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February 2008

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FEATURES
  • 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.
  • Banking: European banks go direct to São Paulo

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

ALSO IN THIS ISSUE

  • 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.
  • Proposals for establishing an EU-wide definition for bank capital have caused a stir in the arcane world of hybrid regulation.
  • The Brazilian financials sector is set to suffer a hit on its profits in 2008 after the government increased banking profit taxes.
  • Icap is determined to boost the position of its spot trading platform, but mutually owned venues are at a disadvantage.
  • 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.
  • 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.
  • We asked leading debt market officials what products they thought would be hot in 2008.
  • Former chairman of the Federal Reserve Alan Greenspan has joined Paulson & Co as a member of its advisory board. He will provide advice to Paulson’s investment management team on financial markets in an exclusive arrangement. John Paulson, founder of the event-driven hedge fund, saw assets balloon from $7 billion to $28 billion last year because of correct calls on the sub-prime market.
  • According to prime brokers in New York and London, funds of hedge funds are reducing the number of new managers they are taking on their books, and, in some instances, are reducing their existing portfolios of managers. One prime broker says that some funds of hedge funds have reduced their books of managers by 10% to 20% over the past two quarters.
  • The credit crunch has spurred an increase in the number of new hedge fund launches. Marco Masotti, partner in the fund formation practice at Paul, Weiss, Rifkind, Wharton & Garrison in New York, says he has had an increasing number of enquiries from new managers over the past two to three months. "Some are setting up as they wish to take advantage of the investment opportunities that have sprung up, others are leaving financial institutions to start on their own as they are unhappy with management changes, or bonuses at their financial institutions."
  • Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.
  • 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.
  • 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.
  • Emerging markets Equity indices in emerging markets outperformed those of developed markets in 2007, rising 42% compared with a gain of just 9.4% in developed markets, according to Standard & Poor’s global stock market review, The World by Numbers.
  • Put off by past experience, but the consensus is that its time has come.
  • 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 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.
  • 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 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • Net inflows into hedge funds in 2007 were higher than 2006 levels in spite of turbulent markets.
  • 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.
  • "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.
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