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January 2009

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LATEST ARTICLES

  • As in all other areas of financial services, the credit crunch has made its presence felt in international cash management. Banks and corporates have found their relationships and business practices severely tested and have found out who they can, and cannot, trust in a downturn.
  • Those of us involved in finance tend to treat the vagaries of investment banking as a matter of life and death.
  • Deleveraging is the key word of the moment and there is still a long way to go for banks and hedge funds. Beyond that, the impact in the real economy of the banking crisis is only just starting to appear. The tools at governments’ disposal may not be strong enough to handle the challenge. Is a raft of new regulation inevitable?
  • Kazakhstan has emerged as the principal conduit for South Korean investment in central Asia. Guy Norton reports from Almaty on the future for cooperation.
  • In 2009 corporate issuers are likely to join financials in seeking to push through equity issues aimed at repairing balance sheets. Intricate measures might be needed to attract investors. However, IPOs look set to be less thin on the ground than in 2008 – at least by mid-2009. Peter Koh reports.
  • "There are concerns that bonuses may increase the appetite for risk," warned Anthony Bellchambers of London’s Futures & Options Association in a prophetic comment from a January 1998 Euromoney, ‘The end of the bonus bonanza?’
  • Investment bankers are struggling in so many ways. The operating environment is far from rosy. Round after round of redundancies are announced and yet even those spared the black-bin-liner treatment are left wondering whether they might have drawn the short straw – the business is not going to be much fun for the few left behind. For those who do have jobs, such is the disdain in which the profession is held by the general public that many are finding themselves having to lie to avoid discomforting situations.
  • Global stock markets are at their cheapest for 25 years. Belated measures taken by the US authorities, and possible stimuli from the new Obama administration – and not forgetting a proper historical analysis – show rewards will come in 2009 for those brave enough to buy, writes Charles Dumas.
  • For those senior bankers bemoaning the fact that they were not awarded a bonus this year take heart – things could be worse. You could be working for Credit Suisse. The Swiss bank decided to pay employee bonuses for 2008 with illiquid leveraged loan and CMBS debt that no-one else will touch with a bargepole.
  • "We call upon the top management of the commercial banks to take these decisions into account and recognize that they are operating in an environment in which a lot of the fundamental risks to liquidity and solvency have been addressed. There now is a different situation because of the actions of central banks and governments. The banks should recognize that they are no longer in a similar state of shock as they were for example in September"
  • Euromoney was emailed this from a Wall Street contact:
  • It wasn’t all gloom as a post-crisis financial world looked forward to a belt-tightening 1998, though: one reader found time to send a poem eulogizing the euro before its launch. Perhaps Ms Opal Innsbruk’s ode can encourage in these dark times as it did over a decade ago:
  • "I was going through passport control and they asked me the purpose of my visit and what I did. For the first time in my career, I thought "I can’t say I’m a banker, I’ve got to say something else – maybe I can tell them that I’m a doctor."
  • US policy failures in the autumn of 2007 were crucial both in letting the financial crisis fester and then spiral out of control, and in a premature, panicky slashing of interest rates that paradoxically aggravated the slowdown severely, writes Charles Dumas.
  • Who dropped the ball?
  • The credit crunch has spread to emerging Europe – despite what the region’s central bank governors may claim. They have taken action to bolster liquidity and shore up the banking sector. Chloe Hayward asked 14 monetary authority heads what more they can do to manage the inevitable downturn.
  • Just two years after facing its previous financial crisis, Hungary is once again in trouble thanks to over-reliance on foreign markets. But it is not necessarily the banks that need saving. Jethro Wookey reports from Budapest.
  • In the first of a series of interviews for 2009 with some of the world’s leading corporate chief executives, boss Antonio Brufau talks to Laurence Neville about his strategy for keeping a top-10 energy company on track in challenging times.
  • Agency brokers have returned to fixed income just as investment banks have withdrawn from the market. Will they be able to create dark pools of liquidity and repair the breach in the distribution of debt securities? And does their increasing power herald the return of the primacy of relationships?
