Euromoney, is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

November 2008

all page content

all page content

Main body page content


  • Under pressure from investors to put money to work, private equity firms are reconsidering the structure of their investment strategies.
  • Giulio Tremonti, Italy’s finance minister, caused something of a PR nightmare when he announced at a G8 meeting in Washington that he would consider banning hedge funds in Italy. He added that hedge funds were opaque and problematic. "Clearly he is crazy," says the head of a prime brokerage. The Alternative Investment Management Association and the Managed Funds Association were more diplomatic, responding jointly: "It is too easy to point a finger at an industry that is misunderstood; hedge funds are not an appropriate scapegoat during a crisis that was caused by failures in the regulated banking system. The hedge fund industry in Italy is a model of successful regulation, provides excellent risk-adjusted returns for investors and is an important source for job creation. It would be a serious mistake to consider eliminating these innovative private pools of capital that are, in fact, an essential source of capital to investors, to Italy and to the global economy."
  • News that ICE is to relaunch its FX contracts gets a cool reception.
  • "This is a profound ethical issue. These are very sophisticated operations where the counterparty was not a hedge fund – it was not even a financial institution. Should a grocery chain be selling volatility protection?"
  • In the September issue of Euromoney, in an article about Turkey entitled It’s about the journey, not the destination, we wrongly attributed a quote to Ceren Akdag of Yapi Kredi. We would like to point out that these comments were not made by Ms Akdag nor anyone else at Yapi Kredi, and apologise for the error.
  • The huge losses being reported by corporates from emerging markets around the world suggest that not all is as rosy in FX as might have been reported.
  • Investors in convertible bonds have been washed out by the storm in debt, equity and derivatives markets, so potential issuers are having to look to other buyers.
  • The collapse of Lehman Brothers has made investors wary of derivatives-based investments, but the US structured notes industry remains confident the market will grow.
  • Bank of America is due to close its acquisition of Merrill Lynch in March 2009 but it is still not clear what it plans to do with Merrill’s Latin American business.
  • Costa Rican pension funds are in desperate need of more local investable securities, according to senior bankers in San José.
  • Hungary reached agreement on a $25.1 billion rescue package last month from a number of multilaterals, including the IMF. The money will be used to help Hungary shore up its financial system, battered by the international crisis. Hungary’s reliance on external debt has made it especially vulnerable with the forint down 20% against the dollar and euro in the past month.
  • In late October, the upper house of parliament in Kazakhstan passed the latest amendments to a law designed to bolster confidence in the central Asian republic’s banking sector, which has been buffeted by the global credit crunch. This, in turn, has choked off the supply of cheap foreign currency debt that had fuelled the rapid expansion of Kazakh banks’ networks and lending portfolios in recent years.
  • As the global financial crisis begins to take its toll in Latin America, several banks are starting to look towards private equity opportunities. "Investment banks are very creative at finding ways to charge fees," says Matt Cole, managing director at North Bay Equity Partners, a Latin America focused private equity house. "In 2006/07 the investment banks encouraged companies to list on the stock exchange. Now the banks are starting to pitch private equity deals rather than public equity deals." Antonio Neto, debt banker at HSBC, says: "It makes sense for the investment banks to consider private equity investments when the capital markets are so quiet."
  • Venezuelan President Hugo Chavez said last month that oil prices, which have dropped by half in the last few months, will probably keep falling as the US falls into recession.
  • Mid-caps starved of operational and growth capital have new lenders.
  • 63,300,000,000 the amount in dollars of equity capital raised by financial institutions in the third quarter of 2008. The quarterly amount is the second highest on record after the second quarter of 2008, when financial institutions raised a record $109.1 billion. Finance sector ECM deals accounted for nearly half of the total volume of transactions in the third quarter.
  • Excuse the cliché, but there is a silver lining in the cloud hanging over hedge funds. Many are destined to shut down. But that means more opportunity for those that survive, argues Neil Wilson.
  • Russia, Iran and Qatar have signed a framework agreement with a view to establishing a gas cartel. Commenting on the deal, Alexei Miller, chief executive of Russian gas company Gazprom, says: "We have decided to have closer contacts, and it can be said that a large gas trio has been formed." It remains to be seen if the new agreement will extend beyond ensuring commonly agreed production targets into regulating gas prices on the world market as Opec does for the oil market.
