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July 9, 2009 • 10:33 am 0

CME Group and BM&FBOVESPA talk up order routing agreement results

CME Group, the world’s largest and most diverse derivatives exchange, and BM&FBOVESPA, the largest exchange in Latin America, announced that more than two million contracts have now traded as a result of their order routing agreement that was fully implemented on February 9, 2009.

The order routing linkage enables customers outside of Brazil for the first time to directly access BM&F segment products on CME Globex, and customers inside Brazil using GTS, one of BM&FBOVESPA’s electronic trading platforms, to directly access CME Group products.

“Facilitating CME Group customer access to BM&F segment products has opened up an entire new set of opportunities for customers outside of Brazil to gain exposure to the Brazilian marketplace,” said Rick Redding, CME Group Managing Director of Products and Services. “With one connection, our customers have an entree to products for one of the most closely followed economies in the world.”

“This new direct access to our markets has been very well received and we now look forward to expanding contract offerings to customers even further with new jointly developed products from CME Group and BM&FBOVESPA. Through this week, more than 2.2 million contracts were traded, representing more than 227,000 transactions, totaling over R$177.36 billion,” said Cicero Augusto Vieira Neto, BM&FBOVESPA Chief Operations Officer.

The order routing agreement includes access to some of the most liquid futures and options contracts in the world on interest rates, commodities such as grains and livestock, equity indexes and foreign exchange listed at CME Group, and One Day Inter-Bank Deposits, the Bovespa Stock Index, which is pending regulatory approval, and commodities such as Arabica coffee, live cattle and corn available at BM&FBOVESPA.

Also as part of the arrangement between the two exchanges, CME Group owns a 4.9 percent equity stake in BM&FBOVESPA, and BM&FBOVESPA owns a 1.7 percent equity stake in CME Group.

Source: CME Group, 09.07.2009

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, Trading Technology , , , , , , , , , ,

• 10:30 am 0

Dual listings pact to strengthen capital markets in Singapore and Norway

Singapore Exchange Limited (SGX) and the OsloBørs ASA (Oslo Børs) today inked their co-operation with the signing of Memorandum ofUnderstanding (MOU) to facilitate the process of secondary listing of companies on eachother’s exchange.

This MOU marks the first formal co-operation between the two exchanges. It also represents the first dual listing co-operation with a sector focus between Singapore and Norway.

The MOU will be signed at a ceremony in Singapore on 8 July 2009 at 5.30pm,witnessed by Mrs Lim Hwee Hua, Minister in the Prime Minister’s Office and SecondMinister for Finance and Transport, Singapore. Minister Lim will be joined by HerExcellency, Ms Janne Julsrud, Ambassador, The Royal Norwegian Embassy, Singapore;and Mr J Y Pillay, Chairman of Singapore Exchange.

The proposed co-operation aims to promote the secondary listing of companies listed oneach other’s exchange. SGX and Oslo Børs will institute a framework to enable and facilitate dual listings through mutually agreed listing rules and processes. In addition,both exchanges will set up a process for settlement and clearing of shares traded of these dual listed companies. The co-operation will begin with companies in the energy,offshore and shipping sectors which are key sectors common to both exchanges. Assuch companies expand their business activities to Norway or Singapore, the dual listing framework will allow them to diversify their shareholder base, build their profile and provide an additional fund raising venue.

Another area of co-operation is joint marketing and promotion. Both exchanges plan to commence a series of marketing seminars to profile the sectors in both regions in the coming months. SGX and Oslo Børs will enhance the co-operation framework by exploring opportunities in introducing new sectors, providing regulatory updates,monitoring and governance matters.

Minister Lim Hwee Hua said, “I congratulate SGX and Oslo Børs on the signing of this MOU. The MOU will enhance the attractiveness of the two exchanges as destinations for listings by shipping, offshore and energy companies, as well as those in other sectors.This will in turn reinforce the standing of Singapore and Norway as international maritime and financial centres. This collaboration will also boost Singapore’s efforts to position itself as a leading shipping and maritime hub in Asia.

”Mr Hsieh Fu Hua, CEO of SGX added, “We are very pleased to co-operate with the OsloBørs. This co-operation complements our Asian gateway strategy. Companies from Asia and Europe in the energy, offshore and shipping sectors will be better profiled and benefit from the larger investor pool. Investors on both our bourses will also have a greater selection of investment choices.

