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January 2011

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  • Foreign exchange traders are getting used to huge volatility in their two core markets – the euro and the dollar. But they’re still battling regulators to prevent what they consider would be a damaging move to trading on exchanges.
  • In the first part of this roundtable on cash management, Euromoney looks at the increasing expectations from corporates of what cash management banks should offer. The second and concluding part will be published in the February issue.
  • The president of the EBRD tells Sudip Roy why adopting the euro is still the best option for central and eastern Europe’s EU members.
  • The two countries will not be able to sustain their export-led growth policies while inflation is boosted by QE II. Beyond that, the reduction of US deficits will further undermine Chinese and German exports, writes Charles Dumas of Lombard Street Research.
  • The ousting of long-time mayor Yury Luzhkov could pave the way for the sale of a number of prime assets owned by the Russian capital’s administration. Guy Norton reports.
  • Magnus Böcker has had a string of successful securities exchange mergers. Now chief executive of the Singapore Exchange, he hopes to conclude a fruitful merger with the Australian Stock Exchange. Chris Wright reports.
  • It has long been a feature of foreign banks’ attempts to break in to the Chinese market that they will go to any lengths to avoid offending the local regulators. Too many have seen their businesses set back by official reprimands, or faced the even worse fate of an unofficial but effective temporary blacklisting. Euromoney heard of a striking example of self-abnegation that took place recently at an event on the mainland. The senior banker involved told us the story (confirmed by somewhat shell-shocked colleagues) on condition that his firm would not be identified beyond it’s being a leading European bank. The banker was just returning from a lavish dinner on the night before the conference, only to be grabbed by a subordinate and rushed to a developing crisis in the event hall. The bank had set up its stall next to that of an important Chinese regulator. A senior official from that regulator remarked in passing that it was a shame that the foreign bank’s display stand was an inch or so higher than the regulator’s. Within minutes a delegation of very senior bankers from the foreign firm were gathered around the offending stand, contemplating its offensive elevation in horror and discussing solutions ranging from sawing off the top inch to just throwing the whole thing away. In the end, they worked feverishly to dismantle it and reassemble it safely at the far end of the event hall, where it could no longer loom over the Chinese regulator’s display. “It could have set our business in this country back five years,” the banker said sheepishly as he remembered the debacle.
  • Poor Vikram Pandit can’t catch a break. Despite Citi stock being up almost 44% over 2010, and profits and revenues on the rise as credit losses decrease, Pandit seems to get blamed for everything. In January, the Indian police reportedly filed a case against Pandit and other senior Citi executives because of an alleged $70 million fraud at a Citibank branch in a New Delhi suburb. Yet more bizarre – the fraud was supposedly reported to the police by Citi itself. But an accusation made in a bar menu in the East Village in New York City poses perhaps the biggest threat to Pandit’s good-guy reputation. He’s apparently lost Santa Claus’s retirement funds.
  • As much as bankers complain about politicians, the country’s biggest problem might be the banks themselves. Whoever is to blame, financial collapse could be just around the corner. Dominic O’Neill reports.
  • Searching for liquidity, high returns? As any bon vivant hedge fund manager will tell you the answer is Chateau Lafite, the wine from the Bordeaux estate owned by the Rothschild family since 1868. While your typical hedge fund recorded an average return of 7% last year, one specialist wine hedge fund, the clearly labelled Wine Investment Fund, returned almost 50%. Since its launch in 2003, this vintage fund has returned its investors the equivalent of 16%. What’s the story behind its success? High-rolling Chinese tycoons, who have a nose for Chateau Lafite and have been buying up bottles almost single-handedly. Some wine merchants claim almost every case they buy ends up in China. While this outstanding trade may be a play on China’s economic miracle, investors need to be wary of the odd bottle being corked. Can the economy continue on its upward trajectory for ever? For those looking for a new carry trade in 2011, wine may also be the ticket, rather than some high-yielding currency of the New World wine regions, such as New Zealand, South Africa or Australia, because it’s value keeps on increasing as the tycoons drink the supply away. Anyone who tries to tell you any different will be vinified.
