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June 2010

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  • "You don’t get it. No one can fly. What do you want me to do? Go over there and blow it away?"
  • It’s a battle of bank research as the FIFA World Cup looms. Both JPMorgan and UBS have put out research notes predicting the winning team based on quantitative analysis. Contrary to the usual bank rhetoric of past performance not being an indicator of future performance, UBS is making its predictions based on just the opposite. The Swiss bank tips the most successful team, Brazil, to be the most likely to win the World Cup 2010, with Germany close behind and Italy (current trophy holder) as third most likely. JPMorgan, however, using mathematical models of market prices, FIFA rankings and historical results, has predicted a far more unlikely outcome of England winning the World Cup, with Spain second and the Netherlands third. According to JPMorgan’s quant team, Spain will knock out complete outsider Slovenia in the semi-finals. The analyst team admits, however, that the probability of their predictions coming true is only 52.5%. Euromoney’s head office in London is clearly rooting for JPMorgan.
  • "It does not solve the fundamental fiscal problems, but it gives countries several years for swift action"
  • The Asian Development Bank took its annual meeting to central Asia last month, as its many officials made the tricky trek from Manila to Tashkent, Uzbekistan. There was plenty to talk about: Greece’s impact on emerging markets, asset bubbles in Asia, and the wholesale boycott of the meeting by NGOs on the grounds of Uzbekistan’s human rights record. But one subject dominated delegate conversation: how thick is your brick? It’s a money thing. Uzbekistan’s currency, the som, comes in maximum denominations of 1,000, which is roughly equal to 65 US cents. Delegates prudently changing $100 into local cash were confronted with a som wad more than an inch thick. Those who thought ahead and changed $200 just in case found themselves without any combination of pockets able to accommodate their wealth. Worse still, delegates at the ADB were unable to change surplus currency at Tashkent airport when they left the country.
  • Hotel Chocolat, a UK confectioner, is seeking to raise £5 million ($7.2 million) by selling "chocolate bonds" to loyal customers, who will receive their coupon payments in chocolate, equivalent to a yield of 6.7%. It’s a novel idea in these cash-strapped times, a kind of hybrid barter system, so Euromoney decided to come up with its own mock menu for the European sovereign bond market. Greece could pay in moussaka, the Spanish perhaps in paella, Portugal with bacalhau, and the French in duck confit. As for Germany, well the obvious dish would be sauerkraut, but given its attempts to battle the forces of the financial markets head on, that might be too much of a double entendre.
  • It is perhaps proof of the strength of sentiment still aroused by the legal dispute between Maan Al Sanea and the defaulted Al Gosaibi family group in Saudi Arabia. Euromoney has received a series of emails regarding the case, in which the Al Gosaibi group has accused Al Sanea, the main figure behind the Saad group (which has also defaulted), of a fraud amounting to some $10 billion.
  • Last month, an email landed in Euromoney’s inbox from Gary Gorton, professor of management and finance at Yale School of Management. Publicizing his new book, Slapped by the Invisible Hand, the Panic of 2007, Gorton explains how the securitized banking system stood at the heart of the current financial crisis. Gorton describes himself as an authority on banking panics and the book comes weighed down by glowing reviews from the great and the good of the academic world.
  • The country’s SMEs have not suffered from the credit drought that has hit some other western economies. Things might get harder as the economy picks up, but lenders to the Mittelstand appear eager to stand by their customers. Philip Moore reports.
  • The balance between centralized and local processes in cash management is a complex issue that varies according to the special requirements of particular corporates. Users and providers discuss the issues in this roundtable.
  • In the midst of the big internal reshuffle at HSBC – with Patrick Nolan and Frank Slevin now running the Americas and Russell Julius moving to Hong Kong – one new appointment last month slipped by almost unnoticed.
  • A survey of 1,700 leading fixed income investors puts the French bank in pole position for credit research. But Barclays and JPMorgan are close behind.
  • The world’s largest borrowers in the international bond markets rate the products and services offered by the biggest deal arrangers.
  • European bank rehabilitation is at risk as funding markets are dislocated by the sovereign debt crisis. Will governments be forced to underwrite their lending again? And what does it mean for companies when the global economy is showing signs of recovery and default rates are falling? Hamish Risk reports.
  • Despite dropping in several of the regional rankings, AIU, now Chartis Insurance, ranked as the best insurer globally for the third year running in Euromoney’s insurance survey. The majority of last year’s top 10 global insurers remained in the top 10; the exception was Mapfre, which was ousted by Australia-headquartered QBE. Within the top 10, Axa made the most progress this year, jumping from seventh in 2009 to second in 2010.
  • Investment banking heads are confident that they can turn a government-sponsored trading boom into an enduring customer-based cash machine. Regulatory reform and renewed volatility threaten revenues, but the leaders think they have created a moat around their core earnings. Jon Macaskill reports.
  • Transaction banks face the double threat of falling cash balances at financial institutions and a changing regulatory environment. Laurence Neville reports on their efforts to keep ahead of the game.
  • Financial inflows have failed to transform the country into a dynamic, growth economy. However, its present crisis, which the government seems determined to solve, might be an opportunity to put in place reforms. Jeff Lewis reports.
  • The turbulent markets of the past two years have provided a unique challenge to debt issuers that can never be closed out of the market. Clive Horwood asked four of the world’s leading borrowing officials how they have maintained access throughout the crisis. From cooperative bonds to building their own banks, the best issuers continue to innovate.
  • After weathering the financial crisis better than most of its rivals, the bank is adopting an aggressive strategy in Asia. It has spent heavily and hired top talent, but getting the new generation to gel with the old won’t be easy. Lawrence White spoke to the heads of the main businesses.
  • The nightmare of being held against his will is finally over for David Proctor, the former chief executive of Al-Khaliji Bank. Reunited with his family, he can finally reveal the extent of his ordeal, and issues a stark warning to other finance professionals looking to do business in Qatar. Eric Ellis, the reporter who broke news of his plight, spoke to Proctor in Singapore.
  • The insurance industry needs to consolidate as regulatory pressures build and margins shrink. Yet last year M&A activity in the sector was at a record low. The beginning of 2010 looked promising, but if the Prudential/AIA deal does not succeed, will it signal to the market that it’s still not time? Helen Avery reports.
  • The Brazilian investment bank has hired some big-name bankers, many from UBS, and wants to develop business linking Latin America with European and Asian investors and corporates. Can its fruitful partnership structure survive if it undertakes an IPO? Chloe Hayward reports.
  • The regulatory bombshell of Basle III has resulted in an almost complete halt to hybrid tier 1 issuance. Banks now need to decide whether they can afford to wait on the sidelines or whether they should issue and let the regulatory chips fall where they may. Louise Bowman reports.
  • The German chancellor’s short-selling ban had no impact other than to increase speculation about the future of the eurozone.
  • For the briefest of moments the news of European Union plans to bail out eurozone members that could not meet their debt obligations brought a sense of calm to the market.
  • The EU’s single-currency system is under great stress but will not reach breaking point so long as Germany wants it to survive.
  • The attack of the machines or flash crash in US stocks on May 6 highlighted serious problems in the one corner of the markets that is supposedly an oasis of liquidity and transparency. This does not augur well for plans by regulators to push fixed-income markets such as credit towards electronic trading and settlement.
  • Exchanges might prove temporary fixes rather than permanent solutions.
  • Dubai World’s debt restructuring shows that orderly, voluntary agreements are the best solution to a crisis.
  • The region’s debt markets have withstood the convulsions in western Europe with surprising ease. Has the global perception of risk irrevocably changed or will the region eventually get caught up in the maelstrom? Sudip Roy reports.
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