September 2013
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LATEST ARTICLES
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Singapore is shifting its growth model from population-driven to productivity-driven expansion, while maintaining its status as an innovative trade and financial-services hub to diversified export markets. Finance minister Tharman Shanmugaratnam has played an overarching role in the city-state’s economy and serves as the region’s statesman on the international stage.
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Agustín Carstens is an orthodox central banker in an increasingly unorthodox world. Inheriting an impressive legacy, he has continued the Mexican central bank’s inflation-targeting work while keeping a pragmatic eye on growth. Growth potential is almost unrivalled and Carstens seems intent on ensuring that Mexico’s voice is heard in a new, multi-polar financial world.
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Liquidity in the world’s bond markets has reached crisis point. Investors can no longer rely on banks to provide a crucial intermediary function in the secondary markets. It is time those fund managers started to think about providing that liquidity among themselves. If they do not, the consequences for the whole of the financial markets might be disastrous.
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It has been an oddly eerie summer. Everybody seems to have fled to the beach, leaving a few journalists to eke out the occasional interesting story.
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The revival of viable, well-funded private-label mortgage issuance is the holy grail of the US housing market. Indeed, as the Fed contemplates the tapering of its $40 billion-a-month agency MBS purchases, it is becoming an urgent necessity. But without a wholesale rethink on how US housing is funded, the cards look stacked against it.
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Investors hold about 99% of all bond inventory. Could all-to-all trading platforms provide the best answer to the crisis in liquidity?
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Amid the litany of complaints against the sell side, one trader at a large investment manager bemoans the continuing pretence of some banks that they are big traders in many instruments across all markets to all investors. He knows that they are not. Rather, dealers are conserving their ammunition to serve favoured clients and he understands why. He would just like to know where best to direct his business.
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As Detroit files for Chapter 9 bankruptcy, municipalities need to look at ways to increase revenues. The battle to create and attract jobs is on.
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Policymakers continue to lavish liquidity on the western world. It will be a long time before short-term money-market rates normalize in the US, the UK, Germany or Australia.
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Much has changed since I used to work in the City. It is out with the autocratic, eccentric banking demigod (think Dick Fuld or Ken Lewis) and in with the omnipotent regulator. It is out with brash, macho money-making and in with a more cuddly approach to deal-doing. Think of the industry’s greatest survivor, Lloyd Blankfein, his sprouting of facial hair and passionate advocacy of gay rights. See my April 2013 column for more on Loveable Lloyd’s transformation.
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The emerging market sell-off since May is just the start of a painful multi-year adjustment process – and China has blazed a trail for the next downturn. Capital abundance, deflationary pressures and imbalanced global demand continue to drive the 15-year cycle of credit booms and busts.
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Prime minister Shinzo Abe’s radical policies have lifted Japan from its slumber. His supporters say he’s slain the deflation dragon. But what tools can he find to win the next fight – a looming fiscal crisis?
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Ackermann has experienced the chill of unwelcome publicity in recent days but how, I wonder, does Jamie Dimon feel when every day seems to bring another cloud, if not a hailstorm? I have written recently about how Jamie’s halo has become tarnished.
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Institutions and private equity have stepped into the gap left by banks, not least because of property’s attractive and duration-matching returns.
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The Chinese economy is growing ever more slowly – probably slipping even faster than officially admitted, and from a base whose size is possibly exaggerated too. In the midst of this, the orthodox banking sector is doing unorthodox things on a grand scale, while being undermined and bypassed by an even more unorthodox grey financial sector.
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Bob Wigley, a former chairman of Merrill Lynch EMEA, might also appreciate a large tumbler of Scotch. Wigley, who left the US investment bank after it was devoured by Bank of America in 2009, became chairman of Hibu, the former Yellow Pages printed directory of local businesses, some four years ago.
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These days banks are desperate for the next business or product line that is capital light, highly profitable and offers masses of potential to command a loyal following.
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The market is showing signs of revival, but it will be smaller and less diversified than it was at its peak.
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Blackstone is not just the biggest real estate investor in the world today, it’s the best according to the annual Euromoney survey. CBRE and Hines maintain their leading positions as advisors and developers respectively, while JPMorgan dislodges Deutsche Bank as the top real estate bank overall
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State-owned companies have, until now, set the tone in China. But as economic growth slows and state-driven capital market activity founders, banks are hunting for business from China’s privately owned, ambitious enterprises.
