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September 1998

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LATEST ARTICLES

  • On a lighter note, we say goodbye for the time being to our resident US banker, Herbie. Herbie first started writing home to Mom in 1969. A firm believer that friends are God's apology for relations, he has spent the last 28 years based in London, as far from his mother as possible, though every faithful month his letters home have kept her, and you, abreast of the latest financial happenings. In the process he has chronicled, mocked and satirized most of the key events in the life of the modern capital markets.
  • The bad times are far from over for Hong Kong. The financial crisis that has engulfed Asia is continuing to put enormous pressure on the once-vibrant local banking sector. Profits are down and bad and doubtful loans have soared. But in spite of the deteriorating operating environment, bankers are scrambling to maximize existing sources of income and to identify new ones.
  • When Russia announced a moratorium on its debt payments and a rouble devaluation, Latin American debt traders had only one thing to say: "The markets are closed."
  • Russia's infamous "dark soul" is alive, if not well. In an article in a recent issue of Novaya Gazeta, Sergei Mavrodi, the architect of the MMM pyramid scheme that swindled millions of Russians out of their life savings, says that nothing would have persuaded him to invest in Russian government treasury bills (GKOs), which he calls "a low-tech version" of his own scam.
  • Economists and academics will long ponder why east Asia's currencies have depreciated so much. Euromoney thinks it may have found the answer - perhaps each country is trying to outdo the others for the title of cheapest currency in Asia.
  • What's behind Lehman Brothers' decision to form an executive committee? The news this August that the heads of the major businesses would join chief executive Richard Fuld in a six-member committee came four years after Lehman split from its marriage with American Express Bank. Ostensibly, the team is being set up to formulate strategy.
  • Is it a correction rather than a crisis? Perhaps, but consider this sobering list of 31 crises, prepared by Tim Bond, a strategist at Barclays Capital. His conclusion? "A western equity market crash will complete this litany of disasters ... since [equities] are mispriced by most yardsticks and since their fundamentals are daily worsening."
  • Banks in the Middle East and North Africa generally performed well in 1997 despite hits in the second half from falling oil prices and Asian economic turmoil. Even where oil economies have successfully diversified, though, 1998 looks like being a tougher prospect. Banks in the region will therefore need to look harder at consolidation and cost-cutting. Andrew Beikos and Anthony Christofides report.
  • During the crisis in emerging markets, equity fund managers that have invested in Asia, Latin America and eastern Europe are most concerned with their exposures to specific countries. How much do they have in Russia, how much in Indonesia? According to a report by ING Barings, however, those portfolios managers may be asking the wrong questions. They should be analyzing how much they have in value stocks, how much in growth.
  • Type of deal: attempted purchase
  • The appointment of David Robins and Malcolm Le May as respectively chief executive and head of global corporate finance at ING Barings reunites the two former UBS management partners whose high profile should go some way to reassuring insiders and clients about their new employer's commitment to investment banking.
  • "If anyone can rescue Liffe, he can." That seems to be the word on Brian Williamson, who in July put his initial reluctance to one side and agreed to become the London International Financial Futures & Options Exchange's first full-time - and salaried - chairman.
  • For foreigners, Japan is a topsy-turvy land where economic theory stands on its head. Nowhere more so than in the banking sector, a gravity-defying edifice which appears to be propping up the entire economy. If you were to rebuild it, you wouldn't start from here. But it has a terrifying logic, eloquently defended by Japan's elite. And remember, they wouldn't be in this mess if the Basle committee had been tougher 10 years ago. Steven Irvine reports.
  • Imagine the volume of issuance if German mortgage banks were allowed to securitize their home loan portfolios. What if Germany's big commercial banks could turn their loan books into CLOs and sell them to bond and commercial paper investors? Well now they can. German banks will issue Dm20 billion in asset-backed securities this year. As Euan Hagger reports, the market should get much bigger.
  • Brazil long needed a heavyweight in the central bank chair and now it's got one. Gustavo Franco earned his spurs in last October's Asian meltdown. His policy regime, especially the use of capital controls, is being studied around the world. Brian Caplen reports.
