February 2008

After a stop-start year of asset-backed securities issuance in 2007, Fitch Ratings expects European emerging market securitizations to perform comparatively well in 2008. However, it says that a prolonged credit squeeze could hit demand for structured bonds. "Borrowers with hard-currency refinancing needs have so far weathered the liquidity crunch remarkably well but their funding needs will become more acute if the international capital markets remain closed for another two or three quarters, and local markets are not deep enough to provide alternative funding," says Jaime Sanz, head of European emerging market securitization at Fitch in London.

Put off by past experience, but the consensus is that its time has come.

During the course of 2007 launching deals went from being the ­easiest in history to perhaps as tough as it has ever been. But the finance industry continued to show it could produce the goods whatever the market’s conditions. These are the deals where issuers and advisers got their timing and structure just right.

The list of credit bosses to resign from their positions has grown longer. Grant Kvalheim has resigned as co-president of Barclays Capital, leaving Jerry del Missier as president of the UK bank under the chief executive, Bob Diamond. Kvalheim lost the credit trading book in the autumn to del Missier, leaving him with a somewhat reduced role. John Winter and Peter Goettler, who were part of the team that followed Kvalheim out of Deutsche Bank in 2001, continue in their respective roles as heads of European and US investment banking.

2007 was a mixed year for Japan, with the stock market suffering from foreign investors uncertainty following the subprime crisis and the long-hoped for recovery of the economy still not fully underway.

Emerging markets Equity indices in emerging markets outperformed those of developed markets in 2007, rising 42% compared with a gain of just 9.4% in developed markets, according to Standard & Poor’s global stock market review, The World by Numbers.

"It’s mainly America’s fault," says a Tokyo analyst with a smile as he walks to the elevator after a meeting. The US is often unjustly invoked as the cause of problems in Japan but this time it’s hard to argue with the assessment. On January 22 the Nikkei 225 stock average plummeted 5.7% to 12753, prompted largely by fears of a US recession. It was a depressing year for Japanese stocks in 2007, with IPO volumes shrinking by more than 50% year on year and the Nikkei creeping downwards. This year looks to have had a bad start too: blame the US or not, local analysts say the index could dip below 12000 this year.

Managers are still learning the ropes.

Icap is determined to boost the position of its spot trading platform, but mutually owned venues are at a disadvantage.

We all know that Iraq is bad but to hear many experts tell it, Afghanistan is the genuine headache of the age, military and economic. With the struggling economy as much a battleground for hearts and minds as the caves of Helmand province or Tora Bora, you’d expect the brightest minds at the IMF and World Bank to be poring over the stricken country, keeping vital but fragile institutions such as the central bank tightly clasped under their intensive care, right? And, with $30 billion of western aid – your taxes – sloshing around the place, at least making sure its books are done properly. Think again.

Japanese ECM issuance fell 177% in 2007 to just $25.5 billion and 266 deals. Japanese companies raised just $6 billion in IPOs, a decrease of 68% from 2006 when they raised $18.9 billion.

The growth in size, expertise and therefore competition in the Shariah-compliant market in 2008 made Euromoney’s choices for our Islamic finance awards the hardest to date. The best firms not only got bigger, they brought new levels of innovation to bear in a series of landmark deals.

As the probability of a US recession rises, the best- and worst-performing credits of 2007 reveal the state of play in global economies. Jethro Wookey reports.

In a signing ceremony witnessed by UK prime minister Gordon Brown and Chinese premier Wen Jiabao, Standard Chartered Bank agreed on January 18 to provide credit to a microfinance organization in China. It is the first time an international bank has backed such a project in China. The bank is to supply an initial Rmb20 million ($2.76 million) to the China Foundation for Poverty Alleviation (CFPA) to support farmers and small business owners. Microfinance initiatives are seen as key tools in the fight against poverty. Providers of microcredit in poor areas get help in reducing their operating costs; the investment banks benefit from being attached to these PR-friendly projects and often make decent returns on their investments. Standard Chartered is no idle investor: in return for its expertise and reach the bank expects CFPA’s assistance to expand its business in rural China.

Hedge funds are on the verge of large-scale direct recruitment of talented graduates, a recent student-organized LSE alternative investments conference suggests. Neil Wilson reports.

Ulan Bator has become the latest destination for hedge fund managers, following the creation of the first offshore investment fund to be focused exclusively on Mongolia. The Mongolia Discovery Fund has been established by Alisher Djumanov, formerly of Uzbek investment banking firm Asher Group, who has raised an initial $5 million of seed capital for the new fund, which is being launched by newly established management company Silk Road Fund Management.

Greg Medcraft, former global head of securitization at SG, has left the bank after a 27-year career there. The new global chief, Jean-François Despoux, has appointed Jerome Jacques to replace Medcraft in the US, as head of securitization in the region.

The Brazilian financials sector is set to suffer a hit on its profits in 2008 after the government increased banking profit taxes.

"Sudan is probably the richest country in the region. It has the best commodity in the world: water. It also has oil, minerals, cattle, fertile land and human resources. If it can resolve its problems, Sudan has the potential to be a perfect economy." Such is the view of Ahmed Abbas, CEO of Liquidity Management Centre, a Bahraini Islamic investment firm. And if the capital markets are anything to go by, says Abbas, the biggest country in Africa might already have begun its recovery.

The Depository Trust & Clearing Corporation and CLS Bank International have launched a central settlement service for over-the-counter credit derivatives transactions. The service is an automated solution for the calculation, netting and issuing of payments between counterparties to bilateral contracts.

The credit crunch has opened up opportunities for hedge fund managers with lending capabilities. Helen Avery talks to Arch’s Stephen Decani about his firm’s asset-based lending activities.

Our annual poll shows which banks are best positioned to benefit from any upturn in the credit market's fortunes.

CFTC and NFA are being inconsistent with the rules for futures and forex traders.

Fund of hedge funds group Financial Risk Management (FRM) has launched a new business to provide seed capital to early-stage hedge fund managers. Group chairman Blaine Tomlinson cites the need for managers to reach critical mass through partner ventures as the reason for the creation of the new platform. The business, FRM Capital, will also provide investment opportunities for existing fund of hedge funds clients. Industry participants say that the number of seeding funds is increasing as entering managers find it harder to attract capital, and as firms such as FRM seek to diversify their business.

Aureos Capital’s Aureos Latin America Fund has held its first closing, with $140 million in committed capital. The fund is expected to close at $300 million in June and will focus on investments of between $2 million and $10 million in Mexico, central America, Colombia and Peru.

The Republic of Turkey, emerging Europe’s most prolific issuer in the international debt markets, made a strong start to 2008 with the reopening of its 2018 6.75% dollar Eurobond for $1 billion.