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Euromoney has been known from time to time to have lunch with the great and the good of the financial markets. It’s a good way to talk to bankers in an environment in which they are comfortable – luxurious restaurants. It also allows our journalists a unique insight into a world – luxurious restaurants – that is otherwise off limits to a humble hack. In Hong Kong last month Euromoney enjoyed a slap-up lunch with a head of investment banking, a chief operating officer and a senior press officer from a large Wall Street bank. We were invited to order anything on the menu and even broke our usual strict and complete abstinence from alcoholic beverages to enjoy a particularly fine Pinot Noir.
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Hedge fund managers have plenty to grapple with right now, not least how to hold their clients in the two and 20 position.
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Want to get introduced to senior executives of Facebook, Google, Yahoo? Or looking for funding from the largest venture capitalist firms? Why not head to Burning Man? The hedonistic week-long arts festival that takes places every August in Nevada on a dry lake called La Playa is best known for the elaborate costumes, or lack thereof, worn by the 60,000 plus attendees.
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A buoyant local economy means Saudi banks are riding high, but they remain over-exposed to their domestic market.
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In an exclusive interview, Riad Salamé, the longstanding governor of Banque du Liban, discusses Lebanon’s perpetual political and economic challenges, the resilience of its banks and the prospects for needed structural reform. He even ponders what he would do if he were president for a day.
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As growth in China falters and India seems to spiral ever more helplessly downward, southeast Asia has become central to the fortunes of banks in the Asia-Pacific region.
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Bank M&A in the Middle East has accelerated over the past year. Although regional events and global markets are already throwing up tests, the motivation for deals is still stronger than ever.
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Banks in Chile, Peru and Colombia are building platforms across the Andean region as a single commercial market between the three countries develops.
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Following in the footsteps of India and China, Indonesia’s second-tier cities are becoming attractive investment destinations. What is holding them back from realizing their full potential?
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Beyond the shadowy world of the big-four Gulf sovereign wealth funds, which can be opaque, seemingly inactive or conservative, a second tier of sometimes equally elusive SWF-style entities has sprung up.
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With growth finally returning to the region, emerging Europe’s big banking players are focusing on the most profitable markets and punishing hostile or incompetent policymakers.
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For all their strengths, the ferocity of this summer’s market sell-off has amplified some vulnerabilities that could be the first true test in a decade of the resilience of banks and the economy as a whole.
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Famed for his tough approach to regulation, Czech central bank head Miroslav Singer now has his sights set on currency market intervention to reflate the country’s flagging economy. He talks to Euromoney about the limitations of fiscal policy, the prospects for Czech adoption of the euro, and the dangers of regulatory integration.
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The country’s new leadership has yet to find solutions to serious economic issues. Plagued by high inflation and dollar shortages, the nation is not making the most of its oil, much of which is unprofitably in hock to regional diplomacy.
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It was second time lucky for the first Brazilian toll-road financing to come to the market without the support of BNDES. The initial attempt ended in confusion. A year later, the revived deal under new leadership faced severe headwinds.
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Despite the broader reassessment of emerging market investment, Mexican debt and equity issuance is sustaining and enhancing its appeal in international markets.
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During the past three years, Russian banks have plastered over holes in the corporate sector with record profits from retail. The choice now might be between fuelling a bubble or stagnation.
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Ngozi Okonjo-Iweala is convinced she can diversify the economy. But fears are growing that the end of the commodities super-cycle will imperil the growth model.
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From informal retailers to supermarket chains, Africa’s baby boomers are fuelling a consumer boom that is spilling over to agribusiness.
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Euromoney speaks to providers and users of transaction banking in the Gulf region about the market’s growing importance and the localization of expertise.
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Commercial lending key to earnings growth; valuations more favourable for buyers/sellers.
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Oil and gold imports problematic for reserves; The worst-performing EM currency this year
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The volatility this summer suggests that markets will find it hard to adapt to policy normalization. But there are still plenty of reasons to stay bullish.
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Sector opened to private participation; expected to add 1.5 points to annual GDP growth.
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African Bank seeks rights issue; Impairments at record high
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Threat of military action adds uncertainty; central bank inactivity supporting volatility.
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Banks everywhere hire well-connected employees as standard practice. Why should Hong Kong so grate with US regulators?
