurex: it knows how to throw a great party. Twice a year the Futures Industry Association hosts a three-day gathering - in Florida's Boca Raton in March, and in Chicago in November. At each event, Eurex hosts the party.
  • Next year the Middle East's sovereign bond markets look likely to expand in scope, with new issuers coming in longer maturities and larger amounts
  • Efficient linkages between stock markets should eventually enable global investors to trade shares easily on local markets removing any need to use such instruments as depositary receipts. But such linkages are far from complete. American investors still prefer to deal in dollar-denominated paper. Foreign companies are building up their ADR programmes as a currency for US acquisitions. With the trade in ADRs in 2000 exceeding $1 trillion by September, and expected to top $1.3 trillion by the end of the year, the depositary receipt market looks set to prosper.
  • Greece’s entry into the eurozone from the start of 2001 is bound to have a profound impact on local banks. Already the country’s successful convergence campaign, characterized by sharp drops in inflation and interest rates, has fuelled competition and accelerated consolidation. There is little doubt that competition will intensify from 2001 onwards, forcing Greek banks to re-think their long-term strategies and consider foreign partners.
  • In most areas of financial services, internet technology has created efficiencies and levelled playing fields, allowing new entrants to compete with established players and bringing the benefits of price transparency to end-users.
  • Much as some might like to, banks can’t uninvent the internet. Nor is there any clear sign that they know what to do with it. For a variety of motives, both obvious and obscure, they have begun entering into platform consortia with rivals. That’s problem enough and costly. Worse, though, is when a platform seems to be biting the hands that feed it. Antony Currie reports
  • The panic’s over. We can all go back to normal. We’ve got it all under control. That’s the message now coming from the investment banking world as we wind down for Christmas.
  • Asia is set to become the new battleground for online brokers. A nascent market with huge potential is incentive enough for the big guns from the US to invest heavily in developing Asian operations. Hong Kong offers a gateway into the new markets, particularly China, for international firms that look set to put many local brokers out of business. Julian Marshall reports
  • When it comes to floating state-owned enterprises, the Chinese authorities have learnt fast. More discriminating in what they offer to the market, they have also recognized that pricing is crucial and that investors are attracted by big issues because of the liquidity they provide. For their part, western banks leading issues have learnt - sometimes the hard way - that the Chinese are increasingly choosy about who they work with. That doesn't make bankers any the less determined to establish a presence in a massive market that is at last beginning to restructure.
  • Although initial international trades have been struck, the financing of commodity trade online is not as easy as many first thought. The requirements of commodity importers and exporters are complex and financiers must come to terms with the logistics that are an essential part of the commodity trade chain. Jonathan Bell, editor of Euromoney’s sister publication Trade Finance, examines the issues
  • A major priority for the UK's Financial Services Authority is developing a suitable regulatory stance in e-commerce and internet delivery of financial services. Its approach rests on judgements about the potential risks from e-developments to its statutory objectives – market confidence, consumer protection, public understanding and reduction of financial crime – and working out strategies to mitigate and minimize risks. By Lydia Bailey and Crispian Lord
  • Turning money and small-value payments into digital form doesn’t interest the banks – it’s against their interests and too expensive. Into the vacuum have stepped hundreds of payment schemes, many of them claiming they have found the Holy Grail. These boasts are premature. Some ideas are elegant but don’t have critical mass. Worse still, they rely on those indifferent beasts, the banks. Find your way through the Darwinian jungle with the help of David Shirreff
  • Issuer: Government of Malaysia Amount: €650m Type of issue: Eurobond Date of issue: November 16
  • The Chinese have a heavy historical load to shrug off. It's the financial system. The need for restructuring is recognized and a start has been made on dealing with banks' non-performing loans. Privatization will then be possible. But for all the bankers' adoption of western business suits, it's far from clear whether the government can bring itself to leave Chinese banks free to develop truly commercial lending policies. And then there's the stock market - the most hedged about with restrictions on foreign access in all Asia. Opening it up will mean grappling with weighty corporate accounting issues. More worrying still, it raises the scary prospect of unrestricted currency convertibility.
  • Among all the many new online marketplaces for trading, issuing and offering research on bonds, none is as ambitious in its scope as BondBook, the alternative trading system launched this summer by Goldman Sachs, Merrill Lynch, Morgan Stanley and Salomon Smith Barney, which Deutsche Bank also joined in September, as a founding equity partner.
  • This year’s ranking of the top 50 biggest banks in Japan shows few changes from last year, though continuing consolidation will result in the formation of at least four major banking groups. In the meantime, profitability remains dismal – blame continued lending to ailing companies in construction, property and retail; low interest-rates; disintermediation; and falling revenue from equity and bond portfolios. By Andrew Newby, tables from Moody’s
  • The number of banks seized by the government in Turkey has recently risen to 10 but foreign banks still manage to elude having their fingers burned.
  • The technocrats who climb their way to the top of the greasy pole of international finance tend to be surrounded by sycophants who are unwilling to tell them just how insignificant they are.
  • The financing of the Julietta goldmine project in Russia's far east has been handled by commercial banks thanks to careful work by law firms
  • In May 1999 Euromoney tipped El Salvador to become the first Latin American country since Panama in 1903 to give up its own currency and adopt the dollar. In fact, the central American republic was pipped at the post by crisis-torn Ecuador, which formally dollarized its economy this year.
  • London law firm Allen & Overy is a major participant in JP Morgan’s Trinity risk collateral management product.