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February 2008

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FEATURES
  • Banking: European banks go direct to São Paulo

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

ALSO IN THIS ISSUE

  • Hedge funds are on the verge of large-scale direct recruitment of talented graduates, a recent student-organized LSE alternative investments conference suggests. Neil Wilson reports.
  • 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.
  • Hedge fund M&A activity on the rise.
  • 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.
  • 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.
  • 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.
  • Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.
  • 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 credit crunch has opened up opportunities for hedge fund managers with lending capabilities. Helen Avery talks to Arch’s Stephen Decani about his firm’s asset-based lending activities.
  • CFTC and NFA are being inconsistent with the rules for futures and forex traders.
  • A strong pipeline of deals keeps ECM bankers optimistic for 2008.
  • Aureos Capital’s Aureos Latin America Fund has held its first closing, with $140 million in committed capital. The fund is expected to close at $300 million in June and will focus on investments of between $2 million and $10 million in Mexico, central America, Colombia and Peru.
  • 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.
  • We asked leading debt market officials what products they thought would be hot in 2008.
  • We all know that Iraq is bad but to hear many experts tell it, Afghanistan is the genuine headache of the age, military and economic. With the struggling economy as much a battleground for hearts and minds as the caves of Helmand province or Tora Bora, you’d expect the brightest minds at the IMF and World Bank to be poring over the stricken country, keeping vital but fragile institutions such as the central bank tightly clasped under their intensive care, right? And, with $30 billion of western aid – your taxes – sloshing around the place, at least making sure its books are done properly. Think again.
  • Fund of hedge funds group Financial Risk Management (FRM) has launched a new business to provide seed capital to early-stage hedge fund managers. Group chairman Blaine Tomlinson cites the need for managers to reach critical mass through partner ventures as the reason for the creation of the new platform. The business, FRM Capital, will also provide investment opportunities for existing fund of hedge funds clients. Industry participants say that the number of seeding funds is increasing as entering managers find it harder to attract capital, and as firms such as FRM seek to diversify their business.
  • Lehman’s new loan modification programme reveals its pessimistic view of the UK housing market.
  • 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.
  • Net inflows into hedge funds in 2007 were higher than 2006 levels in spite of turbulent markets.
  • But lack of legislation might deter traditional 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.
  • Cognotec, an FX trading solutions provider, has formed a partnership with Saxo Bank. As a result, Saxo will stream liquidity to Cognotec’s RealStream Margin trading platform, which Cognotec developed specifically to target what it calls the professional retail market. In a press release, Brian Maccaba, Cognotec’s chief executive, said: "We are delighted to partner with a progressive bank such as Saxo Bank with its depth of FX experience, and particularly their leading profile in the professional retail trading market."
  • In a sign of growing economic cooperation between Russia and China, VTB, Russia’s second-largest bank, has become the first bank from the country to receive a licence to open a branch in China. VTB’s Shanghai branch will primarily service Russia-China trade, big industrial inter-state projects and the investment projects of Russian and Chinese companies.
  • Regulator considers allowing foreign exchanges to operate in the US without registering and rules to make it easier for foreign issuers.
  • FSA gets mixed response to proposals on disclosure while LSE plans to trade the instruments on its orderbook.
  • Euromoney has been informed by a source claiming to have been close to an eight-figure deal that cash-rich Saudi Islamic bank Al Rajhi entered into with troubled US bank Bear Stearns just before Christmas.
  • 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.
  • 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.
  • 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.
  • "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.