  • Western bankers have paid a heavy price for their expansion into the further reaches of central and eastern Europe yet the region still offers potential for growth. With recovery on the way, will banking groups be able to resist making the same mistakes again? Lucy Fitzgeorge-Parker reports.
  • Central and eastern Europe is not a single entity when it comes to cash management. EU members in the region are committed to the union’s payment principles. By contrast, Russia and other non-EU states have much more ground to make up. Laurence Neville reports.
  • Basle III has been agreed and rubber-stamped in a remarkably short time. It might make the banking system more robust, but it has also ridden roughshod over some markets with near flawless reputations. One of them is Denmark, whose covered bond market is under threat. Hamish Risk reports
  • Hungary started its six-month stint as the rotating president of the 27-member European Union on January 1. In that post, Hungarian officials get to chair meetings of national ministers, including the closely watched monthly gathering of finance ministers. It’s certainly in the hot seat as the sovereign debt crisis lingers and markets speculate about the future of the euro as a currency bloc. A bloc that Hungary isn’t yet part of. A source tells Euromoney of a December meeting he attended in Brussels where he and others met with Hungarian officials. The source asked the Hungarians to give their views on the future of the euro. One official started with a diplomatic ramble about the importance of a strong currency for economic stability, then stopped mid-sentence. “Actually, we are not part of the euro, and so we don’t really care,” the diplomat continued, not so diplomatically.
  • As the financial sector enters 2011, evidence of the new austerity that the industry has embraced reaches Euromoney’s London offices. An invitation to a cocktail party by independent financial adviser Falcon Group greets us as we return from the Christmas break, delivered in the form of a bottle of champagne. Things can’t be that bad after all! Closer inspection reveals, however, that not only is the bottle a mere eight inches tall, it is... empty. Perhaps the elusive recovery in the sector will take longer after all.
  • “I suspect eventually it won’t be management who decide whether HSBC is based in the UK or elsewhere. It will be the major shareholders who will consider the cost of being in the UK, the return on equity and whether that justifies the investment that they have made in the company”
  • “They’ve simultaneously pulled off one of the most lucrative investments of all time, and crystallized a long-running missed opportunity. So, yes...tough one to evaluate”
  • This month there will be a changing of the guard at UK bank plc. I will be watching with interest as the new boys put on their bullet-proof vests and tin hats and go into battle.
  • Asia’s best-run companies are taking advantage of strong domestic growth to integrate and expand, while the tough global environment distracts their peers. Chinese and Indian companies are leading the charge. This year’s Euromoney best-managed companies in Asia survey highlights some of the region’s world-beaters. Lawrence White reports.
  • The EU’s European Stability Mechanism will make last resort funding for distressed sovereigns conditional on restructuring their debts. However, some restructuring specialists argue pre-emptive involvement with private sector creditors is the cheapest solution for all concerned. Hamish Risk reports.
  • New rules boost transparency; Goldman launches MTF
  • Investor appetite returns; Listed companies tipped to debut
  • If market confidence in the eurozone is to be restored, not just Greece and Ireland but also Portugal and Spain need the attention of the EU’s Financial Stability Facility.
  • Last month, Euromoney attended a reception celebrating a landmark anniversary for one of China’s leading financial institutions. The event was held in an historic London building and was attended by several dignitaries and luminaries of the investment world.
  • Airports deal ended year in style; Infrastructure issuance a rising trend
  • Observers of the Japanese government bond market are sounding a note of caution at the start of this year, amid concerns that the domestic investors that have propped up the market for so long might finally lose their nerve.
  • Success crucial for sovereign debt markets; Strong investor demand expected
  • Treasury secretary to make ruling in Q1; Risk mitigation duplicated, costs increased
  • Launches find it hard to raise capital; Investment banking salaries prove more appealing
  • On January 4 the World Bank became the first issuer this year in the developing offshore renminbi bond market, with an Rmb500 million ($75.8 million) 0.95% fixed-rate note due 2013.