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As KPMG wins a $5.4 billion advisory mandate, are consultants stealing big deals from investment banks?

Where developed western markets go, Asia’s markets usually follow. Bankers in the region are confident that’s true of hybrid securities. From a buy-side perspective, hybrids have arrived already. As many as a dozen international issuers, most conspicuously from Latin America, have successfully tapped an Asian retail market driven principally by private bank clients hungry for yield.

In Japan emerges from the shadows, February issue, we reported that Nikko Citigroup had led a ¥120 billion domestic bond deal for Sanyo last September. In fact, the deal was for Sony. Apologies to all concerned.

Asian-based hedge funds generated 30% of all reported commissions earned by brokers over the past 12 months on trades of Asian stocks.

As China’s banks continue their rapid restructuring, government and regulators are already mapping out the future for the industry. “One word is becoming very important in China’s banking sector – deregulation,” says Zhang Jinguo, president of Bank of Communications (Bocom). “Banks in the west were talking about this in the 1980s and 1990s. We’ve been talking about this only since last year.” The People’s Bank of China, the mainland’s central bank, wants several so-called universal banks to emerge. That, say China bankers, means huge opportunities for mergers and acquisitions of banks and other financial services businesses such as securities firms and insurance companies.

This could be just the beginning of a battle between exchanges and their users.

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DrKW has embraced blogging in a big way. The fondness for internet opinion boards has spread from the bank’s IT staff to the rest of the bank, which now has about 300 internal web logs, used for sharing work ideas.

The Lehman Bond Show will now be available via podcast.

There was a message of serious intent in the choice of syndicate for Hong Kong-based Hutchison Whampoa’s proposed flotation of its Italian 3G business. The message from the market was equally clear. Despite the best efforts of Goldman Sachs, HSBC, JPMorgan, Merrill Lynch and Morgan Stanley to get the deal away, the US$7 billion price offered by investors was simply too unpalatable for an investment that has cost Hutchison between US$8 billion and US$9 billion. The IPO was pulled.

Arcelor, the Luxembourg-based steel company that has in the past preferred not to use bank advisers, is wheeling out the big guns to defend it against the €18.6 billion ($22.1 billion) hostile bid from Mittal Steel. It has just hired Morgan Stanley, which will join BNP Paribas, Deutsche Bank, UBS and Merrill Lynch in advising it. Most of the main advisory firms are involved in the hostile bid on one side or the other. Mittal Steel is being advised by Credit Suisse, Goldman Sachs, HSBC, Société Générale and Citigroup.

It hasn’t been the easiest of starts to 2006 for Citigroup in Asia, with continuing integration challenges at its Korean banking acquisition and difficult negotiations with existing and future partners over its China strategy [see Citigroup fails to solve the China conundrum, this issue]. Now Citi’s China strategy will need to be reconsidered after the departures of chief rainmakers Francis Leung and Wei Christianson.