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January 2006

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  • The Tokyo Stock Exchange found that a malfunction in its new and trouble-prone trading system prevented Mizuho Securities from being able to cancel the mistaken J-Com order.
  • The bond market might have underestimated the troubled issuer’s ability to realize investment-grade ambitions.
  • Excitement over corporate hybrids has been replaced by hopes of a boom in M&A refinancing.
  • Innovation and wider investor participation continue apace.
  • Investment banks Nomura and Mediobanca are about to close Italy’s largest ever securitization of regional healthcare receivables, according to market sources in Italy and London. “This is the largest ever deal of its type, and it has unique structural features that have never been used before in this asset class,” says a source close to the €2 billion transaction.
  • The National Bank of Abu Dhabi’s (NBAD) $850m floating rate note sold in December has set a new benchmark for the region’s issuers both in terms of size and spread.
  • Asia’s business community is never slow to spot a trend and real estate investment trusts are certainly hot news. A trickle from the pipeline of early Reit offerings in Singapore and latterly Hong Kong earlier in 2005 threatens to become a torrent of new issues in 2006 as the region’s property developers and investment banks line up to launch new vehicles for Asia’s yield-voracious investors.
  • The Czech Republic’s PPF Group, which owns Home Credit and insurer Ceska Pojistovna, has managed to achieve top three positions in all of its countries of operation and with limited need for international financing. Now, the previously inwardly focused group has finally begun to let outsiders in. Kathryn Wells reports.
  • Many of the most attractive banking assets in emerging Europe have already been bought. Acquirers must look further east for their next target. But investment bankers are already thinking of the next big play – a global bank trying to buy a presence across the region. Sudip Roy reports.
  • “OK, if there were a big credit event, and if it coincided with one of the dealers going down, there would be a problem. How many ‘ifs’ do they want?”
  • “What surprised me when I became minister of finance was that we had the debt situation, but nobody wanted to talk about it. We need to first explain how we got into this position before we can talk about how we will get out of it.”
  • Thailand faces a looming pensions crisis. Its government is already moving down the path of reform but its critics don’t like the direction in which the programme is headed. Chris Leahy reports from Bangkok.
  • Hedge funds are main drivers into insurance underwriting. An increasing number of hedge funds and private investors are looking to the insurance markets as a source of attractive returns and diversification.
  • Structured products are a hugely profitable business line for investment banks. They allow banks to package up risks and pass them on to third parties in the form of an investment where the buyer may win or lose, but the seller always stands to gain.
  • China Aviation Oil (Singapore) Corporation (CAO) the Singapore-listed subsidiary of mainland Chinese aviation fuel importer China Aviation Oil Holding Company (CAOH) announced in December a successful debt restructuring including significant investments from BP Investments Asia and Temasek Holdings.
  • Hybrids will drive investment-grade issuance this year. The emergence in mid-December of Burlington Northern’s $500 million hybrid debt transaction via Merrill Lynch and Goldman Sachs indicated that the first US corporate hybrid, issued by Stanley Works the previous month, was not a one-off.
  • Australian lender ANZ became the latest foreign bank to invest in a mainland Chinese lender in December 2005 when it agreed to invest $120 million for a 19.9% stake in Tianjin City Commercial Bank. TCCB, based in Tianjin, is China’s fourth-largest city commercial bank by assets, which totalled $8 billion as at October 2005. The bank serves 5 million customers from 180 branches and offices. ANZ plans to provide TCCB with access to its intellectual property and technical resources, specifically to build risk management, retail banking and trade finance capabilities. ANZ has clearly considered its investment in TCCB carefully: Tianjin was voted “most livable city in China” according to an international survey and it is twinned with Melbourne, ANZ’s home city.
  • Loss of guidance note 5 wording boosts shareholder leverage.
  • After months of complaints from debt syndicate managers, UK regulator the Financial Standards Authority has responded to their complaints about the Market Abuse Directive’s stipulation that supposedly stopped new issues being over-allocated by more than 5%.The requirement, which originally targeted mispriced equity issues in southern Europe, was limiting the ability of lead managers to control aftermarket performance, particularly on volatile credits. The FSA has now said it was feasible for firms to document their reasons for over-allocating beyond the 5% but that such action would not be automatically regarded as market abuse by the regulator.
  • The departure of BNP Paribas’ head of corporate debt capital markets, Brian Lazell, was a real shock. It is highly unusual for bankers to leave their jobs just weeks before bonuses are paid. But it is clear from insiders that Lazell has another job that he is due to take up early in the New Year.
  • Technicals will turn negative and valuations widen this quarter.
  • Last month’s cover story received a lot of feedback. It seems sell side is in a state of flux and running scared of algorithmic trading.
  • The Chicago Mercantile Exchange reported record FX volume on December 12. A total of 872,271 futures and option contracts were traded, representing $96 billion in notional value. This was 16.6% up on the previous record of 748,050 contracts, set on June 8 2005. Electronic transactions on the exchange’s Globex platform accounted for 71% of the turnover. Even though calendar rolls into the March contract inflated the total, if the CME can maintain levels at anywhere near the record, the debate on whether or not FX can migrate to an exchange-traded environment will grow louder.
  • Fitch has cut Hungary’s sovereign credit rating to BBB+ from A–, one of the first times that a new EU member state has had a downward, rather than upward, rating movement applied to it since the EU enlargement process began.
  • Acceptance as asset class and Ucits III mean new retail currency funds.
  • Most analysts got it wrong in 2005, who says they’ll get it right this time?
  • Investors seem to like Mexico’s new investment fund, Impulsora del Desarrollo Económico de America Latina (Ideal), owned by the country’s richest man, Carlos Slim.
  • Last year was tumultuous for Ecuador. A president was ousted, a spat with the World Bank threatened to get out of hand and there were genuine fears that the sovereign might default. At long last, though, there are signs that Ecuador might be on the path to recovery, not least because of the strong support that the sovereign received for its first bond issue in six years.
  • Latin American banks have come a long way since the financial crises of the 1990s and ordinary citizens are bringing their savings out from under their mattresses like never before.
  • Corporate hybrid has moved beyond investment grade. The development is significant for the leveraged finance community – it’s one thing persuading buyers to invest in the subordinated debt of an investment-grade company, but finding investors receptive to one from a BB/Ba2 credit is quite another. Hedge funds and certain other institutional investors were reluctant to get involved. Yet German tourism and shipping company Tui was able to raise €300 million of perpetual (non-call seven) debt rated B+/B1 via Citigroup, Deutsche Bank, HVB and RBS. The coupon was 8.625%. Those going for the issue, of whom a big proportion are retail investors, certainly deserve that coupon given that this is a highly cyclical business. The deal was part of a €1.3 billion offering to refinance short-term acquisition funding of CP Ships.