The credit market seizure vindicated a few brave hedge fund managers who had spotted the sub-prime crash coming, positioned themselves deftly, and made huge returns from it. These managers recount the challenges of deploying funds against the long-only herd, outline expectations for worse market disruptions ahead and analyze the public policy responses that threaten the potential returns of many investors now seeking to profit from distress. Peter Lee reports.

Singapore has made great strides as a private banking centre, attracting almost every bank that matters to set up shop there to service the region’s rich. But recent developments in Burma (Myanmar) suggest that the city state’s financial success has come with a string attached to it: increasing scrutiny of its morality.

The summer’s financial crisis has helped materialize in the markets a distinction between covered bonds and structured covered bonds that had been a matter of debate for some time. Philip Moore reports.

The credit crunch fundamentally altered the cash bond/CDS dynamic. As more and more managers are forced to turn to CDS to hedge their bond portfolios, will we ever see a return to highly liquid cash markets? Jethro Wookey reports.

The collapse of structured finance issuance has significant implications for the financing of assets such as mortgage loans but has also dramatically changed the nature of the traditional investment-grade bond business in America. Alex Chambers reports.

Kazakhstan looks set to be the CIS region’s biggest victim of the fallout from the problems in the US sub-prime mortgage market, with the country’s banks seen as the most vulnerable in the Commonwealth of Independent States to any reduction in global liquidity. In recent weeks, the country has been hit by ratings downgrades, whipsawing bond and equity prices, and pressure on the currency. Furthermore, the track record of the banking regulators – previously regarded as the best in the region – is now beginning to look tarnished.

Royal Bank of Canada has launched its €15 billion covered bond programme with a jumbo issue in the European covered bond market. The deal is Canada’s first ever covered bond.

The Cairo and Alexandria Stock Exchange (Case) has launched a new exchange for small and medium-sized enterprises. Case has established several new trading capabilities in the past two years, such as margin trading, online trading and short-selling. Case also plans to launch a derivatives exchange late next year. "We would like to see our derivatives market competing with other emerging markets," says Maged Shawky Sourial, chairman of Case since 2005.

If hedge funds have increased systemic risk, we need to find out by how much and whether the benefits outweigh the risks, says Andrew Lo and Amir Khandani’s paper on quants (see story on page 42). But registration is not the way forward. The authors back up proposals made by other academics that instead a monitoring board would make a good starting point. "By establishing a dedicated and experienced team of forensic accountants, lawyers, and financial engineers to monitor various aspects of systemic risk in the financial system, and by studying every financial blow-up and developing guidelines for improving our methods and models a capital markets safety board may be a more direct way to deal with the systemic risks of the hedge fund industry," concludes the paper. "A great idea," comments one manager, "but the banks will never allow it."

Evolvence Capital, a Dubai alternative investment company, is on track to raise $150 million for what it claims is the region’s first hedge fund when it closes to investment next month.

Economic growth, stability, market reform and liberalization have led to a Latin American investors into Chile, Colombia and Peru. Leticia Lozano reports.

Interest in emerging market high-yield debt is at an all-time high.

In October Venezuela’s president, Hugo Chávez, signed a number of new economic cooperation agreements in Havana with Raul Castro, the island’s temporary leader, in a move to reaffirm the countries’ anti-US alliance and strengthen their bilateral ties.

180,600,000,000 the dollar amount of equity capital raised in Bric countries (Brazil, Russia, India and China) so far this year. The total is up 137% on the same period in 2006 thanks to record volumes across all Bric markets.

Global liquidity is set to keep contracting and inflation will keep on increasing despite a growth slowdown. There is a serious risk of global recession in 2008.

Mifid came into effect on November 1 but the market had already been benefiting from the innovation it encourages. Peter Koh reports.

The Hedge Fund Working Group, a UK group of managers headed by Andrew Large, has released its extensive guide to best practices for hedge funds that it hopes will encourage a global standard.

Many have struggled to beat regular equity market returns, especially after liquidity crisis, says research.

The NFA is seeking to up the ante in its fight against the bucket shops that tarnish the US retail FX market.

Kaupthing Bank and the state-owned Export-Import Bank of Korea both launched Mexican peso issues in October. The Export-Import bank issued a Ps1 billion ($92 million) 10-year bond. The Icelandic bank launched a Ps2.3 billion bond transaction on October 10 to become the first Nordic bank to do a public issue in Mexico. The deal was led by BBVA Bancomer and Lehman Brothers and aimed at diversifying the bank’s funding sources.

According to Olivier LeMarois, CEO of Riskdata, equity market neutral funds’ reliance on one risk model for both trading and risk management exacerbated their losses in the summer.

A growing number of superannuation funds in Australia are turning away from funds of hedge funds and external advisers to set up hedge fund manager selection capabilities in house.

They are serious events but the IMF-World Bank meetings always leave plenty of room for frivolities. Investment banks compete to lay on the most lavish parties. Huge amounts are spent to attract the great and the good.

In March, Taiwan’s voters will go to the polls, and as ever the issue of cross-strait relations with mainland China will be key. And few groups will have more at stake than Taiwan’s banking sector.

Icap’s announcement on October that it was buying Traiana, a held company that specializes in automated post-trade processing services, triggered some talk that the broker was looking to challenge CLS, the regulator-sponsored settlement utility. Not surprisingly, Icap was swift to play this down.

The Euromoney debt trading poll is in its second year, and quite a year it has been. Twelve months ago credit houses were hosing their customers with liquidity in a market awash with happy traders. The action had moved out of the cash market and into a thriving derivatives sector. Structured products and indices were flourishing. "You are no longer a bond trader," Henrik Raber, head of credit trading at UBS, was saying to his staff. "You are a trader in multiple asset classes."

"We want to be the Singapore of Europe." That’s the striking slogan employed by Gligor Tashkovich, Macedonia’s minister of foreign investment. Speaking at Euromoney’s Regional Finance & Investment for South East Europe Conference in Dubrovnik, Croatia, Tashkovich told delegates that the Balkan republic is pulling out all the stops in an attempt to secure the necessary foreign funds to help turn the country into a centre for hi-tech assembly and manufacturing. Tashkovich says that the centre-right government that came to power in late August 2006 is slashing its way through red tape and providing special incentives that it believes will transform Macedonia from a still primarily agrarian economy to one that is more knowledge-based.

Monte Kristo Capital of the UK is the latest foreign entrant to the burgeoning Georgian banking market, having bought a 70% stake in Tetri Bank for an undisclosed sum. Following the deal, Tetri Bank, the country’s 16th biggest bank by assets, will be renamed First British Bank. Monte Kristo’s move is the latest in a series of acquisitions by foreign banking groups in recent months. France’s Société Générale, Russia’s VTB and Ukraine’s Privatbank have all bought banks in the Caucasian republic.

What was hailed as a great success for the credit derivatives market, the tackling of the unconfirmed transaction backlog, has turned out to be far from a mission accomplished.

The reaction to JPMorgan, Bank of America and Citi’s proposals to launch a super-SIV called M-LEC to solve the liquidity crisis in the ABCP sector has been an equal mix of enthusiasm and cynicism.