June 2013
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LATEST ARTICLES
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"Corporates that issue hybrids get part equity treatment which enables their senior bonds to get a higher rating or for their rating to be protected. But another way of looking at it is that the corporate now has more debt so the probability of default is higher. This is a ratings and rules arbitrage. If you are going to play in this market you had better understand the motivations behind that arbitrage"
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Last month, poor first-quarter growth figures showed the French economy entering triple-dip recession, while the EU postponed until 2015 the 3% of GDP fiscal deficit target, at the same time increasing pressure on the government of François Hollande to enact structural reforms of in pensions and the labour and product markets.
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Euromoney received votes from 1,107 investors nominating the best borrowers in the international debt capital markets, a ranking traditionally dominated by the highest-quality sovereign borrowers, supranationals and agencies and frequent corporate issuers. The biggest riser in the ranking this year, up to 11th position from 33rd last year, is the European Financial Stability Facility (EFSF), which funds the debt issued to bail out Greece, Ireland and Portugal.
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Activity in primary debt capital markets has never been greater. DCM desks are having record years. Investors are faced with a quandary: stay in, and stay with the rally; or try to get out, before the market turns. But those considering the latter option may be caught out. Even borrowers are getting worried about liquidity in the secondary markets.
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The young up-start is giving bigger Nordic investment banks a run for their money. The firm’s CEO reckons its size and a commitment to local research have been an advantage in adapting to the changing climate of the region’s capital markets.
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I am sure Jamie Dimon considers the hoo-ha about splitting the chief executive and chairman roles at JPMorgan to be an over-reaction.
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In his last public appearance as the head of investment banking at Barclays, Rich Ricci thanked clients who have stuck by the bank in the aftermath of the Libor scandal by inviting them to a performance of the wonderful Conor McPherson play, The Weir, at the Donmar Warehouse in London’s Covent Garden.
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Dominique Strauss-Kahn, or DSK as he likes to style himself, has made an unusual comeback to the economic scene. After a two-year hiatus following charges of sexual assault in a swanky New York hotel room, Strauss-Kahn has decided to take things back to basics. In South Sudan.
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Worrying news from the world of academia: a professor at Warwick Business School has found that some investors refer to stocks 'almost as if they were lovers'.
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Municipal and regional governments are trying to build new investor bases in the teeth of the eurozone crisis. And they’re having success, not least in the Nordic region, which could provide a template for other parts of Europe.
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The popularity of some seemingly high-risk frontier bond issues suggests investors are driven by the need to fill index allocations rather than issuer quality. It also suggests the traditional market-capitalization approach of indices needs reconsideration.
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One impact of the current economic and regulatory environment is that correspondent banking – the provision of services to other banks to enable them to service their own clients – is facing a shake-up.
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Competition in US debt capital markets remains fierce despite pressure on European banks to retrench from capital-intensive business lines. Faced with regulatory and funding headwinds, European banks insist they are staying put, and other non-US banks are joining them in the world’s biggest debt market.
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Returning to the category of imperial CEOs, most would agree that Bob Diamond, the former Barclays chief, was an earlier poster boy: a Do-it-my-way-or-take-the-highway kind of boss.
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Government considers reforms, including nationalization; Private managers reject profiteering claims
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There is just about enough global growth activity to sustain growth-dependent assets. But stagnating Europe remains the weak link that could disrupt peaceful progress.
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15 companies slated for privatization; Eyes on Russian, Turkish buyers
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Banks need to be better regulated. But a financial transactions tax is more than wrongheaded. As currently formulated, it would be hugely damaging.
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Bloomberg brought a knife to a gunfight when it tried to pry information out of Goldman Sachs by using details gathered from the data and media firm’s terminals about the bank’s employees. An enquiry by a Bloomberg reporter about whether a partner had left Goldman, given that his terminal was not in regular use, set alarms bells ringing at a bank that has a well-deserved reputation for paranoia.
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A seasoned source told me a few months ago that Diamond’s tenure was abruptly terminated because "He was foreign! In this new era of heightened public scrutiny and domineering regulators," the source sighed, "your cultural values and background have to be aligned with those of the national authorities. If your face doesn’t fit and there’s a setback, you are out. It happened to Bob and it happened to Vikram Pandit at Citi. Anshu Jain, over at Deutsche, needs to watch out."
