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September 2003

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  • Source: is Europe's leading financial commentary service
  • Turkish banks' dependence on earnings from treasury bills has put them in the same ramshackle boat as the government and rendered them apathetic towards innovation and consolidation.
  • Five years after Russia defaulted on its sovereign debt, burning foreign investors, the government is poised to return to international capital markets next year with $2.76 billion of Eurobond issues. Thanks to the country's revival, investors are salivating at the prospect of fresh Russian paper.
  • Banks reported strong results for the first half of the year, so it seems odd that senior executives at US banks are so concerned about stagnant revenues. It has been an issue for two years, but there were ways of getting around it. First came cost-cutting. Then revenue from the consumer sector held up, with sustained buying and remortgaging of houses, and spending on credit. Third was what banks call yield-curve plays and the rest of us proprietary trading.
  • Strong growth and enhanced political stability appear to have broken down the barriers to foreign investment in Russia. But since much of what flows is disguised in various ways, it's hard to state precise figures.
  • Saudi Arabia is making progress in restructuring its economy, but keeping up to speed a move away from dependence on oil itself rests on high oil prices and low interest rates.
  • Ghana has stolen a march on its rivals in the world of peacekeeping operations. The ministry of defence drew down in August the first instalment of a $55 million loan from Barclays that will enable it to upgrade its military equipment and secure higher-margin reimbursement from the UN for a stint in the Democratic Republic of Congo.
  • Bond investors finally appear to be getting the message that exposure to commodities can be a useful hedge in a portfolio. And if they have invested in the right commodities, they could find themselves in an excellent position to profit from any forthcoming US interest rate rise.
  • Advisers: UBS (Cordiant); Goldman Sachs (WPP)
  • As Duma and presidential elections loom, the two main Kremlin political factions are vying for control of Russia's development.
  • A new capital markets law, continued privatization and an eventual opening up to foreign investors should boost Saudi Arabia's equity market.
  • The start of the political season in Russia has capped the wild upswing in the country's equity market but not brought share prices crashing to the ground. Predictions of quiet growth based on a growing equity culture still seem apt.
  • The emerging-market bond bubble may be close to bursting as the US economy shows signs of picking up and bondholders digest a recent rise in yields. It means investors will have to dig harder for opportunities in the CEE region.
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  • Bankers are grateful for the bouyancy of the debt capital markets. But they are not letting the rush of business impede their efforts to broaden the range of products they offer clients and cut out unfruitful relationship banking.
  • Investors in the US need to decide which numbers to believe. Typically, statistics such as unemployment or capacity utilization are on average revised up or down by 30% within 12 months.
  • Latin America's poor economic performance in the past decade has overturned analysts' judgements that getting rid of the region's dictatorships and introducing free-market reforms would clear the path to sustainable economic growth.
  • Royal Bank of Scotland is beefing up debt headcount aggressively. In its fixed-income division, RBS Financial Markets, staffing was up 25% last year. This year it aims to accelerate that growth. If it is to fulfil its ambitions to grow from a strong sterling and loan house to a broader business in euros and dollars, it has no choice but to recruit fast.
  • China's A-share market has such a shady reputation that foreign investors might have been expected to revel in their exclusion from it. But its recent opening to outside institutional investors has been greeted with enthusiasm.
  • Politicians in the US and Japan are blaming the low value of the Chinese renminbi for all manner of economic ills in their countries and pressing for its revaluation upwards. Yet many of their own manufacturers are benefiting greatly from the low manufacturing costs in China. Speculators will win if the renminbi rises.
  • Fixed-asset investment in China is growing faster than demand, creating overcapacity that may never be drained no matter how fast exports grow. A new burden of potential non-performing loans could be accreting as a result.
  • The bulk of corporate earnings results for the second quarter of 2003 from S&P500 companies are now in and equity bulls are claiming that they justify the sharp equity rally since mid-March. I'm not convinced. More companies beat analysts' expectations, but then estimates had been revised down sharply.
  • Kazakhstan
  • Results of Euromoney's corporate governance poll suggest that the efforts a company makes to ensure appropriate practices are reflected in its share price.
  • What are the defining traits that good investment bankers share? Energy, creativity, entrepreneurship, willingness and ability to take risk, the strength of intelligence to form independent views of the world and the courage to back them: all traits that tend to be driven out of people when they become institutionalized within large organizations under cynical leaders. Everyone toiling at the coalface in a large bank should take lessons from the stories that follow of those who have quit to set up on their own. There's never been a better time to do it.
  • After falling out with the US over access to Iraq, Turkey is regaining favour with the west as its economy revives. Its long-term goal is EU membership, but how far away does that target remain?
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  • Junk mail drives most westerners mad. But if a Russian gets a personally addressed letter on his birthday offering a tempting gift at half price he might be so pleased he will include a thank-you note with his order.
  • MONGOLIA IS A country of extremes. Landlocked between its two former colonial rulers in a landmass some three times the size of France live just 2.6 million people. A dwindling, ageing one-third of the population ekes out an increasingly precarious living as nomadic herdsmen on Mongolia's vast steppe facing up to the world's widest extremes of temperature.
  • There can be a hefty difference between perception and reality on debt markets pay these days. One headhunter recalls: "A senior banker called me when I was on a ski lift at Christmas. He said he was going to get only $1 million in the current bonus cycle. He wanted to know whether he had been hard done by as he thought he was worth $2 million. I got a researcher to check what someone in his position and with his job title would usually earn right now. I called him back and said 'you're worth $600,000, so you're doing well'."
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