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May 2008

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  • Foreign exchange has arguably held up better than any other financial market in the fallout from the sub-prime crisis. Will its robustness result in it being taken more seriously as both a business and as an asset class? And which banks have fared best in Euromoney’s benchmark industry poll?
  • Ukraine’s financial institutions are thriving despite renewed political upheaval. A surge in M&A and IPO activity could be the next stage.
  • Sepa came into being in January but there is still much work to be done before the full benefits come through for banks and corporate customers. What are the main threats or opportunities of the developments? What obstacles have to be overcome? Euromoney’s debate panel wrestles with the key issues.
  • Osman Semerci, Merrill Lynch’s former global head of fixed income, currencies and commodities, and co-president of the EMEA global markets and investment banking business, has joined $1.7 billion alternatives group Duet as its chief executive. Duet Group, which started in 2002 with just $10 million in a single fund, now has 14 funds, and is looking to further expand its range of strategies, in addition to growing its private equity business.
  • Kazakhstan’s banks have built up onerous debt repayments after a splurge of Eurobond issuance. Are they facing a liquidity crunch?
  • Mongolia’s most profitable bank is considering accessing the capital markets later this year, according to its chief executive, Peter Morrow.
  • Conifer Securities, which provides back- and middle-office solutions to hedge funds, family offices and endowments, has bought Morgan Stanley’s outsourced trading business. The platform provides independent trade execution in equities, options and ETFs to Morgan Stanley’s prime brokerage hedge fund clients. Conifer has also recently hired UBS’s former head of prime brokerage for the Americas, Dick Del Bello, as a senior partner.
  • Bad infrastructure, a weak economy and vulnerable financial assets – but bankers in South Africa remain confident.
  • Tradeweb has unveiled an electronic market for deposits. The platform’s management say that Tradeweb Deposit will support the placement of new and maturing deposits in euro, sterling, dollar, Swiss franc and yen. The timing of this launch comes just as the focus on the money markets has sharpened as discrepancies between the reported fixing of the interbank offered rate and the real level of bank funding have emerged. The new offering has been running on beta since January and 1,500 placements had already been conducted as of April 22. Tradeweb’s belief that electronic trading will help price transparency in the market will no doubt be challenged by the leading brokers. But the benefits of e-finance around processing are less disputed.
  • The Eurasian Development Bank, which was founded in 2006 to finance infrastructure projects in Russia and Kazakhstan, is to expand its remit to include investments in financial institutions, according to its chairman.
  • Liquidity remains the primary challenge in the present environment, meaning that few credit managers have ventured beyond the relatively liquid credit derivative indices. Managers including BlueCrest, Cairn Capital, CQS and Pimco are all seeking to take advantage of the unique opportunities the dislocation in the credit market has created, say market participants.
  • Figures released by Isda during April show that the notional amount of credit default swaps outstanding during 2007 grew by 37% from the first half of the year to the second half. After the first six months of 2007 – before problems in the US sub-prime mortgage market tipped the credit markets into turmoil – there were $45.5 trillion of CDS outstanding but by the end of the year there were $62.2 billion. CDS notional growth for the whole year was a full 81%. The figures are a stark illustration of the extent to which CDS were embraced as a means of hedging credit risk when the markets turned.
  • Competition between trading venues is leading to soaring trading volumes in Europe. Brokers are reaping the benefits and incumbent exchanges have yet to feel any pain, despite the success of new competitors.
  • It is too early to call the end of the credit crunch but evidence that the crisis is not worsening, if not starting to ease, was in abundance last month. If March marked the lowest point in the financial crisis, the first half of April gave ample reasons to believe that sentiment is improving – at least in the short term.
  • Barclays Capital has poached Adrian McGowan from Deutsche Bank, where he was head of FX complex risk, to head its FX business in Asia. McGowan will be based in Singapore and report to Ivan Ritossa, the bank’s head of global markets – trading, Asia Pacific, and global head of FX and prime services.
  • Standard Chartered Bank has made three senior appointments of former Lehman Brothers staff to boost its financial markets management team. Remy Klammers becomes the bank’s new global head of fixed-income trading with responsibility for FX, rates, credit and structured products trading. Klammers reports to Lenny Feder, the bank’s group head of financial markets. Klammers was previously managing director of structured products Asia at Lehman. He is being joined by Alexis Suzat, who has been appointed as global head of structured products trading, and Marten Agren, who joins as global head of modelling and analytics group, financial markets.
  • UniCredit Markets and Investment Banking has hired Xavier Alexandre as its head of e-commerce and electronic trading for FICC. The bank has yet to finalize the reporting lines for this new position. Alexandre will be based in London.
  • Retail FX provider Oanda is building up its presence in Asia following the recent appointment of K Duker as its managing director for Asia Pacific. The company has hired Maxine Loh, formerly a marketing director at UBS; Zena Tong, formerly a senior sales executive at Saxo Bank; and Tracey Tan, who was a senior customer service executive at Bloomberg, to work out of its Singapore office.
  • The Bank of England levelled the playing field for UK financial institutions last month when it followed the lead of the Federal Reserve and provided a facility for domestic banks and building societies to refinance mortgage-backed bonds for government bonds. Continental European banks have long been able to use the European Central Bank’s repo facility for their mortgage-backed securities. Until the European securitization market shut down, UK banks were by far its biggest users – accounting for between 40% and 50% of annual issuance over the past three years alone. The Bank of England has carefully constructed its programme to ensure that banks retain all credit risk.
  • The rise of alternative beta strategies seems inevitable as investors chase greater levels of diversification in their portfolios. What are the secrets of alternative beta’s success and what obstacles can still impede its progress?
  • The sideways, low-volatility markets of the past two years are gone, so how should investors review their currency management strategies? Should they consider shifting mandates from quant to discretionary? And should capital preservation take over from return maximization?
  • UBS has done a service to all investors in bank stocks and bonds by making public the report requested by the Swiss Federal Banking Commission into the root causes of its sub-prime losses.
  • If you’re sick of hearing about Goldman Sachs beating the competition, look away now. Euromoney has conducted its first (somewhat unscientific) poll of investment banks’ online popularity as measured on social networking site Facebook, and the US firm has won by a clear margin. Facebook allows companies to create ‘fan’ pages: "...a unique experience where users can become more deeply connected with your business or brand. Users can express their support by adding themselves as a fan, writing on your Wall, uploading photos and joining other fans in discussion groups."
  • As part of Man Investments’ plan to expand its range, the firm has joined its European credit manager, Pemba Credit Advisors, with Ore Hill, a US credit specialist. Man has taken a 50% stake in Ore Hill, and Ore Hill has taken a 50% stake in Pemba.
  • The fuller acceptance of volatility as an asset has moved closer with a new range of investable indices.
  • The Bank of England’s special liquidity scheme does nothing that hasn’t already been done by the Fed and the ECB – except on more onerous terms.
  • The grip of the credit crunch seems to be easing for Brazilian corporates wanting to issue debt. This optimism from Brazil is in line with the rest of Latin America, where the debt market fog is clearing.
  • In April, Instinet added Korea to the growing list of markets where it operates alternative trading systems.
  • The African Development Bank issued its third bond on the Bond Exchange of South Africa last month. The rand-denominated bond, the ADB03S, together with the ADB01S and ADB02S, which were issued in December 2007, total $408 million. Standard Bank managed and placed the issue. AfDB’s shareholders include 53 African countries and 24 countries from the Americas, Asia, and Europe.
  • So much for Kenya’s Kibaki/Odinga rivalry derailing the Africa boom.