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.

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.

Innovation and wider investor participation continue apace.

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.

Euromoney reports on the innovations driving the market forward, and profiles the winners of latest Islamic finance awards.

Fewer new financial sector rules from the EC might sound like a welcome respite, but it is not the same thing as no new rules.

If Mifid forces banks to physically trade illiquid bonds they publish prices on, they won’t risk their capital.

In an historic move in late November, the People’s Bank of China, the country’s central bank, conducted the first ever swap of renminbi with the US dollar, a move that it intends to repeat fortnightly.

Greece’s economy grew faster than expected in 2005. But its government faces a major challenge in 2006: to maintain its strong growth rate while complying with the EU directive to cut its budget deficit by the end of the year. By Dimitris Kontogiannis.

Although Asia remains in the vanguard of private banking growth, a new survey from Boston Consulting Group highlights key challenges ahead.

Malaysian retail bank Southern Bank had its expansion plans scuppered in December by Bank Negara Malaysia, the country’s central bank, after BNM refused to approve Southern Bank’s proposed acquisition of Asia General Holdings, a Singapore general insurance company.

With the Bombay Sensex, India’s benchmark index, hitting new highs, it is perhaps not surprising that December saw India’s second largest ever equity deal and one of the biggest deals in Asia in 2005. Leading private sector bank ICICI Bank raised more than $1.5 billion from a local and American depositary share offering through Merrill Lynch and Morgan Stanley.

In battle for Time Warner, he must convince institutions and the proxy recommendation service advisers.

Calpers, the largest US pension fund, is on the prowl for a new chief investment officer to replace Mark Anson, who stepped down in October to become chief executive officer of Hermes Pensions Management Ltd. The $200 billion fund says it has appointed a recruitment firm and hopes to fill the position in the next six to eight months.

Tougher financing conditions are now making it harder to execute.

Scotland’s richest man, Sir Tom Hunter, plans to pull out £100 million ($177 million) he has invested with UBS Wealth Management after falling out with UBS executive Jon Wood, according to the UK press. The two have been battling it out in a court case in connection with their personal involvement in The Gadget Shop.

With just weeks to go before the SEC’s new hedge fund regulation comes into force, its legitimacy has been questioned by a federal appeals court. Philip Goldstein has been challenging the rule in court, arguing that the regulator does not have the power to alter or make law [see Euromoney March 2005]. Although it was widely supposed that Goldstein’s complaints would go unnoticed, judges in the case last month questioned whether the SEC had overstepped its authority. A decision is expected in two months.

Has Gartmore’s public mulling of the possibility of an IPO in the past few months been nothing more than an attempt to attract takeover bids? Statements from the fund manager now pour cold water on the notion of an IPO but concede that the firm is open to acquisition enquiries. The latest buyer to be mentioned in the rumours is Lehman Brothers.

Dresdner Bank has sent out a request for proposals for a sale and leaseback of its retail banking network in Germany. The deal involves some 300 banks and will raise an estimated €2 billion. In mid-December four buyers were left in the auction process – Babcock and Brown, Carlyle, Citigroup Property Investment and Fortress.

Market dismisses concentration risk claims.

After earlier forecasting that European share prices would rise in 2006, Standard & Poor’s equity research now expects a 7% fall. The change in outlook is the result of the European Central Bank’s decision to jump on the bandwagon of global monetary policy tightening.

The general picture’s good and the four biggest economies are simultaneously on a growth path.

Just as Schroders Investment Management joins the ranks of company pension funds to dramatically cut equity exposure, the debate about the merits of such moves is heating up.

In December, the UK’s Financial Services Authority held a meeting with the Association of British Insurers setting out its position on securitization and reinsurance for life insurers. All year there had been talk of monetization being a big story. Legal and General has been rumoured to have mandated a structuring mandate, and Standard Life was looking at both new business strain and value in force (VIF) structures before being overwhelmed with the process of demutualization. There has been talk of VIF securitizations coming from France and the Netherlands. However, some originators argue that the cost effectiveness of this approach is far from proved and question whether the six months or so spent working on structures is worth it. Also the competitiveness of reinsurance has improved dramatically in response to the capital market, especially for one-year maturity. But for a five-year maturity, a reinsurance treaty is twice as expensive as a capital markets solution. It appears that the FSA is trying to give greater guidance to issuers and arrangers on how to streamline the process; there are hopes for as many as four deals in 2006.