”Mrs Bente A Landsnes, CEO of Oslo Børs ASA said, “A co-operation between SGX and Oslo Børs supports the fact that both Singapore and Norway has long, and to a great extent, similar traditions when it comes to shipping and energy-related industries. At OsloBørs we are proud to join this exciting co-operation, and we have great expectations on behalf of the companies that choose to list their shares on both exchanges.”

Source: Bob’s guide, 09.07.2009

Filed under: Asia, Exchanges, News, Singapore , , , , , ,

• 10:28 am 2

Deutsche Bank securities JV with Shanxi Securities gets China approval

The license allows Zhong De Securities to underwrite A-shares and domestic Chinese bond issues.

Deutsche Bank announced yesterday that its joint securities venture with Shanxi Securities has received a business license from the Chinese regulators, meaning it is now free to launch investment banking services targeted at the domestic Chinese market. The license was granted about six months to the day after the two firms got the approval to set up the JV and makes Deutsche the fifth international bank to gain access to China’s equity and bond markets after CLSA, Goldman Sachs, UBS and Credit Suisse.

In accordance with the prevailing Chinese regulations, Deutsche owns 33.3% of the Beijing-based JV — named Zhong De Securities — while Shanxi Securities owns the remaining 66.7%. The business license allows Zhong De to underwrite and sponsor Chinese A-share issues, as well as government and corporate bonds, but not to conduct brokerage operations. It is believed that the new firm will initially focus on large-scale equity issues, but in the longer term it is likely that Zhong De will want to take advantage of Deutsche’s expertise in the international bond markets and get more involved in China’s rapidly growing corporate bond market as well.

Stock broking is one of the most profitable areas of the securities business in China, but new regulations issued in December 2007 stipulate that Sino-foreign securities JVs will have to wait five years after their establishment to obtain an A-share brokerage license.

Deutsche Bank’s head of China corporate finance, Charles Wang, has been appointed CEO of the JV, while Shanxi Securities’ president, Wei Hou, will become chairman. Wang is an experienced investment banker who has been with Deutsche bank for three years. Before that he spent 12 years with Merrill Lynch. During his career he has focused primarily on equity and advisory, which reinforces the suggestion that Zhong De’s initial focus will be on A-shares.

Deutsche will nominate three members to Zhong De’s nine-person board of directors, including Wang and one independent director. Shanxi Securities will nominate the other six, which will include the chairman and two independent directors.

While current Chinese regulations caps the investment by foreign banks in a Sino-foreign securities JV at 33% and direct stakes in a securities firm at 20%, the international banks are all striving to get as much management influence as possible. While abiding by the ownership rules, Goldman Sachs and UBS both have effective operational control over their China businesses. However, both these firms received a special dispensation because they got involved in securities firms that were distressed and it is widely believed that Beijing will not allow more similar set-ups under the existing regulations.

Deutsche Bank didn’t comment on the level of management influence it expects to have, but a source said that as CEO Wang will be responsible for appointing most of Zhong De’s senior managers. Meanwhile, Shanxi Securities will appoint the chairman of the supervisory board.

“Zhong De Securities combines unique strengths from both of its shareholders,” Wang said in a written statement. “We have the personnel, experience, infrastructure and ambition to become a leading firm within China’s domestic financial services market.”

Zhong De gets the go-ahead just as China is re-opening its A-share IPO market, which was suspended in September in light of the financial market turmoil, which saw both Chinese and international equity markets tumble. In late June, Guilin Sanjin Pharmaceutical became the first company to receive approval for an initial public offering after the sharp rise in Chinese share prices this year had indicated that the market would be able to absorb new issues. However, the regulators have been allowing smaller companies to go public first, no doubt to test the waters. Guilin Sanjin, a manufacturer of traditional Chinese medicine, sold Rmb910.8 million ($133 million) worth of shares, or 44% more than it initially planned, after the offering ended up heavily oversubscribed. The deal was arranged by China Merchants Securities.

According to media reports, another three companies have also received approval for A-share IPOs so far, including Hong Kong-listed Sichuan Expressway.

Deutsche Bank is the second international bank to get approval for a Sino-foreign securities JV since a moratorium on such JVs was lifted in May 2007 and since the new regulations were announced in December 2007. A JV between Credit Suisse and Founder Securities received its final business license in January this year and has been underwriting a few corporate bond issues since then.

