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September 2008

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  • "We have all the signs of emerging markets in the US now – there’s stagflation, growing unemployment, excess debt, poor monetary management – I just wonder when the US will be included in the EMBI+"
  • Of benefit to both the environment and HSBC’s bottom line is the opening of a new internal network of conference rooms by the UK bank, which CIO Ken Harvey says will give "the experience and benefit of actually being in the room with colleagues on the other side of the world, without having to pack a suitcase".
  • The greenback revival, driven by ECB recognition that the eurozone is faltering, will be sustained by the narrowing of the US current account deficit, the fall in the oil price and the US pursuit of a soft monetary policy.
  • Faced with growing evidence that issuers were gaming the scheme, the European Central Bank has finally tweaked the collateral requirements for its repo liquidity programme. Haircuts for ABS and unsecured bank bonds have been increased, the former up from 2% to 12%. This brings the scheme into line with Bank of England and Federal Reserve rules – but in reality makes ECB rules more stringent as the maturities on offer are shorter. The ECB has also tightened the close-link rules so that ABS collateral for which the seller is also swap counterparty is disallowed. Seller liquidity support of more than 20% has also been axed. The rules are likely to have an impact on smaller banks that have relied on ECB liquidity but analysts at Deutsche Bank calculate that the incremental cost to banks following the haircut change is 50 basis points. This means that the ECB window is still the most cost-efficient funding channel available to banks if maturity is not a consideration. "This change alone is unlikely to compel many banks to return to the securitization capital markets," conclude the DB analysts.
  • With a huge pipeline of covered bond issuance planned for the next few months, much is being asked of investors. There might not be enough of them to go around.
  • Government intervention in financial markets goes against the grain of any US administration. However, it appears preventing closure of the mortgage finance markets is more important than ideology.
  • The SEC and the FSA have both acted too hastily in reacting to short selling. In the UK, the new disclosure rules have compounded the turbulent mood of the market. Neil Wilson reports.
  • David Puth, the former head of FX and commodities at JPMorgan, has resurfaced after nearly two years out of the market. He has been appointed to the new position of head of investment research, securities finance and trading activities for State Street. He will report to Jay Hooley, president and chief operating officer of the Boston-based bank and will sit on the company’s operating group. Puth spent many years at what was originally Chemical Bank, going through several mergers and takeovers to end up at JPMorgan. After he left the bank in November 2006, he founded risk management and advisory group Eriska; he also joined Icap’s board as a non-executive director in November 2007.
  • "Our long-term view remains – we will eventually see 1.60 for cable and parity for EUR/GBP" -Paul Day, Mig Investments
  • "For the rest of the bank, we’re actually managing the businesses; with the problem assets we’re not really managing them at all, we’re just managing the accounting"
  • Moscow private equity firm Mint Capital has taken a stake in beer restaurant chain Tinkoff Restaurants.
  • Japan’s Mitsubishi UFJ Asset Management Company and Brazil’s Bradesco Asset Management have agreed to set up a mutual fund that will invest in Brazilian bonds.
  • Venezuela’s president, Hugo Chávez, has announced plans to nationalize the Bank of Venezuela, the largest bank in the country. Chavez has asked for a meeting with Spanish group Santander, which owns the bank, in order to agree a price.
  • It could be the perfect storm – financial, macroeconomic and geopolitical risk are all on the rise. Risk is both where you anticipate it, and where you least expect it.
  • "More business is done here in the sauna after a good round of golf than is ever done in meeting rooms," says a senior manager at a top investment bank in Seoul, perhaps a touch wistfully, when Euromoney’s correspondent asks for advice on networking on a recent visit to Korea.
  • The tables are starting to turn in the Brazilian banking market – for the first time foreign-owned banks have become acquisition targets for locals Itaú and Bradesco, valued at more than $60 billion each, which now dwarf the purchasing power of several of the international banks in the aftermath of the sub-prime crisis.
  • HSBC’s attempted takeover of Korea Exchange Bank has been in limbo for more than a year, pending regulatory approval that in turn depends on the outcome of a court case involving individuals charged with improper conduct in the Korean bank’s original sale to private equity firm Lone Star. With the initial deadline already passed, the Financial Services Commission has said it is still reviewing the case, and Korean banks have said that they too would be interested in KEB. Richard Wacker, the bank’s chief executive, is a 20-year veteran of General Electric brought in by Lone Star in February 2004 to turn the then-troubled bank around. Euromoney spoke to him in Seoul about the frustrations of the delayed deal, his plans for KEB’s future and what having HSBC as a majority shareholder could mean for his bank.
  • Peru’s dramatic rise from market pariah to investors’ darling was capped this year with investment-grade status awarded by Standard & Poor’s and Fitch, opening Peruvian capital markets to huge interest among institutional investors. Ironically, Alan García, the president who made Peruvian debt a no-go area in the 1980s with soaring inflation and bond defaults, oversaw the upgrades in his second term, two decades later as a free-market convert.
  • The present round of bank reorganizations look as if they might not be as efficacious as leaving things well alone.
  • Barely a day goes by without a new craze for so-called frontier markets in Africa being mentioned somewhere. But are the returns worth the fuss?
  • Some 190 IPOs seeking to raise $33.1 billion in capital have been postponed or withdrawn across the world so far this year, according to Dealogic.
  • Concerns about an economic slowdown now weigh on capital markets.
  • Asia-focused hedge funds received $530 million in new assets over the second quarter, down from $1 billion in net inflows the previous quarter, according to HFRI. Its Asia hedge fund index has lost almost 14% this year. Recent research by Singapore fund of hedge funds GFIA suggests that performance is better among indigenous managers, and that London and New York will continue to lose market share to Asia strategies.
  • Banks in central and eastern Europe are still posting results that laugh in the face of the credit crisis. But bad – or at least worse – times might be just around the corner for some. Charles Piggott reports.
  • It is a sign of the times that, as investment banks in the UK and US downsize, those in the Arab world are doing the opposite.
  • Third rights issue in a row for UK bank is shunned.
  • Banks are booming in Nigeria on the back of oil revenue inflows. But solutions to some of the country’s problems – particularly the need for infrastructure development and a reversal of falls in oil production – remain stymied by an inflexible political system. Rupert Wright reports.
  • Outstanding contribution to finance: Dr Sri Mulyani Indrawati, Indonesia
  • The chief executives of 11 of the world's biggest banks discuss the lessons they have learnt from the global financial crisis, their concerns over a regulatory backlash, and how they plan to rebuild profitability in the toughest markets in history.