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%.

Volatility creates opportunities but, in the case of some strategies, high levels can be lethal. Helen Avery talks to the founder of CTA Pirates of Profit about how risks need to be fully understood.

Corporate earnings forecasts might still need to fall but the near 20% collapse in global equity markets since their 2007 peaks suggests that the worst might already be almost fully priced in.

Saxo Bank has promoted Tobias Straessle, who was chief information officer, to chief operating officer. The bank has also promoted Claus Nielsen to the new role of chief operating officer for trading. Saxo says Nielsen’s promotion reflects a change in its structure and will help to ensure coordination between all of the bank’s growing list of services. As a replacement for Nielsen, Saxo has hired industry veteran Steve "Wham" Braithwaite as its director, global head of foreign exchange and fixed income. The bank has also appointed two new spot dealers, Steve Bellamy, who joins from JPMorgan, and Matt Strand, who was at Bank of America.

The main clearing houses in Europe have had a busy few years.

Robert Palache has left Morgan Stanley after a little over 18 months in a role that involved the securitization of corporate, real estate and infrastructure assets. Palache was also the newly appointed chair of the European Securitization Forum.

Reserve managers are unlikely to suddenly adjust foreign currency holdings and latest IMF data suggest they will not chase the euro higher.

Richard D’Albert, global head of the securitized product group and CDOs at Deutsche Bank is not to become global head of the institutional client group at the European bank after all. Euromoney heard that D’Albert was taking on the global sales role Jim Turley’s decision to take a sabbatical.

Going up

Mid-East equity capital market volumes

A report by EDHEC says funds of hedge funds returned more than 10% in 2007 on average, compared with just 3.53% for the S&P 500 and 4.14% for the Lehman Global US Treasury Bond index. The best-performing strategy last year in single managers was emerging markets. All strategies produced positive returns, although a majority suffered a slight fall-off in performance on 2006.

Egypt’s banking system is undergoing wide-ranging reforms designed to make it more competitive. Have the lessons from the past finally been learnt?

Understanding the mark-to-market meltdown

Brazil’s private bankers are eagerly seeking out the means to differentiate themselves from rivals and attract the rich shoal of high-net-worth individuals a market boom has created.

With no sub-prime problems, real estate bubble or complex credit portfolios to worry about, the country’s banking sector should be a relative safe haven. But while investors remain receptive to their covered bonds, banks are finding liquidity scarce. Peter Koh reports.

Will the long-awaited recovery in the German real estate market be stopped in its tracks by turmoil in the debt markets? Louise Bowman reports.

New accounting rules designed to improve transparency and disclosure were bound to increase noise on financial institutions’ balance sheets. But now they are adding to the credit crunch.

Since launching in 2007, Chi-X, the pan-European multilateral trading facility run by Nomura’s Instinet, has made notable inroads into the market for trading German stocks, regularly trading more than 15% of the daily turnover of blue-chip companies such as BASF. At the same time, however, Xetra, Deutsche Börse’s order book, has increased its market share of domestic trading to a record 99%.

Richard Herman has moved across from his role as European head of debt sales to become Deutsche Bank’s global head of sales following Jim Turley’s decision to take a sabbatical and focus on rugby coaching. The bank has also announced that Mark Carrodus has stepped down from his position as global head of FX spot and options at Deutsche Bank for personal reasons. Carrodus, who is returning with his family to New Zealand, will be replaced by Rob Mandeno, who coincidentally is at present based in New Zealand. Mandeno will move to London to take up his new role.

China’s ICBC, the world’s biggest bank by market capitalization, has been granted a licence to operate in the Qatar Financial Centre. This is ICBC’s first outlet in the Gulf, although in September 2007 the bank’s president indicated that a branch was planned for Dubai. Activities at the Qatar branch will include wholesale and investment banking, as well as asset management, consulting and trust services.

Infrastructure financing has become synonymous with Brazilian president Lula’s second-term government. As the country enters the first stage of its largest ever hydroelectric project there is a growing demand for funds that the local market is struggling to source. Chloe Hayward reports from São Paulo.

Icap has announced that it has upgraded its EBS spot FX platform, making it faster and adding enhancements. The company says that as a result, global deal times on the platform are now 75% faster than they were a year ago. Intra-regional deals are-now completed on average in five to eight milliseconds.

Marcus Browning has resigned from Citi, where he recently took up a new role to build a proprietary team to trade volatility. He is believed to be headed for a position on the buy side. "We are disappointed to see Marcus leave, he has been a profitable trader for us and he has been instrumental in building FX options into the strong business that it is today at Citi. But we understand that he has long harboured a desire to work on the buy side, and we wish him success in the future," says James Bindler, global FX options head at Citi.

Two SIVs endured very different fates in February. On February 21, Dresdner Bank announced plans to shore up its K2 vehicle, providing liquidity support to the $19 billion vehicle as it restructures. But parent company Allianz has confirmed its plans to wind the vehicle down by the year-end. K2 runs three portfolios, one of which has entered a restricted operating period. Standard Chartered, however, has walked away from its SIV, Whistlejacket, which entered receivership on February 11 and was teetering on the brink of default by February 21.

From a subsidiary of an English public school to a UAE migrant labour camp: diversification can hardly be said to be lacking at Evolvence Capital. The Dubai-based alternative investment group is reportedly planning to market bonds backed by commercial mortgages worth up to $700 million in order to kick-start a $1 billion Reit. Aside from a migrant labour camp, the Reit, the company’s first, will also contain a warehouse and offices. Evolvence is apparently aiming for the CMBS to be sold in the fourth quarter.

Independent M&A boutiques are sensing an opportunity in Japan as the country’s top corporate names increasingly look to firms not tied to large commercial banks when awarding cross-border mandates.

Distressed seems the right route to take.

New Bramdean fund looks to bring new players to alternatives.

The reporting season in the Middle East this year has been an incongruous affair. There has been record revenue growth as the economic boom continues but some banks have had to be content with much smaller growth in their profits.

Many of the delegates at an industry conference in Nevada seemed blind to the real world beyond the securitization desk.

The latest bout of blood-letting at the bank may only tarnish its reputation further.