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February 2008

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FEATURES
  • FX debate (part two of two): Towards a golden age for foreign exchange

    Last month the panel examined volatility and the reported demise of the dollar. This month, they discuss the merits of prime brokerage, the weakness of algos and how to generate alpha.
  • Banking: European banks go direct to São Paulo

    New York no longer holds the key to success in Latin America for some European banks.
  • Bank CEO ranking

    Which CEOs have created (or destroyed) the most shareholder value? Euromoney's latest ranking shows that, despite the reverses of 2007, most remain in credit with investors.
  • The greening of Qatar

    Perhaps it’s a feeling of guilt, or an urge to give something back. After all, according to new figures from the IMF, nature has gifted Qatar with oil and gas that have helped it achieve a GDP per capita approaching $70,000.
  • No fresh start for capital markets

    For the first time since 2002 debt is a buyer’s market, and investors are getting what they have long wanted: wider spreads. But at what cost?
  • No more level playing field as the cost of bank funding goes up

    Banks must come to terms with higher costs of funding, putting some at a competitive disadvantage to their peers for the first time. The worst hit might have to rethink completely how they fund themselves.
  • The Sepa revolution quietly creeps in

    Unprecedented co-operation between European banks has, at last, created a single euro payments area. It will transform the cash management business and possibly the whole banking industry. Laurence Neville reports.
  • Greek banks face up to doorstep challenge

    The leaders are busy expanding in the Balkans and beyond in emerging Europe. But will buying more and more on their doorstep prove better than an organic growth strategy in the long term? Chloe Hayward reports from Athens.

