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June 2000

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  • Who could have dreamt that Korean online trading, almost non-existent two years ago, could be almost as large as that of the US?" So asked Andrew Sheng, chairman of Hong Kong's Securities&Futures Commission (SFC) in an address to the local Securities Institute delivered earlier this spring. Although online trading is gathering momentum across Asia, the speed with which it has been embraced by Korean investors has been staggering. As a report published on Korea's "internet laboratory" by Lehman Brothers early in March commented: "Over just a one-year period, online trading has grown from 4% of market turnover to 45%. Twenty-nine out of 31 domestic brokers now offer online broking services, and two million Korean investors have gone online."
  • The proposed merger between the Deutsche Börse and the London Stock Exchange (LSE) is meant to reduce transaction costs and consolidate the fragmented European market for equities. This rather lopsided plan has to win the vote of all interested parties and many political obstacles stand in its way. Even if it falls through, the LSE is now in play and should make sure it sells out to the highest bidder.
  • The nature of sovereign debt reschedulings is changing as private sector bail-ins of diverse groups of bondholders replace the Brady-style deals that used to be negotiated between borrowers and tight groups of creditors. Lawyers have their work cut out.
  • Remember the "vanguard of the proletariat" - that Marxist/Leninist menace. It turns out that the vanguard part is alive, well and very successfully managing about $550 billion in mutual fund assets from a suburb of Philadelphia. The Vanguard Group is America's second largest mutual fund complex. Almost half of its assets are in various index funds.
  • My name is Leon and I am going to London". It may have surprised Leon but all 357 people on board the Heathrow-bound plane from Johannesburg were going to London. Right plane, wrong seat. Leon was going to sit next to me. He filled the chair comfortably. So much so that the occupants on either side of him braced themselves for the battle of the bulge.
  • Something has to give. Fannie Mae and Freddie Mac - America's colossal home mortgage securitizers - have been growing at about 11.5% per year. That's much faster than the market they serve: the underlying market for home mortgages in America is growing at only about 6% per year.
  • Issuer: Phillips Petroleum Co
  • The spilling over of Nasdaq volatility into emerging-market bonds has not amused their issuers. How can the fortunes of an internet start-up in Atlanta be intelligently compared with those of a tropical commodity producer, they ask, never mind that one is a company, the other a country?
  • In order to combat the Taiwan stock market's infamous volatility, oYcials in Taipei have come up with the idea of a National Stabilization Fund (NSF), whose job it is to intervene selectively and dampen down sharp stock market falls.
  • What do you give to a man who has everything? For her husband, Alison Lutnick chose a round of golf with Tiger Woods. For $51,000 husband Howard, CEO of inter-dealer broker Cantor Fitzgerald, joined three others in playing 18 holes with golfer Woods last month.
  • They're shark-infested investment waters out there. Nasdaq, the US tech sector index, continues to plunge and most indices worldwide are now well down for the year. The US March inflation figures started the rot, even though April's appeared more benign. Real GDP and employment cost data for the first quarter of 2000 show a red-hot economy with rising labour costs. It would have been difficult to invent a more bearish set of macro numbers. So it was no surprise that last month the US Federal Reserve hiked the interest rate by 50 basis points and indicated that it was ready to raise it again unless there were signs of a slowdown. There won't be, so expect another 50bp before the summer is over.
  • Wholesale financial services firms have made great play of their internet ventures in the last year, seeking to present themselves both as being internet-enabled and as pioneers in reshaping financial markets. Yet in reality few firms have done any more than take their traditional businesses and put them online. The true capacity of the internet to transform financial market structures has yet to be unleashed, although pure trading is changing fast. Maybe some of the self-styled pioneers want to hold this transforming power in check. They won't succeed for long, reports Antony Currie
  • The Asian Development Bank's May governors meeting included sessions where bankers spoke candidly about the problems faced by the region's financial sector.
  • Why can Polish companies raise $1 billion a year by floating new stock in Warsaw while their counterparts in Prague come up with zilch? Andrei Shleifer of Harvard University thinks he has the answer and presented some of his latest research, joint work with Edward Glaeser and Simon Johnson, at the US Federal Reserve last month.
  • It wasn't so long ago that fund managers, investors and equity analysts joked that Chile was like a popular make of cockroach trap that worked by luring the critter inside a box whose door wouldn't open outwards.
  • Dan Case couldn't do it. Roddy Fleming couldn't do it. Even Neal Garonzik, long-time friend of Chase CEO William Harrison, couldn't do it. Through all the quiet discussions to buy a top investment bank and the change of tack last year to build through smaller acquisitions, vice-chairman Jimmy Lee remained king of Chase's investment banking heap.
  • "If I were Euromoney editor, I would beat up on institutional investors for the insanity they've been creating," says Allan Kennedy. He has written a book, The end of shareholder value, about the embracing of this ethic and its adverse aVect on business practices. Kennedy has seen the "insanity" spread at close quarters. He held a top position with McKinsey.
  • What's the signiWcance of Merrill Lynch's decision to appoint a British banker, Kevan Watts, in London as co-head of its global investment banking group? "The location is clearly a large part of it but my background outside the US also played a role," Watts says. Watts joined Merrill in 1981 and spent 17 years toiling for it outside the US. He worked in advisory and Wnance for UK clients in the 1980s and recalls Xoating Euromoney in 1986 at £4.60 a share. "It's been a very successful company," he says.
  • Consolidation continues to shake up the tables as restructuring sweeps both developed and developing nations alike. Research by Andrew Newby.
  • Head of global technology banking, Merrill Lynch
  • The Spanish have proved themselves masters of the bank merger. Successfully integrating two differing cultural entities, the merged Banco Santander Central Hispano has within a year become a European force to be reckoned with. Neighbours take note.
  • The contrast could not have been greater. Each of the two 40-somethings heads one of Thailand's largest banks, having inherited their family mantles. Both have managed to keep their banks afloat during a tough three years that has seen other institutions collapse or be taken over by foreigners. Both also have degrees in chemical engineering from US universities.
  • Joint head of Global M&A at Commerzbank.
  • In 1998, Paribas had its best year in fixed income by a long distance and was the acknowledged king of the Ecu market, precursor to the soon-to-flourish euro debt market. Following the acquisition by BNP, however, many in Paribas' fixed-income division began to grow restless. Although Andrew Pisker, until recently BNP Paribas' deputy head of fixed income, says he "greatly enjoyed" his time at Paribas and "learnt a lot", it is reasonable to assume that he too began to feel less than settled.
  • How do you pick winners among the disorderly rabble of hedge funds, especially now that some of the greatest market wizards of all time have lost their nerve? Soros and Robertson have left the game. Macroeconomic models no longer convince. Yet armies of the true, non-directional, or market-protected, hedge fund managers are attracting new investors. And some traditional managers are copying their game. Isn't the industry becoming too respectable? David Shirreff reports