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November 2008

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  • 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.
  • 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.
  • 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.
  • Under pressure from investors to put money to work, private equity firms are reconsidering the structure of their investment strategies.
  • 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.
  • Seesawing markets set a number of records over the four weeks between mid-September and mid-October, including:
  • News that ICE is to relaunch its FX contracts gets a cool reception.
  • 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.
  • 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.
  • 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".
  • IMF loan may not be enough to stave off banking and currency collapse.
  • 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.
  • Until now, the most famous thing the small Australian wheatbelt community of Parkes could boast was a massive radio telescope on the outskirts of town known locally, with typical Australian reduction, as ‘The dish’. Nationally recognizable, the dish was the one thing that connected Parkes and, by extension, Australia, to the world and beyond. Moonshots have been traced and tracked from Parkes. Visiting US citizens – astronauts and their counterparts from Nasa – would periodically add foreign dash to Parkes’s determinedly middle-Australia ethos.
  • Despite turmoil in the global stock markets, Cambodia is pressing on with its plans to open a stock exchange in late 2009. A note from Leopard Cambodia, a private fund that invests in the country, confirms that the currency of the exchange will be US dollars and that "the newly announced listing criteria include two years of profitability, $1 million paid-up capital or $2 million shareholders’ equity, and 100+ shareholders or 10% free float".
  • 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.
  • 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.
  • Pension system nationalization announced last month brings country ‘closer to the abyss’.
  • 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.
  • 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."
  • Citadel has hired Rohit d’Souza, former global head of equities and alternative investments at Merrill Lynch, to expand the firm’s capital markets business. Citadel’s capital markets businesses execute and route more than 30% of average US listed equity options trading volume, and more than 8% of average Nasdaq and NYSE equities volume.
  • 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.
  • Almost two-thirds of asset managers at buy-side firms in the US believe the continuing credit crisis is having a big impact on the trading of over-the-counter derivatives, according to research and consultancy firm Tabb Group. Meanwhile, 57% say the leading impact of the credit crisis is an increased focus on counterparty risk.
  • 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.
  • Apparently, you can learn everything you ever wanted to know about investment banking in just four weeks.
  • The BBC has launched a new series in the UK that seems eerily well timed considering the current financial situation. Little Dorrit, which premiered on Sunday October 26, is the story of a family that has fallen into debt and lost its house thanks to the overly aggressive lending policies of banks on the brink of world recession.