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June 2004

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  • BNP Paribas has long been a staunch supporter of tennis and is firmly connected with the French Open championships at Roland Garros in Paris. But the surprising success of Tim Henman this year will surely have raised Gallic eyebrows.
  • Free money and a profligate fiscal policy in the US have achieved the near impossible - job creation. But don't count on a sustained upswing and meanwhile look to equities as the asset of last resort.
  • Of the 10 countries to join the EU last month, Poland, Hungary and the Czech Republic have been identified as offering the most opportunities for wealth managers. According to a report by Datamonitor, the relatively high national savings ratios in the three countries offer an encouraging sign to banks looking at entering the wealth management sector in central and eastern Europe. "In comparison to the UK, with a national saving ratio of 13.1%, individuals in all three countries save, on average, a far greater proportion of their disposable income," says the report.
  • Investors panicked last month as fear spread that the US Federal Reserve would soon hike rates. Momentum players of the global reflation trade rushed to unwind positions in high-yield markets. Borrowers were forced to pull deals. The panic subsided as quickly as it arose and the sell-off failed to engulf global markets this time. What happens next?
  • The European high-yield market ran into volatility last month on fears of US interest rate rises. But it is not life threatening. Fundamentals look good: fewer defaults, more diversity in issuers and buyers, and landmark deals.
  • Central America's republics share the problem of heavy fiscal deficits, which incoming administrations hope to cure. Much is also expected of the implementation of a free trade agreement with the US.
  • When WestLB put the venerable but slightly dishevelled corporate broker Panmure Gordon up for sale in January 2004 it was probably rather surprised to find 35 bidders competing for the toy it had got bored with.
  • Portuguese banks got through last year's recession remarkably smoothly. But despite their strength, there's still talk of further consolidation. Quite how this would be achieved is not clear, particularly as the government is likely to resist further foreign involvement.
  • It all looked propitious for FDI. The World Bank/IFC was touting it, reforms favouring foreign investment had been put in place and the opening of talks for EU accession seemed assured. Enter the element of destabilizing surprise that Turkey specializes in.
  • Merrill Lynch is the corporate broking success story that everyone wants to replicate. This can clearly be seen from the fact that Morgan Stanley was not the first to decide to go shopping at Merrill for its corporate broking team.
  • Economic recovery in Japan is not expected to be accompanied by a rush of corporates to the bond markets. Many companies are still paying down debt and those that are borrowing can do so relatively cheaply through bank lending. Nevertheless, there are signs of growing activity from Japanese credits both domestically and in international markets.
  • M&A activity in Australia, which has the largest M&A market in the Asia Pacific ex-Japan region, is set to grow by 20% this year, according to JPMorgan.
  • It seems Bank of England governor Mervyn King?s love of football is catching on at the UK?s central bank.
  • By Fiona Maharg Bravo
  • There have been more rumours in the past two years that CSFB and Credit Suisse were about to be sold than there have been sightings of Elvis. And like the King of Rock 'n' Roll, these rumours just won't go away. The recent spate of commercial bank mergers in the US fuelled speculation, with Credit Suisse said to be hooking up with Deutsche Bank, Citigroup and, lately, HSBC.
  • Investment banks are bulking up their presence in mortgage lending, once the exclusive domain of their commercial and retail brethren. For some, such as Merrill Lynch, the advantage lies in being able to offer yet another financial product to its wealthy private clients.
  • Continuous Linked Settlement (CLS), the electronic settlement network for foreign exchange, is handling a growing proportion of transactions globally, according to a new report.
  • The family's toilet seat hangs on a nail in the shared bathroom. The man in the big room at the end of the corridor is always drunk. No-one cleans the kitchen properly. And the baby next door always cries in the middle of the night. Tens of thousands of Russians still live in communal apartments (komunalka) in buildings confiscated from the rich and given to the workers immediately after the revolution. Entire families are crushed into each room, with six or seven families to an apartment. The irony is that some have decent jobs but are unable to borrow from a bank, so moving remains beyond their reach.
  • There was great potential for confusion at Deutsche Bank?s London office one day last month. Standing in the grand reception area was a large sign bearing the words ?Welcome to Marks and Spencer?.
  • Six years of haggling came to an end last month when Russia and the EU finally signed off on a bilateral trade agreement that clears away a major obstacle in Russia?s efforts to join the World Trade Organization.
  • UK bankers depressed by the size of their last bonus should stop reading now. The news gets worse.
  • If you ask a trader to explain the emotional relationship he has with his positions, you will usually be met with a gruff rebuff.
  • As Euromoney's annual awards show, best borrowers come in all shapes and sizes, winning acclaim because of their investor appeal, tight pricing, good timing, or structural ingenuity. But, as Kathryn Tully reports, activists on the buy side are developing a more formal view of the basics of an investor-friendly issuer.
  • Seeking funds for a US acquisition, Royal Bank of Scotland filled the book for a £2.5 billion equity placing in one day. The money raised will part fund the purchase of US bank Charter One Financial.
  • The panic selling that hit high-yield bonds, high-yield currencies, and emerging-country debt and equity markets last month has utterly destroyed market consensus.
  • Igor Yurgens, executive secretary of the Russian Union of Industrialists and Entrepreneurs, is a little wistful. “We used to have regular meetings with president Putin, roundtable discussions, normally in the presence of the prime minister and chief of staff,” he says. “We delivered a message, and usually he listened attentively, then we prepared a draft law if required. Then we’d work through bilateral committees and commissions.” But invitations from the Kremlin have got scarcer. “There has been a pause since the Khordorkovsky case,” Yurgens says. “We haven’t had any of these roundtable discussions since June last year. We had a chance to express some of our concerns to the president at our congress in October 2003, and that’s it. So now we’re waiting for a new meeting. It’s supposed to take place this month, and we’re hoping the dialogue will be resumed there. But at the moment, it’s pretty tense.”
  • There is rarely much middle ground between deluge and drought in Hong Kong's IPO market, which is powered by a powerful but fickle wall of retail money. The failure of several high-profile issues has started to claim victims. With mainland China's increasing reliance on Hong Kong to absorb issues from its frantic restructuring efforts, a market closure could have a serious impact.
  • The International Swaps and Derivatives Association is writing to capital markets regulators in the Middle East to see whether its derivatives documentation can be used in Islamic jurisdictions.
  • Of all the global investment banks, UBS has perhaps the most unlikely provenance, rooted as it is in private-banking skills. After transformational acquisitions a new UBS has emerged that means business. Group CEO Peter Wuffli outlines its ambitions in Asia.