Years of heavy losses from traditional assets are prompting investors to seek new havens for their money. Overlay managers sing the praises of going beyond hedging to invest actively in forex.

"I wish my last year had been in better times," sighs Albrecht Schmidt, soon-to-be ex-CEO of HypoVereinsbank, over lunch in a London restaurant. "There's still so much to do." Officially Schmidt is still CEO until January - the changeover was bought forward from May to pacify investors - but when Euromoney meets him in mid-November, he's already handed over day-to-day responsibility to the new CEO Dieter Rampl. Schmidt now spends his time shuttling between Munich, Brussels and London in his job as an ambassador for the Munich Finanzplatz.

After the blows many investment banks' reputations took in 2002, equity researchers might have been expected to keep their heads down. Not Steve Galbraith, who put his foot deftly in his mouth with a note advising clients to avoid investing in companies with highly unionized workforces.

Few people know currency overlay - an industry always on the verge of maturing - better than Neil Record, chairman and CEO of Record Currency Management. According to Mercer Investment Consulting, the company he started was awarded the world's first currency overlay mandate in 1985, when the Water Authority Superannuation Fund asked it to implement a dollar-based hedge.

The volume and sophistication of Poland’s debt strategy last year made it the golden mandate for emerging-market debt teams. And they’ll be chasing Poland hard in 2003. But could its public debt prove too large even for this masterful finance ministry to handle?

Citibank opened its first retail branch in Moscow in November as Russia's leading commercial banks begin to slug it out for Russia's retail banking business.

There have been many departures from investment banking this year but doubtless staff around Citbank in London will be mourning the loss of Nicola T from their compliance department more than many.

Deutsche Telekom hasn't been that successful in 2002 in making asset disposals or cutting debt. The sale of its cable businesses, for example, has been delayed and the price it is negotiating is unlikely to reach the e2.5 billion it predicted halfway though the year.

Last month's surprise resignation of US Treasury secretary Paul O'Neill and White House economic adviser Lawrence Lindsey smacks of desperation in the Bush administration. Only two weeks earlier, O'Neill had indicated that a costly stimulus package was unnecessary as the US economy was recovering nicely. He suggested that a simplification of the tax code was his sole priority and that government funds should be directed only to troubled sectors, such as the airlines.

E-finance

Few would dispute that 2002 was an awful year for equities. The MSCI World index plunged nearly 20% and the same was true for the MSCI North America and MSCI Europe. While stock markets and investors' portfolios crashed in nearly every developed market except for New Zealand (where the index rose 16.2% last year) and Austria (up 9.5%), net capital flows to emerging markets turned negative.

With trading costs bearing down on them, UK fund managers are tentatively exploring the savings offered by alternative trading venues.

India

Indices

A complex debt exchange during a merger transaction saved AT&T Broadband and Comcast the expense and the hassle of raising new debt. Bankers won’t want other companies to follow suit.

Keen to exploit the massive oil deposits found in its segment of the Caspian Sea, Kazakhstan is pushing for an end to the decade-long dispute over how to draw borders between the five countries that share its coastline.

Russia’s central bank is launching a controversial new scheme aimed at creating stability and competition. Deputy central bank chairman Andrei Kozlov explains why the reforms are needed.

HVB and Commerzbank face an awful choice: lend more to German companies and rack up those NPLs, or stop lending, induce more bankruptcies and drive away customers.

A radical overhaul of Russia's creaking pension system is set to release billions of dollars into the country's debt and equity markets over the next few years and will stimulate dramatic growth of the financial industry.

Electronic trading

Lehman Brothers' trials and tribulations with its wayward chef continue (see Euromoney, November 2002).

It was billed as a "good-natured rugby challenge amongst representatives of corporate Hong Kong". But last month's Professions Sevens 2002 tournament, with CSFB, Goldman Sachs, Morgan Stanley, Deutsche Bank, JPMorgan, CLSA and HSBC among those fielding teams, turned into a free-for-all.

If the role of a banking system is to finance corporates through the bad times as well as the good, the German system is failing. At least that's what the recent decision by the Federal government to establish a Mittelstand bank strongly suggests.

A dispute over the funding of oil pipeline development pinpoints increasing tension between foreign investors and the Kazakh authorities that may hamper the development of offshore Caspian oil resources.

Russia's re-emerging middle class is driving strong growth in the country's embryonic mortgage market as pent-up housing demand and limited supply have caused property prices to soar 30% in Moscow and St Petersburg in the past year.

Few capital markets participants will be sorry to see the back of 2002. Fear dominated the year: fear of more terrorist attacks, fear of the consequences of a war against Iraq, fear of more corporate scandals, fear of losing yet more money, fear of losing one's job, fear of going to jail.

Despite the supposed fiscal rectitude demanded by dollarization, Ecuador has once again spent itself into trouble.

Islamic law once forced Muslims to make do with poor investment returns. Now, complex Shariah-compliant structures are burgeoning to add value. We look at the market leaders.

Indonesia

Is the burgeoning credit derivatives market still best seen as a hedging device? Or have some participants turned it to unfair advantage over bond investors on the basis of what amounts to inside information?