ALSO IN THIS ISSUE

  • Japanese ECM issuance fell 177% in 2007 to just $25.5 billion and 266 deals. Japanese companies raised just $6 billion in IPOs, a decrease of 68% from 2006 when they raised $18.9 billion.
  • The growth in size, expertise and therefore competition in the Shariah-compliant market in 2008 made Euromoney’s choices for our Islamic finance awards the hardest to date. The best firms not only got bigger, they brought new levels of innovation to bear in a series of landmark deals.
  • 2007 was a mixed year for Japan, with the stock market suffering from foreign investors uncertainty following the subprime crisis and the long-hoped for recovery of the economy still not fully underway.
  • Greg Medcraft, former global head of securitization at SG, has left the bank after a 27-year career there. The new global chief, Jean-François Despoux, has appointed Jerome Jacques to replace Medcraft in the US, as head of securitization in the region.
  • Put off by past experience, but the consensus is that its time has come.
  • Venezuelan president Hugo Chávez raised the regulated price of milk and threatened to seize dairies that tried to charge more as he attempted to increase milk supplies.
  • But lack of legislation might deter traditional investors.
  • Hedge fund M&A activity on the rise.
  • FSA gets mixed response to proposals on disclosure while LSE plans to trade the instruments on its orderbook.
  • Ulan Bator has become the latest destination for hedge fund managers, following the creation of the first offshore investment fund to be focused exclusively on Mongolia. The Mongolia Discovery Fund has been established by Alisher Djumanov, formerly of Uzbek investment banking firm Asher Group, who has raised an initial $5 million of seed capital for the new fund, which is being launched by newly established management company Silk Road Fund Management.
  • During the course of 2007 launching deals went from being the ­easiest in history to perhaps as tough as it has ever been. But the finance industry continued to show it could produce the goods whatever the market’s conditions. These are the deals where issuers and advisers got their timing and structure just right.
  • US and European fund managers are snapping up stakes in Brazil’s small, specialist fund boutiques. They are looking to gain exposure to some of the world’s fastest-growing financial markets, diversify revenues, and capture the huge Brazilian shift out of bonds into equities and other assets. For their part, Brazilian managers are gaining know-how, technology and access to well-oiled marketing machines.
  • Regulator considers allowing foreign exchanges to operate in the US without registering and rules to make it easier for foreign issuers.
  • The Brazilian financials sector is set to suffer a hit on its profits in 2008 after the government increased banking profit taxes.
  • Mizuho Corporate Bank and its German subsidiary have together bought a Russian bank, Michinoku Bank (Moscow), completing the purchase of 100% of all 10 million outstanding shares on January 21.
  • Fitch Ratings has placed Sigma Finance’s senior note programme on negative watch, in a move affecting $31.6 billion of medium-term notes rated triple A and some $2.3 billion of F1 rated CP.
  • The strategic investment case for emerging European equities remains solid despite the deterioration of global markets caused by liquidity constraints in the banking system, says Martin Majdaniuk, manager of Baring Emerging Europe, which has $850 million under management and has returned 195.6% over the past three years.
  • As the probability of a US recession rises, the best- and worst-performing credits of 2007 reveal the state of play in global economies. Jethro Wookey reports.
  • Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.
  • After a stop-start year of asset-backed securities issuance in 2007, Fitch Ratings expects European emerging market securitizations to perform comparatively well in 2008. However, it says that a prolonged credit squeeze could hit demand for structured bonds. "Borrowers with hard-currency refinancing needs have so far weathered the liquidity crunch remarkably well but their funding needs will become more acute if the international capital markets remain closed for another two or three quarters, and local markets are not deep enough to provide alternative funding," says Jaime Sanz, head of European emerging market securitization at Fitch in London.
  • The Republic of Turkey, emerging Europe’s most prolific issuer in the international debt markets, made a strong start to 2008 with the reopening of its 2018 6.75% dollar Eurobond for $1 billion.
  • Bolsa de Mercadorias & Futuros, the Brazilian derivatives exchange, has announced that it will introduce a new electronic platform to trade spot US dollar/Brazilian real. The venture is a joint initiative with the Brazilian Federation of Banks and the Banco Central do Brasil. BM&F says it is currently responsible for the registration and settlement of about 95% of transactions in the domestic dollar/real market. About 85% of this is traded OTC. The exchange says the addition of transparency and easier access to the market will improve efficiency and facilitate the execution of arbitrage and hedge strategies. The platform is scheduled to go live in the second quarter of 2008.
  • The Depository Trust & Clearing Corporation and CLS Bank International have launched a central settlement service for over-the-counter credit derivatives transactions. The service is an automated solution for the calculation, netting and issuing of payments between counterparties to bilateral contracts.
  • The Argentine government under the leadership of Cristina Kirchner will have to reach a resolution with the holdout investors from the sovereign’s debt restructuring of 2005 if it is to avoid financing issues, according to analysts.
  • Central and eastern European issuers are likely to find accessing the international bond markets a challenging experience in the coming months given the continued US-inspired global liquidity squeeze. Speaking at Euromoney’s conference on central and eastern Europe in Vienna, Fokion Karavias, general manager of the global markets division at Greece’s EFG Eurobank, says that on the back of a general flight to quality from emerging towards developed markets all borrowers will face tougher market conditions but that government borrowers should find it easiest to issue. "Sovereigns will need to pay much higher spreads, but they will be able to issue," says Karavias, adding that even potential Euromarket debutantes such as Albania and Azerbaijan could get maiden issues away if they are prepared to pay the higher market clearing levels being demanded by investors.
  • Structured finance departments have taken a bit of a battering in the past few months but in southern Africa there is still belief in and appetite for the business. The domestic market in South Africa is growing rapidly, partly to meet political pressure to transfer assets to people with little money and no equity. Electricity shortages might well also be a key driver of new deal flows.
  • Net inflows into hedge funds in 2007 were higher than 2006 levels in spite of turbulent markets.
  • "Sudan is probably the richest country in the region. It has the best commodity in the world: water. It also has oil, minerals, cattle, fertile land and human resources. If it can resolve its problems, Sudan has the potential to be a perfect economy." Such is the view of Ahmed Abbas, CEO of Liquidity Management Centre, a Bahraini Islamic investment firm. And if the capital markets are anything to go by, says Abbas, the biggest country in Africa might already have begun its recovery.
  • Redecard, a merchant servicing business in Brazil that Citi holds a majority stake in, plans to undertake a follow-on secondary offering. The announcement came within hours of Citi announcing write-downs of $18.1 billion in the fourth quarter of 2007.