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The country’s recent sovereign bond might or might not amount to a return to full market access, but it is certainly a positive development. Its progress on its economy and the state of its banks is equally crucial.
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With fresh signs of political and legislative progress, there is a renewed sense of optimism around the country after more than a year of political posturing that cast a pall over the nation and put the brakes on foreign direct investment that sent asset prices tumbling.
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Corporate hybrids are booming, thanks to surging appetite from investors in Asia and Europe – and potentially even the US. These deals offer a great pick-up over anaemic senior spreads. But are buyers turning a blind eye to the risks in their hunt for yield?
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Japan’s Seibu Holdings and US private equity house Cerberus are at each other’s throats. Cerberus claims that it can improve Seibu’s management; Seibu’s other stakeholders say Cerberus is a vulture fund intent on asset stripping.
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Private equity pioneers admit they’ve made mistakes. Now, they’re struggling to raise new funds, but they are not giving up. New sectors and revised exit strategies will be key to the next wave of deals.
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The country’s rapidly growing SMEs urgently need funding avenues other than those provided by the country’s banks. Some new options are beginning to emerge to solve that conundrum.
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What comes first for transaction banks? Their financial institutions clients want them to help meet new challenges – especially around regulation and depressed earnings – through innovating new products. But the big cash managers find most of their technology budgets focused on dealing with regulatory burdens.
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QInvest bid for EFG Hermes collapses; New buyouts show what is possible
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Televisa takes up global peso structure; Femsa returns to international market
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High capital ratio now a key part of strategy; new issue might help meet US demand.
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Halfway through the second quarter of 2013, global investment banking revenues had reached $25.7 billion, some 14% ahead of the average year-to-date total over the past 10 years. Debt capital markets revenue is running at a record level, having hit $9.2 billion between the start of 2013 and mid-May. Syndicated loan revenue is markedly up on the same period in 2012, as is global equity capital markets revenue for the banks as IPOs return. Only M&A remains quiet.
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More common sense, along the lines of the EC reversal of proposed pension-funding rules, needs to prevail in financial services regulation.
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Tentative recovery gains momentum; Choppy trading persists
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Asian bond issues are attracting levels of over-subscription that are taxing bankers already squeezed by inflation in bookrunner numbers.
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Having lobbied hard against most new financial regulation for the past five years, the banking industry’s valid objections to the proposed financial transaction (Tobin) tax risk falling on deaf ears.
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CMA looking at foreign access; Revenues lagging UAE
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Rights of residence in Australia might not be enough to entice Chinese investment; hefty taxes on mining are a deterrent.
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Clear pathway to resolution; market ‘massively’ underpricing uncertainty.
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Big deals come thick and fast from the EU periphery; Italy monitors US dollar market
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Buyout firms struggle with first closes; exits remain tricky, extending holding period of portfolio assets.
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Danger of ‘Lehman-type event’; advocates US model of receivership.
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ING IPO ‘eye opener’ for other European FIs; RBS Citizens sell-off might be advanced.
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Sprint considering rival offer; Raine leads Softbank advisers
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Local banks outgun global leads; Brasil Plural the latest ECM contender
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Qatar’s investment in VTB helps future deals between Russia and the Gulf, but relations will remain difficult.
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Firm seen as ‘catalyst for consolidation’; Fierce competition driving down fees
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BBVA’s additional tier 1 capital raising generated an astonishing €9 billion of orders, prompting bankers to proclaim it the opening of a big new market. But the staggering array and complexity of conversion triggers contained in the deal has set off alarm bells among investors.
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QE has created ‘drugged’ environment; prime risk is that of economic recovery.
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At the Chelsea Flower Show in London last month, the floral displays were not the only brilliant thing catching the attention of throngs of visitors.
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Jamie Dimon comfortably survived an attempt to split his combined chairman and CEO role at JPMorgan, which will allow him to set the terms of his eventual departure from the bank. He should start by appointing a president to give a potential successor a trial run.
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Ramin Toloui, global co-head of emerging markets, explains what GDP-weighted indices have meant for his firm Pimco.
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The Australian dollar, once the darling of currency investors, has fallen firmly out of favour, with the pace of the move taking many by surprise.
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HSBC’s Flint sees tension rise between home and host regulators; Deutsche says balkanization threatens financial stability.