  • HSBC is buying 88.89% of Indonesia’s Bank Ekonomi for $607.5 million in cash, almost doubling the bank’s network in the country. The offer of Rp2,452 a share was a 29% premium on the bank’s stock price at the time of the offer; the shares rose rapidly on news of the deal.
  • Cash-strapped Pakistan is trying every trick in the book to stave off a humiliating default on its mountain of foreign borrowings and inject some life into its moribund share markets. Mirroring the financial crisis elsewhere, the State Bank of Pakistan on October 16 moved to inject liquidity into the country’s financial system, cutting the cash reserve ratio – the amount banks are required to hold in reserve – by two percentage points, to 6%, and promising a further one percentage point cut by November 15. SBP governor Shamshad Akhtar promised the country’s embattled bankers that the move would immediately inject up to Rs180 billion ($2.2 billion) into the banking system, with a further Rs90 billion in capital to be freed up "at a later date".
  • China’s cabinet has approved a capital injection into ailing state lender Agricultural Bank of China, priming it for an initial public offering in late 2009 or 2010. In addition, $150 billion to $200 billion of failed loans will be sucked out of ABC, which was set up in 1979 to provide financing to China’s 800 million farmers, and stored in one or several of the country’s leading asset management companies. In a year full of record bail-outs, the capital injection will be provided by Central Huijin, a division of China Investment Corporation (CIC), Beijing’s sovereign wealth fund, ABC vice-president Pan Gongsheng told a press conference on October 22. Set up in 2005 to oversee the bail-out of other leading Chinese banks, Central Huijin will take a 50% stake in ABC, with the remainder to be held by the country’s finance ministry. The bank will also seek further capital – as well as much-needed management and risk-control expertise – from one or more foreign lenders, who will buy a strategic stake in the lender before its IPO.
  • The people of Nigeria’s oil-rich Niger delta have yet to see many benefits of the natural resources under their feet. But Rotimi Amaechi, governor of Rivers State, the most populous delta state, is trumpeting the measures he is taking to improve his state’s infrastructural deficiencies. He tells Euromoney that in Nigeria’s federal system, the 36 states get 30% of government revenue, while the nine delta states get additional cash thanks to their importance in the country’s petrochemicals industry.
  • Difficult market conditions cost the hedge fund industry $210 billion over the third quarter, according to Hedge Fund Research. Of that, $31 billion was in outflows as investors pulled money out. The entire industry, which was thought to hit $2 trillion last year, is now at $1.72 trillion, says HFR.
  • A good deal has already been written about the relatively high cost, at least when compared with many other markets, of processing trades in foreign exchange.
  • Commerzbank has confirmed market rumours that two senior figures from Dresdner Kleinwort will not now be joining it. Staff were told that Eddie Listorti, Dresdner’s head of FICC, and Stefan Gütter, its head of sales, would have senior roles at the new, enlarged bank when the takeover is completed in Q3 of 2009. The two were involved in pre-integration planning. Their decision will no doubt lead to a good deal of uncertainty among their existing staff at Dresdner.
  • The Loan Market Association held its inaugural conference in London on October 16. It was packed meeting of market participants looked for reasons to be optimistic amidst the gloom. The programme featured panel discussions designed to shine some light in the darkness: how to revitalize the primary market; where the liquidity safe havens are; how to invest in distressed debt.
  • When structured products started turning into four-letter words, investors should have taken heed.
  • Pension system nationalization announced last month brings country ‘closer to the abyss’.
  • Hedge funds are resorting to fee cuts in an attempt to discourage investors from redemptions. Ramius Capital, which has two funds totalling $11 billion in assets, reduced its incentive fee last month from 20% to 15% for current investors who agree to leave their money in its funds. Those investors would enjoy the lower fees until the end of 2010. Investors that add capital won’t pay an incentive fee on the additional funds until the beginning of 2010.
  • Mitsubishi UFJ Financial Group closed its $9 billion investment in Morgan Stanley on October 13, ending speculation that the deal might not go ahead. The terms of the deal were more favourable to the Japanese institution than had originally been agreed, reflecting Morgan Stanley’s troubles. Rather than spending $3 billion of the total on ordinary shares at $25.25 each and the rest on convertible preferred shares with a conversion price of $31.25, MUFG will get a total of $7.8 billion-worth of the convertible preferred shares converting at $25.25 and the remaining $1.2 billion in preferred shares. The new deal offers substantially more protection for MUFG on its investment since preferred shares offer a fixed yield and their holders rank above common equity owners.