Published in conjuction with: ABN Amro - BNP Paribas - Citi - Commerzbank - Deutsche Bank - Fortis - HSBC - ING - Rabobank - SEB - Société Générale - Standard Chartered

The effects of the sub-prime crisis are spreading and could cost 2.5% of world GDP. Emerging market economies will not be immune.

Large Latin American companies with substantial exposure to foreign investment are adapting rapidly to the need for good corporate governance and receptive investor relations. But there is still a hard core of resistance to change from family-centred businesses. John Rumsey reports.

Geert Vinken, global head of syndicate at Barclays Capital, has retired. Vinken will be replaced by Mark Bamford, head of US syndicate. Vinken held the global role since 2000, having joined Barcap in 1998.

Far from turning a corner in 2008, the market looks set for a few tough months yet.

As their peers in Europe and the US struggle to adjust to the world post sub-prime, Japan’s megabanks find themselves in the glow of unaccustomed financial health. But how do they put their new-found advantage to best use? And can they ignore the demons that caused such huge mistakes in the past?

The UK Financial Services Authority has questioned the spread of derivatives-based trading strategies, such as 130/30, by traditional long-only managers. The increasing use of derivatives poses a "range of risks", warns the FSA.

LATIN AMERICA ONLINE EXTRA: Mexico’s structured finance market continues to grow on the back of its housing boom.

Credit Suisse is building its investment banking presence in the Andes. The Swiss house is adding an executive in Bogotá and is on the lookout for a person in Lima to bolster client coverage. The group has been aggressive in the region for the past 12 months and wants to consolidate its position. Credit Suisse took part in a series of high-profile deals in 2007, including the $2.8 billion privatization IPO of Ecopetrol, as well as deals for some first-time issuers such as Peruvian fishmeal company Copeinca.

Inflation, far from being a thing of the past, is back in the forefront of investors’ and issuers’ minds. The increased use of innovations such as liability-driven investment means a rise in demand for inflation-linked products. How are the markets responding?

Structured note sellers had high hopes that property-linked pay-offs would be a big revenue generator in the UK. However, recent real estate upheavals have cast a dark cloud over the market.

Latin American bankers appear confident that the region can continue to avoid the worst of the US contagion.

Fitch’s proposed new methodology will tighten CDO ratings, and Moody’s is considering abolishing its current ratings scale altogether.

Private placements are becoming an increasingly common route for emerging market companies seeking to tap global debt markets.

The Japanese megabanks claim there are no shocks to come on the sub-prime losses front. If true, it’s a big leap forward for transparency.

It seems they may be using support to grow balance sheets rather than to roll funding.

As an agreement between FXall and ITG shows, multi-asset platforms can be created virtually.

Six months into a credit crunch there are few signs of an improving outlook for non-government bond markets. It is a signal equity investors would do well to heed.

Amid all the bad news surrounding the world’s best-known banks, one institution can hold its head high after its latest results.

Lebanon still has no president, and now its public debt has been downgraded.

The financial services sector in the former Yugoslav Republic of Macedonia looks set to remain a magnet for foreign direct investment thanks to growing economic and political stability.

Citi has hired Jaime Yordan to head its Latin American banking business. Yordan comes to the bank from CDK, a New York alternative investment fund, where he was advisory director. At Citi he will be vice-chairman of global banking for Latin America, reporting to Manuel Medina Mora, chairman and CEO of the business. He will also report to Raymond McGuire and Alberto Verme, co-heads of investment banking.

Central and eastern Europe is by no means immune to financial woes, strong economic growth levels notwithstanding.

Companies are beginning to look to their neighbours for investment flows.

Foreign banks continue to eye expansion opportunities in Kazakhstan, despite the cloudier outlook for the central Asian republic’s financial sector. South Korea’s Kookmin Bank is in talks with Bank CenterCredit, the sixth-largest Kazakh bank, with a view to taking at least a 30% stake. UniCredit is looking to finalize its $2.2 billion purchase of ATF Bank, Kazakhstan’s number four player. But the Italian bank has become embroiled in a legal dispute with US hedge fund QVT Financial, which has accused it of abusing minority investors’ rights. Finally, a Russian investment bank is reported to have built a 10% to 15% stake in the country’s largest bank, Kazkommertsbank, on behalf of an unknown party, prompting further takeover speculation.

February 11 was supposed to be so much fun for Anil Ambani. The billionaire younger son of the late Indian industrialist Dhirubhai had just floated his latest investment vehicle on the Mumbai stock exchange. Reliance Power’s stock sale was a cracker: sold in less than 60 seconds, its mid-January roadshow was a whopping 73 times subscribed, sucking huge chunks of liquidity from the system. Investors scrambled to buy paper linked to India’s latest infrastructure play – a company so shiny new that its valuation is based on a dozen huge power plants that won’t come online until 2012. Yet Ambani’s party, held at his plush Mumbai residence, turned out to be more wake than celebration. In the few weeks since Reliance Power’s roadshow, India’s markets tanked. The local benchmark Sensex index lost more than 20% in the five weeks to February 12. Several infrastructure-related IPOs were also pulled in early February, including Indo-Dubai real estate joint venture Emaar MGF, whose initial stock sale was slightly less than 90% subscribed when it was pulled.

Nobody expects it to get any easier, especially if January’s figures for Europe and Asia are any indication of the future, says Neil Wilson.

The downward curve on Reliance Power’s post-launch stock price chart (see India: Reliance Power unplugged by inconstant investors, Euromoney, March 2008) wasn’t the only graphic shocker in India last month. In a single week in early February, three Indian corporates – Wockhardt Hospitals, real estate firm Emaar MGF and SVEC Constructions – pulled their IPOs. The lack of demand for their paper among every class of investor was stunning. Emaar’s $1.64 billion stock sale performed best but was subscribed just 0.83 times. Investors were even more Scrooge-like with SVEC’s tiny $10 million sale, which was only a quarter covered. But pity poor Wockhardt, whose $165 million was subscribed a pitiful 0.15 times on the institutional investor side, and just 6.44% among qualified institutional buyers.

Julius Baer plans to undertake an IPO of its US asset management business later this year, aiming to raise $1 billion. According to filings with the SEC, the US arm also intends to launch hedge fund and private equity vehicles. Its private equity funds will focus on central and eastern Europe.

Latin American private equity fund managers report an increase in interest from European investors. According to a survey of managers by KPMG, European institutional investors account for 13% of fund sources – in 2004 European investors had no presence at all. European investors are also becoming more prominent relative to US investors as the latter, having become a little more risk averse, are looking away from Latin America towards more established markets to make investments. US institutional investors are still the primary sources of funds, said 41% of respondents; in 2004, though, this figure was 49%.