Weak execution caused by the end-of-year rush to issue was mostly limited to the CMBS sector. Execution lower down the capital structure suffered the most, with triple B notes hitting three-month Euribor plus 100 basis points, a level not seen for more than 18 months.

With their core jobs as trustees and paying agents commoditized, corporate trustees are relishing the chance to carve out a new role for themselves on structured credit deals.

As economic growth slows in 2006, more businesses are expected to fail, with the biggest increases likely in Germany, Japan, the UK, and the US.

A trader at Mizuho Securities in Tokyo accidentally sold 610,000 shares in J-Com for ¥1 instead of one share for ¥610,000.

ABN Amro bit off more than it could chew when it tried to sell a 4.9% stake in Dutch Telecom company KPN for the Dutch government in December. The bank was unable to offload the entire €883 million block and was left with stock on its books that rivals estimate could be worth hundreds of millions of euros. At least ABN Amro was in good company. Lehman Brothers and HVB also bungled a pre-Christmas trade. Lehman and HVB Corporates & Markets tried to sell an €804 million block of Munich Re shares, equivalent to about 3% of the company’s outstanding shares, at a price range of €116.75 to €117.50 a share, but the deal, on behalf of HVB’s parent, closed at just €116.30. Rivals believe the two might be facing seven-digit losses.

The European Bank for Reconstruction and Development is helping to develop securitization structures in central and eastern Europe. Sudip Roy reports.

Europe may have one currency, but it still has many payment systems. What will be the impact of SEPA on banks and their clients? What opportunities exist in emerging Europe? Leading cash management professionals debate the confusion over standardization and the pros and cons of payment factories.

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.”

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.

In an open letter to market participants, the New York-based Foreign Exchange Committee has warned about some of the dangers posed by the advent of retail FX products. The committee says technology often separates “the wholesale foreign exchange dealer from the end user, perhaps by multiple intermediaries”. This makes it difficult for banks to “know their customer”, and possibly hampers such compliance measures as anti-money-laundering and counter-terrorism obligations.

A recent report by BreakingViews has revived the familiar story that EBS is up for sale, claiming that the company was hawking itself around via its adviser, Citigroup. The £1 billion ($1.8 billion) valuation that BreakingViews has put on EBS looks a little toppy and might well scare potential suitors away. Back-of-the-fag-packet calculations suggest that EBS captures about 20% of the total spot market. As FX volumes are still expected to grow, and EBS could quite conceivably increase its market share, someone with deep pockets might well decide it is worth a punt, even at £1 billion. However, whether its multiple owners will ever agree on the attractions of a suitor remains to be seen.

Dressing up down under

The security for the sixth ministerial conference was intense but Korean protesters were still able to set off a police fishing operation and the director-general did not escape a barracking, while residents wonder what it’s all for.

Europe is in better shape than a cursory examination of its politicians might suggest.

India’s private banking industry is booming. Indians living abroad and at home want to invest in the domestic markets. This is providing opportunities for local and international private banks. Kautilya Shastri reports.

Stephan Theissing is the treasurer of Allianz as well as its head of corporate finance. He’s the man that investment bankers, looking for a share of the global financial group’s substantial capital markets activity, need to impress. Peter Koh finds out what they have to do to win his favour.

Like bespoke tailors, private bankers have to offer clients just that little bit extra.

Funds are still unsure what use they can make of derivatives.

Speculation continues about the value of funds of hedge funds. A recent survey of 146 European institutional investors by research firm Investor Source and law firm Clifford Chance revealed a significant drop in interest in funds of hedge funds. Only 50% were investing or considering investing in such vehicles in the third-quarter of 2005, down from 65% at the beginning. And of those investing in both funds of hedge funds and single hedge funds, 18% have switched to invest in just the latter.