Goldman Sachs and UBS were both allowed to set up businesses in China before the new rules took effect, in 2006 and 2007 respectively, but chose different routes to do so — Goldman through a joint venture with Gao Hua Securities and UBS through its direct 20% stake in Beijing Securities.

Meanwhile, CLSA has a JV with Hunan-based Fortune Securities under the name of China Euro Securities (CESL), which was set up in 2003 under regulations that were introduced as a result of China’s entry into the World Trade Organisation in 2002. Pursuant to the five-year rule, CESL was granted a brokerage license for the Yangtze River Delta area in June last year in addition to its underwriting license and the firm is now focusing primarily on the brokerage business.

The only other international investment bank to have direct exposure to China’s domestic market is Morgan Stanley, which set up the very first JV (China International Capital Corp) together with China Construction Bank in 1995. This “pilot” programme turned out to be a one-off at the time though and no further approvals were granted until after China’s WTO entry. Today, Morgan Stanley has no management input into the JV, but receives revenues in proportion to its 33% stake.

Morgan Stanley signed a memorandum of understanding with Huaxin Securities in early 2008 to establish a JV where it would be more actively involved, but this is still awaiting regulatory approval. Another firm waiting for approvals is Citi, which signed a MoU for a securities JV with Zhongyuan Securities around the same time in early 2008.

For Deutsche Bank, this license means that it is now able to offer all of its core global businesses in China as well. The German bank has made significant investments in China over the past 18 months and currently has a 30% stake in Harvest Asset Management and a 13.7% stake in Hua Xia Bank. It also has a derivatives license and is locally incorporated in Beijing, which means it can roll out a branch network should it decide to do so.

Shanxi Securities was founded in 1988 among the first group of securities firms to be set up in China. According to a statement in January, when the approval for the JV was received, it has more than 53 branches in Shanxi province and other major cities, including Beijing, Shanghai and Shenzhen. At that time, it had 800 employees.

Read original article here

Source: FinanceAsia.com, 08.07.2009 By Anette Jönsson

Filed under: Asia, Banking, China, News, Services, Wealth Management , , , , , , , , ,

• 10:24 am 0

New Views on the Hedge Fund Industry – State Street Study June 2009

The global financial crisis is bringing about an evolution in hedge funds that will render  significant changes to the industry. Record investment losses and investor withdrawals  have cut assets under management by more than one-quarter, consolidation is under  way, and both investors and regulators are calling for greater transparency.

Download: Hedge Fund Study – State Street -June 2009

Two major trends that will have far-reaching impacts are emerging: a migration among the maturing hedge fund industry to third-party administration, custody and specialized services, and the most comprehensive reconsideration of financial regulations in a generation.

According to State Street’s annual hedge fund study conducted in October 2008, 84 percent of institutional investors surveyed expect more frequent disclosure of  hedge fund positions, while 49 percent anticipate more frequent reporting.
Before the dust from the crisis settles, it will be important for all of the stakeholders in this market to understand the ramifications of these trends and to participate in shaping the new structure of this changing industry.
Though forever altered by current market conditions, hedge funds will retain their critical and proven role in institutional investors’ financial portfolios.

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London Mayor: Hedge Fund might leave London for Singapore, SGP Hedge Fund, 09,07,2009

London Mayor Boris Johnson attacks EU’s plans to regulate hedge funds, FT 08.07.2009

Source: State Street, June 2009

Filed under: Asia, Library, News, Risk Management, Services, Wealth Management , , , , , , , , ,

• 10:00 am 0

China: the risk of Selling Foreign Exchange Derivatives Under Contro

The People’s Bank of China, the central bank, recently made an investigation on derivatives operation of six domestic commercial lenders.

They included Industrial and Commercial Bank of China (ICBC, SHSE: 601398, and SEHK: 1398), Agricultural Bank of China (ABC), Bank of China (BoC, SEHK: 3988 and SHSE: 601988), China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939), Bank of Communications (BoCom, SEHK: 3328 and SHSE: 601328) and China Development Bank (CDB). Such investigation actually has been made by the China Banking Regulatory Commission (CBRC), the top Chinese banking regulator, and the conclusion it reached is that the risk for commercial banks to sell foreign exchange derivatives is under control, revealed an insider.