  • Euromoney lost a great mentor and friend on September 1. Vere Harmsworth, the third Viscount Rothermere, died unexpectedly at 73.
  • Poorly served under the communists, ignored in the nineties' frenzy of corporate activity, he's suddenly being courted by bankers across central and eastern Europe. Hail the consumer. James Rutter on the rise of the retail client.
  • When their country was isolated by sanctions, South African banks had it easy. Now foreign competitors are eating away at their share of the most profitable business. Sam Swiss reports.
  • Only floating exchange rates will allow the world to steer between the Scylla of capital controls and the Charybdis of recurrent financial crisis and wealth destruction, argues Bernard Connolly.
  • When Hotman Hutapea, Indonesia's premier bankruptcy advocate, presented his first case to the new commercial court on September 1, he set telephones ringing in bank offices all over town. "Now they believe it," says one senior banker. "They see they'd better do a deal - or else."
  • Their mission is the same: to hunt down and execute mandates. They're all winners. Yet their tactics differ greatly, reflecting the varied cast of characters now reigning on Wall Street - tough New Yorkers, Cuban exiles, a laid-back Brazilian, an English lawyer, even a Senegalese photographer. Brian Caplen investigates the mix.
  • Must the IMF grow in size just to stomach the next bail-out, or should it reinvent itself as a tougher, global rating agency of countries and their banking systems? Such an IMF would not whisper advice into the ear of crony capitalists and then pay off their creditors - it would be a lean, mean agent of transparency and would deal out pain where pain is due. James Smalhout reports.
  • The men charged with sorting out Korea's sickly, debt-laden corporate sector are making many of the right noises, but old habits are proving hard to break. A year after they went bust, Kia is still churning out cars and Jinro is still brewing the nation's favourite tipple. Jack Lowenstein reports on the dangerous brew of nationalism, legal failings and bureaucratic intransigence which is preventing Korea Inc from getting back on its feet.
  • It's a measure of the turmoil in world markets that not a single bank was at first prepared to supply the forfaiting rates used by Euromoney in its calculation of these country-risk rankings. So fast were things changing that even these usually stable indicators became too volatile. Banks supplied them on request on a day-by-day basis to clients an indication of how difficult trade finance, the lubricant of the real economy, was becoming.
  • Foreign banks are trying to sell investment-banking services in Croatia but so far with limited success. Delays in state sell-offs and corporate restructuring aren't helping. By Charles Olivier.
  • Mexican corporates are raring to go but the borrowing outlook is grim. International markets are expensive, the local banking sector weak. The big names can raise funds but may be hit because their customers are cash-strapped. By Matthew Doman.
  • Vicious dogs and bottom-dwelling, scum-sucking creatures of the deep - and that's just what they call themselves. But don't be too unkind to the vulture funds hunting for deals in Asia, they are playing a useful role in bringing value back to a depressed continent. And they are not the only ones doing deals. Conglomerates are restructuring and western financial institutions are looking for partners. We profile a mixed bunch of Asia's top deal makers. Some are ex-soldiers, some are former consultants and analysts. One is even a leading Asian central banker
  • Eugene Black argues the case for an alternative method of funding the IMF that would enable it to tap the private markets and reduce the need to return to member states for additional funds.
  • Profits are down, salaries are being sliced, portfolios are moving into cash, buyers are getting choosy about the brokers they use. Is it all doom and gloom? Not if you're smart. Markets that were overbroked are losing the dross: that means new opportunities for firms with good counterparty risk. And research is getting better as brokers fight to sell their services to investors. Steven Irvine sketches in the background to the Euromoney/Global Investor 10th annual Asian broker survey.
  • Ukraine has been pushed to the brink by Russia's financial turmoil and the government's resistance to reform. The treasury bill market needs restructuring or there will be default, equity trading has ground to a standstill, and foreign investors are counting the days until they can get their money out of the country. Theodore Kim reports.