JPMorgan found itself in a sticky hole last month when its private equity arm, JPMorgan Partners, was part of a consortium bidding for US doughnut company Dunkin’ Brands, which was being sold by French drinks company Pernod Ricard.

Concerned about growing inflationary pressures, Russia’s government plans to limit the amount state companies can borrow in international bond markets. Julian Evans reports on likely effects on the rouble capital market.

Russia has an undeveloped equity market culture, so it is no surprise that there are few retail investors. But this is changing as confidence and understanding of the market grows and disposable incomes increase. Kathryn Wells reports from Moscow.

Complaints about the prices of bank privatizations do nothing to further the cause of China’s continued integration into the global economy.

The economy minister’s ousting signals the end of an era.

Nobody in their right mind would spend the week before Christmas trawling through the credit outlooks for 2006 published by investment banks, so Euromoney has done it for you. The good times should continue to roll, but look out for some painful bumps along the way.

India is fast becoming a remote front and middle office for the banking industry.

The investment manager reckons there is a wider market for its products.

A new series of private banking indices is to be launched this month, replacing those ABN Amro established in May.

Kazakhstan’s three biggest banks dominate the industry, but there are opportunities for the country’s second-tier institutions. Patrick Gill reports.

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.

Excitement over corporate hybrids has been replaced by hopes of a boom in M&A refinancing.

When Malcolm Glazer bought UK Premiership football club Manchester United in May, alarm bells rang. The £790.3 million ($1.4 billion) deal was partly funded by a high-cost loan of £275 million from three US hedge funds, and subject to strict ebitda targets over the first two years.

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?

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.

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.

Analysts are pondering the new economy minister’s strategy.

The annual meeting of EMTA, formerly the Emerging Market Traders Association, has for the past few years been an exercise in watching analysts berate themselves for not being sufficiently bullish about the previous year. The 2005 meeting was no exception: no one thought, a year ago, that emerging-market debt would return anything like the 9% it ended up posting over the course of the year.

Republic’s next challenge is to revamp its domestic debt portfolio.

Brazil’s economy shrank 1.2% in the third quarter as pressure mounted on the scandal-hit Lula administration. The performance, which was much worse than analysts had been expecting, came after a rise in output of 1.1% in the second quarter. Analysts suggest that Brazil’s high interest rate is stifling growth. At one point the base rate was at 19.75%, before dropping back to 18.5%. Confidence in Brazil has also been shaken by corruption scandals involving the ruling PT Party.

A close ally of Hugo Chávez has claimed that the CIA plotted to assassinate Venezuela’s president in the run-up to last month’s legislative elections. Nicolas Maduro, president of the National Assembly, says that the CIA wanted to disrupt Venezuela’s democracy by killing the country’s leader. “They planned to suspend the elections,” he said. “They planned to attack the head of state, assassinate top officials and carry out massive killings – all these charges are backed up by conversations between the very participants.” The CIA has denied all the allegations. “It’s nonsense,” said a spokesman at the agency.

EMEA to see further growth in asset-backed transactions.

Rash of strategic sales and IPOs planned.

Africa:

In early December HSBC and Deutsche Bank simultaneously engaged in a charity event to raise funds for London’s Great Ormond Street Hospital’s development fund. In order to entice its workers to stump up some cash, the two banks had a number of celebrities tour their trading floors.

The markets revere individualists who are prepared to follow their hunches – think Soros, Buffett or Kerkorian. But are the many actually smarter than the few?

Congratulations to the winner of the inaugural Euromoney award for media relations. This bank, before pitching a CDO as part of our deals of the year research, invited the relevant Euromoney journalists to sign a beautifully drafted, five-page confidentiality agreement.

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.

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.

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.

Tier 1 perpetual CMS-linked products, once in high demand from private investors, have shown their dark side. Some deals have lost 20% of their value. Their highly illiquid nature means investors could be left high and dry. How did these inappropriate products come to be sold to an unsuitable investor base? Alex Chambers and Helen Avery report.

Citigroup, Morgan Stanley and RBS finance the UK pub party.