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September 2001

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  • Saudi Arabia’s banks are bracing for a period of intense retail competition by preparing to launch new products, especially for Islamic and internet banking, and developing personal and mortgage lending.
  • General Pervez Musharraf, Pakistan's head of state, talks about his country's economic programme, the Afghan Taliban and Islamic fundamentalism.
  • Investors fearful that the crisis in Argentina might spill over into the largest Latin American economy, Brazil, generally draw some comfort from the fact that the country’s central bank is led by former speculator Arminio Fraga. Fraga, who took up his post just after the floating of the real in 1999, has implemented an inflation-targeting system, enhanced bank supervision, and garnered universal respect and admiration. Brazil might have been hit by Argentina, but now the country should be seen as a turnaround story, he tells Felix Salmon
  • Euromoney's September edition had already gone to press when news broke of the horriffc terrorist attack on the World Trade Centre in New York and the Pentagon in Washington, DC. The sheer scale of the destruction and loss of life numbs the mind, making rational analysis almost impossible. Financial markets consist of nothing more than men and women buying and selling. In the immediate aftermath few could turn their minds to anything so mundane as dealing or stock tipping. It's likely that every reader of Euromoney will have known people who worked in the World Trade Centre and it is with those unfortunate individuals that most people's thoughts now lie.
  • Underperformance is still the norm in emerging markets.
  • The aura of calm efficiency surrounding the new Indonesian administration of president Megawati Soekarnoputri has come as a relief to most Indonesians. After nearly four years of riots, coup rumours, unpredictable policymaking and political infighting, a rest is as good as a holiday.
  • "CSFB is just like Laurel and Hardy," says one banker. "It's gotten itself into another fine mess." Following hard on the heels of its problems in Japan, Sweden, the UK, India and the US, it's now in trouble with the Chinese. This time it's nothing to do with the regulators, but a diplomatic faux pas, and an expensive one at that.
  • Russia has done little to reform a banking sector that is still littered with hundreds of thinly capitalized and barely functioning institutions. But there are some signs of improvement. A stronger economy has made it more attractive for the larger commercial banks to start lending to Russian companies. It’s a new game for them.
  • Equity buyers are increasingly basing investment decisions on companies’ records on corporate governance as well as on projected real shareholder returns. The challenge for investors is to measure and reward good corporate governance practice as readily as they have criticized bad corporate governance in the past. Euromoney offers its own contribution, with a new corporate governance ranking and also reproduces analyses by banks. For investors and companies, especially in emerging markets, new rules of engagement are being drawn up. Kapila Monet reports, research by Andrew Newby
  • Saudi Arabia has demonstrated strong growth in the midst of the falling global economy, and that growth can be attributed to more than just oil. Natural gas and tourism also have contributed to this boom, but it is unclear whether Saudi Arabia can generate enough jobs for its growing population.
  • Even after China has joined the World Trade Organization, there will be a grace period of five years before foreign banks can compete head-on with local banks. But that still represents an ambitious timetable for reform. There has been progress, but the sheer scale of China’s banking system, the need to adopt new accounting standards and the number of bad loans present hurdles.
  • Lars Thunell, president of SEB, in which Investor has a large stake, explains its strategy
  • This summer the euro began to strengthen, the European Central Bank pleased markets and politicians with a long-awaited quarter-point rate cut and criticism of the policy conduct of the ECB receded. It may be time for a new assessment of how the bank has been doing. Clearly it has inherited flaws from the political compromises made to set it up. Is it in such a hopeless state that mistakes will happen again, or were past errors excusable gaffes in an otherwise reasonably successful performance?
  • The Paris Club of official bilateral creditors is promoting the view that holders of sovereign bonds should take their share of the burdens when borrowers need rescuing from default. Jerome Booth argues that this burden-sharing dogma flies in the face of insights that can be gleaned from history and conflates what is essentially politically-motivated lending with market-driven lending. It will, he argues, inevitably damage the debtors it is ostensibly designed to help
  • The Fed has dscovered the gift of the gab, and it doesn't seem to have done any harm. Not yet, anyway.
  • Bulgaria’s new government is preparing to enter the Eurobond markets to reduce its debt service costs. The country’s strong recovery from the banking collapse and economic setbacks of 1996 and 1997, its recent currency stability and commitment to EU convergence should win it a strong reception among investors. But concerns persist over the credibility of the government’s ambitions to balance the budget, cut taxes and increase spending all at the same time.
  • Despite the dire state of the Japanese economy, yen-denominated issues have maintained their popularity, providing borrowers useful diversity and a domestic investor base hungry for yield.
  • Years from now, the banking crisis of today will probably be seen as the beginning of a period when market dominance started to pass to foreign hands.
  • Société Générale paid Eu1.2 billion for 60% of Komercni Banka as it moved into the Czech Republic in June. The move was criticized as too risky. Now, it appears that it was right on target.
  • Author: Antony Currie
  • Russian bonds are looking much safer than equities, offering good growth potential while still guaranteeing favourable yields. Once again, investors have their eyes on bonds.
  • Legislation is pending that should liberalize Saudi Arabia’s capital markets and attract foreign investment and returning Saudi capital. The extent of these reforms will show how far the country’s leaders intend to open up an economy that needs capital investment and job creation.
  • Turkish inspectors have discovered that the governmental abuse of the state banks continues and has remained unpunished.
  • Under James Wolfensohn the World Bank has beaten off influential enemies through polished public relations, but there are still widespread doubts about the effectiveness of Bank policies. Projects continue to fail and adjustment lending has in many cases been granted without proper safeguards. Bank insiders claim that programmes are increasingly effective but critics point to the weakness of Bank models for measuring success.
  • Most of the prize assets have been snapped up as bank privatization draws to an end in Europe’s emerging markets. Those banks that remain on offer are getting more pricey. But impending European Union accession for several countries means this is still an appealing market and is driving strategic change among both veteran players and big-spending newcomers.
  • The reform of Russia’s electricity sector is going faster than that of other utilities. UES chief executive Anatoly Chubais talked to Ben Aris about the proposals and the timetable
  • The departure of David Salisbury from Schroders gives more ammunition to those critics who say the firm lacks direction.
  • David Malpass, chief international economist at Bear Stearns, in a speech last month to the National Economists Club in Washington outlines the view that the world economy is entering a long, "saucer-shaped" slowdown. The nub of the problem is deflation, reckons Malpass. The flip side of the greenback's repeated 10% year-on-year gains is a drop in commodity prices of roughly the same amount. That's going to result in hard knocks for many economies.
  • RZB, Austria’s largest private banking group, has been in the race for market share in central and eastern Europe from the beginning. Now, with so many western rivals, RZB looks to new ground in a pair of Bosnian start-ups.
  • Russia’s stock market has ended the first half of the year as the third best performing market in the world.