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Survey says banking union will not reduce default risk; SSM set-up could be pushed into 2014
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Despite Roussef’s protestations, only structural reform will put Brazil back on a growth path.
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Talk to big dealers and investors in the secondary corporate and government bond markets and it is clear that radical changes are coming. An exchange-like model with a central order book for bonds has been talked about for years. The time for action is at hand. The old over-the-counter market-making system is withering.
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Focus on sub-€1.5 billion turnover firms; response to change in corporate behaviour.
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Metals warehousing under threat; Goldman rejects criticism over delays
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EC proposals might reduce the influence of credit rating agencies. But are market participants likely to ignore the agencies’ assessments?
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Risk-control measures in place; further step in economic liberalization.
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Lack of reform momentum being challenged; Secular, long-term trend seen as favourable for EM
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Frontier markets may not lend themselves to an easy acronym. But they deserve plenty of attention from the world’s emerging market investors.
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Local lenders burgeoning; regulators accommodative.
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Loss for DBS and Danamon; Politics underlines acquisition failure
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The Abenomics high might give Japan’s markets a hangover if structural reforms are not implemented.
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No support for Rodovias do Tietê issue; Rotas das Bandeirantes refinancing blocked.
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Eurozone banks still have a way to go in deleveraging, but investor concern over weak disclosure might close access to equity.
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The untimely death of an intern at Bank of America prompted a spate of headlines about the long hours worked in the City of London and Wall Street. Forcing junior staff to put in exceptionally long hours is clearly counterproductive in any sector of banking, as it is in other industries. But the practice reaches a peak of pointlessness in corporate finance, where the Bank of America intern worked. Pure corporate finance, such as mergers and acquisitions or advisory work, is the area in the City where the greatest nominal effort is applied to the least practical effect.
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Former chairman arrested in France; $112 million net profit in first half.
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The recently discovered regulatory zeal for a focus on gross leverage ratios at banks, rather than capital assessed on risk-weighted assets, is creating a new set of problems for some of the biggest dealers. Barclays and Deutsche Bank in particular have been put on the back foot by the regulatory bait and switch, which comes at an awkward time – just as key engines of their profitability, such as rates trading, are sputtering.
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Billionaire looks beyond Hong Kong; Legacy planning underway
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Leads the way with low-trigger temporary write-down deal; Regulators will push banks to issue
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The new head of the International Finance Corporation, Jin-Yong Cai, tells Euromoney about the need for the World Bank’s private-sector arm to take more risks and be more activist in developing policy ideas in such areas as infrastructure development and poverty reduction.
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Telecoms firm opted to pay up to avoid looming rate rises.
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Despite recent positive GDP figures, there is still depressed consumer demand and tight credit in large parts of the single-currency area.
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The European Commission’s onerous clampdown on money-market reforms will likely ‘kill off’ constant net-asset value funds and potentially encourage investors and corporate treasurers to place excess cash in bank deposits instead, say analysts.
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Revived Glass-Steagall-type legislation might well benefit banks more than they like to believe.
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The future structure of housing finance in the US might well not be decided on Capitol Hill or New York, but in a small, working-class suburb of San Francisco.
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Japanese newspapers often refer to Koichi Hamada as “the brains behind Abenomics”. During a recent visit to Tokyo, the 77-year-old special adviser to Abe spoke frankly to Euromoney not only about Abenomics, but also the character and nationalism of Japan’s prime minister.
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Richard Fisher, president of the Federal Reserve Bank of Dallas, tells Euromoney why no bank is too big to fail and why Texas has much to teach the rest of the US economy
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Final rules on margin requirements for non-centrally cleared derivatives are expected in the coming days and are likely to include an exemption for foreign exchange swaps and forwards, analysts say. However, lobbying efforts are likely to swiftly move on to whether FX derivatives should be mandated for clearing.
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The Fed should continue with its current quantitative-easing programme, given the prolonged US deleveraging cycle and downside risks to inflation and growth, warns Carmen Reinhart, economics professor at Harvard, as fears grow that the tapering of bond purchases, expected in September, will deepen the sell-off in emerging markets.
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Greek lenders have beefed up their liquidity and capital buffers in recent months amid a Europe-wide fall in systemic banking risk, according to the latest projections from a European systemic risk index, Euromoney can reveal.