  • In the past few months the Russian capital markets have been hit by a rush of selling as spooked investors head for the exit, sending valuations into free fall. Guy Norton reports from Moscow on what lies in store.
  • Jordan’s Arab Bank is one of the most influential financial institutions in the Middle East. It has thrived for nearly 80 years, largely because of a strict risk management policy. Sudip Roy reports from Amman on how the bank is managing the financial crisis.
  • In this downturn, corporate restructurings will be driven by problems at the banks rather than the struggling companies themselves. Louise Bowman explains why.
  • After enjoying years of plenty, the country’s investment banks are facing up to the prospect of leaner times ahead. Guy Norton reports from Moscow on how they are looking to survive the economic downturn.
  • Unlike most sovereign wealth funds, the State Oil Fund of Azerbaijan is still growing strongly and looking for more foreign risk. Will the country’s experience of the global downturn rob the international capital markets of a new hope? Dominic O’Neill reports from Baku.
  • When it comes to retaining clients, hedge funds can’t win at the moment.
  • The Latin American hedge fund index compiled by HFR was down 25.41% at end of November as the Brazilian real was hit, but compared with Russia/eastern Europe and Asia ex-Japan, which were down 53.95% and 35.61%, respectively, the region is the safer of the emerging markets.
  • The European Commission has launched a public consultation into the adequacy and supervision and regulation of hedge funds and private equity funds. For private equity, the focus will be on corporate governance, transparency and reporting. Issues of transparency, oversight, risk management, capital and short-selling are to be looked at as far as hedge funds are concerned.
  • Jeremy Isaacs, the former chief executive of Lehman Brothers’ European business, has set up a boutique investment firm with Roger Nagioff, Lehman’s former head of fixed income. The firm will be called JRJ Investments.
  • Louis Hagen is to leave the association of German Pfandbrief banks (VDP) to join Münchener Hypothekenbank’s board of managing directors. Hagen is executive director at the VDP, and is known for his spirited and often eccentric promotion of the Pfandbrief at various covered bond events around the world. Hagen was also chairman of the European covered bond council between 2004 and 2007. His departure follows Henning Rasche’s decision to leave the board of Eurohypo to concentrate on his role as president of the VDP. Hagen is succeeded by Jens Tolckmitt, general manager of the association of foreign banks in Germany.
  • Credit insurer Coface is to launch a financial ratings service in the UK. By using company information, credit insurance expertise and its own expertise, the firm aims to be able to offer spot ratings on a medium-sized company for a starting price of just £4,000. Coface has criticized the draft EU regulation for rating agencies saying that it will increase costs without having any impact on quality.
  • The liquidity crisis has contributed to a dramatic change in the trading of fixed-income securities. A year ago the curtailment of the liquidity to investors could be written off as a temporary state of affairs that would be rectified as soon as market conditions got back to normal.
  • The endless series of new index lows has repeatedly confounded investors who see equities as having become cheap again. The rally at the end of last year has raised hopes once more that valuations might have found a bottom. However, for some leading strategists, what looks like cheap today may not be cheap enough.
  • European institutional investors and banks were increasing their use of equity derivatives in the months leading up to the events of September and October 2008 but it remains unclear how much of this business will ultimately be affected by the financial crisis that has also hit structured products and equity derivative investors and traders hard.
  • Asia has proved less immune to the global downturn than was once thought.
  • Fund of hedge funds Pacific Alternative Asset Management Company (PAAMCO) has taken on the investment team of KBC Alpha Asset Management, a $700 million pan-Asian fund of hedge funds business. PAAMCO has $9 billion in assets under management.
  • Hedge funds were ill-prepared for a downturn. Survivors of the shake-out will need to develop their business management skills to cope, says Nick Evans, editor of EuroHedge.
  • The Norwegian government and Eksportfinans have announced a facility that will provide long-term financing for the country’s export sector.
