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January 2003

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  • Financial engineering for ethical investors
  • 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.
  • A pioneer of foreign investment in post-Soviet Russia, Bill Browder has battled with corporate misdeeds and tracked the “bad guys” to take his Hermitage fund up 446% since 1996.
  • Bond performance
  • Head of credit research, Gartmore
  • A recent UK court judgment has stopped minority lenders blocking a workout because it is not in their interests. Rob Mannix explains why the ruling is good news for the banking industry
  • CEE issues have innovated on several fronts this year. Bulgaria made Europe’s first Brady exchange, Poland revived sterling sovereign issues and Gazprom launched Russia’s biggest ever domestic corporate bond.
  • 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.
  • In the sober world of finance, naming a bank after a famous vodka seems like suicide, but not in Russia. In 1999 Roustam Tariko, owner of Russia's leading vodka brand, Russky Standart, decided to open a bank with the same name.
  • 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?
  • With trading costs bearing down on them, UK fund managers are tentatively exploring the savings offered by alternative trading venues.
  • Indonesia
  • "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.
  • Kazakhstan has had a good run, but the easy things have been done and the strong economic growth of the past two years has eased. The republic is banging up against a ceiling that will only be breached if there is more reform.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • Indices
  • Bank reform in Russia is hampered by the dominance of the two big state-owned banks, neither of which can be speedily rationalized or sold off without disruption. So although the central bank is now intent on regulatory activism it is seeking to enable competition rather than enforce it.
  • 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.
  • 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.
  • E-finance
  • India
  • 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.
  • Few if any currency managers attempt to forecast precise exchange rates. The trick is to predict directional moves. Different managers work to different time horizons but, broadly speaking, currency management can be separated into two categories: a technicals-based approach and one that looks to fundamentals.