  • Irish divestment would be severe test for weakened loan market.
  • The European secondary loan market was bracing itself for a painful year-end in December as balance-sheet-driven forced selling started to bite.
  • TraderTools has unveiled a compact keyboard, the AI-1, which it says will simplify the trading process. It comes with extra-large, colour-coded keys that should prove extremely useful for those old spot dealers who have delayed their retirement because of the lack of a bonus in 2008. The keyboard can be connected to a wide range of trading platforms. I did suggest to TraderTools that it should launch a version with a ‘mom tick’ button for all the snipers that still exist in the market, but apparently there’s not that great a demand for it any more in spot. In options, though, it’s a different matter.
  • Not all doom and gloom for 2009, though capacity will be tested.
  • The CME has hired Mark Thompson as a director. His main task will be to look after the exchange’s hedge fund clients on the US’s eastern seaboard. Thompson, who joins the exchange from UBS, will be based in New York and report to Tina Lemieux, the exchange’s managing director, hedge funds and broker services.
  • Hybrid capital issuance threat from Deutsche Bank’s non-call.
  • Investment bankers out of a job might do well to consider a career in alternative investments in 2009.
  • –38 the average percentage return from IPOs globally.
  • Private equity firm the Carlyle Group has announced plans to cut 10% of its staff, some 100 employees. It will be the first firm-wide lay-off in the group’s 20-year history.
  • Saxo Bank has had a mixed press this year, which is perhaps testament to the fact that it can no longer be considered to be a junior upstart in foreign exchange.
  • Levels quoted make no market sense whatsoever.
  • Having negotiated away their covenant protection in the boom years, lenders find themselves in a weak negotiating position in the bust.
  • Non-performing loans will haunt the People’s Republic in 2009.
  • Madoff should mark the end of feeder funds.
  • Five years ago, Euromoney was catching up over lunch with a senior figure at a large European bank. Something was troubling him. His private bankers were reporting that emissaries from a large US-based hedge fund had been approaching wealthy European clients telling them that they had unearthed a secret formula to extract regular, risk-free returns from the stock markets.
  • Relationships count more than ever in the world of equity trading.
  • The US Commodity Futures Trading Commission has secured more than $12 million in restitution and civil monetary penalties against nine Florida defendants in settlement of an anti-fraud lawsuit related to the marketing of illegal off-exchange FX options.
  • Data released by Icap, CME and CLS all provide support for what market participants have been saying for the past few weeks – liquidity is drying up. Daily turnover on Icap’s EBS platform averaged $167 billion, a fall of around 32% from November 2007 and from October 2008. Similarly, the CME saw turnover in its futures and options average 471,000 contracts a day, down 26% on November 2007. Elsewhere, CLS says it settled a daily average of 588,416 instructions with a value of $3.25 trillion. In comparison, it settled 727,934 instructions in October and 488,000 deals in November 2007. Of course, November 2007 was an exceptionally busy month, which has probably exaggerated the severity of the annualized decline.
  • At the start of 2008, Paul Day, deputy head of research at MIG Investments, predicted that sterling would be the dog of the FX market in 2008. He reckoned that it would plunge to parity against the euro – a prediction that many thought singled him out as being barking mad.
  • Few would have predicted such a result given the underlying doom and gloom in the financial markets, but Icap’s 16th annual charity day, held on December 10, proved another outstanding success. The company donates all of its brokerage earned during the day to various charities. Last year, it raised a record £9.2 million ($14 million) and few realistically expected that figure to be surpassed. However, despite the sombre mood nearly everywhere else, the atmosphere at Icap was buoyant. As has become the custom, the company’s offices around the world were visited by a string of celebrities throughout the day.
  • A fuller understanding of true trading costs should help decisions about post-trade functions.
  • India’s largest corporates, desperate to shore up working capital or pay the interest on overpriced flagship acquisitions, are trying every trick in the book to raise cash from investors, banks and non-bank financial institutions.