Currently, foreign exchange derivatives sold in the country include foreign exchange option, foreign currency swap, foreign exchange interest swap and etc. The floating losses commercial banks suffer from selling such products has dropped to different extents thanks to rebound of the global market and importance they attached to downsizing such business. Statistics show that such business’ notional principal amounts of the nation’s Big Four state-owned commercial banks
, including ICBC, ABC, BoC and CCB, each has slid abut 50 percent since the fourth quarter of last year.

In addition, they lowered the proportion of complicated structural products in succession. Complicated structural products are always designed by foreign banks and faire value accounting of those products is also provided by them. They have become two big obstacles on the way of the growth of their Chinese partners’ derivatives business.

In order to reduce risk, Chinese companies have no choice but to buy foreign exchange derivatives. The pricing right is tightly controlled by foreign banks despite that the products are sold by their Chinese partners. As a result, a considerable part of the profit those Chinese banks gained from the business is taken by foreign banks.

Foreign banks know little about Chinese companies, so they prefer to sell products to the latter via Chinese banks. Those Chinese banks have to loan money to buyers of such products provided that loss takes place. Under such environment, those Chinese banks will be under rising credit risk. And the best way for them to solve the problem is to ask buyers of such products to pay deposits, added the insider with Trading Markets

Source: Singapore Hedge Fund, 08.07.2009

Filed under: China, News, Risk Management, Services , , , , , , ,

• 6:34 am 0

Private banks under pressure to Change Business Models

Private banks that don’t focus on profitable segments won’t make it, says Scorpio Partnership.

Amid the losses suffered by individuals, corporations and institutions from the global financial crisis has emerged the opportunity for private banks to step into the spotlight and highlight their strengths. Private banks, after all, are associated with financial advisory services and what was sorely lacking during the buying frenzy in capital markets in the run-up to the financial crisis was precisely that: advice. Too many investors were chasing the momentum, and sales-driven money managers were all too happy to take in the excess liquidity. The rest, as they say, is history.

A report by Scorpio Partnership, a London-based strategist and high-net-worth consumer issues research firm, shows that the private banking industry managed to pull through in relative terms in 2008. However, the industry is facing a very difficult 12 months ahead if it fails to adjust business models, according to Scorpio Partnership’s Global Private Banking KPI Benchmark 2009 report.

“2009-2010 will be a moment of truth for the global private banking model,” says Sebastian Dovey, managing partner of Scorpio Partnership. “Asset levels have declined by a median of -15.7% and cost-to-income ratios have risen by 13.7% which places a huge strain on the models of many competitors.”

The way to survive post crisis is through an “intelligent focus on profitable segments and efficiency drives”, Dovey says, adding that the traditional management tendency for “slash and burn” in such conditions will be much more damaging in the long-term.

“This is a time for vision and leadership,” Dovey says. “Our view is firms must now use traditional consumer tools in branding and advertising to reclaim confidence and new business.”

Global wealth managers now have around $14.5 trillion in assets under management (AUM), a decline of 16.7% from the previous year, according to the report.

Apart from slashing assets, the global financial crisis also affected the roster of the top private banking institutions in AUM. M&A activity, particularly in the US, influenced the top 10, with Bank of America (BoA) now becoming the world’s largest wealth manager, according to the report. The core of BoA’s asset base remains inside the US, however. UBS, meanwhile, remains in second spot and is effectively still the largest non-US international wealth manager.

AUM of the world’s top 10 private banks, according to Scorpio Partnership:

  • 1. Bank of America – $1,501 billion
  • 2. UBS – $1,393 billion
  • 3. Citi – $1,320 billion
  • 4. Wells Fargo – $1,000 billion
  • 5. Credit Suisse – $611 billion
  • 6. JP Morgan – $552 billion
  • 7. Morgan Stanley – $522 billion
  • 8. HSBC – $352 billion
  • 9. Deutsche Bank – $231 billion
  • 10. Goldman Sachs – $215 billion

The top 20 global private banks manage nearly $9.2 trillion of private client assets. That’s around 63% of the total global market and challenges the widely expressed view the global wealth industry is fragmented, according to the report.

The report shows that “market fragmentation as a characteristic of the industry is hugely overstated”, Dovey says. “Our goal has always been to demonstrate that market share — as measured by a percentage of assets managed relative to the total asset managed by all competition — is much more concentrated. This has significant consequences for evaluating the industry and businesses within it.”

Meanwhile, despite the fall in assets last year, the private banking industry as a whole added to its headcount. Overall, there was an uptick in new hires of 6% worldwide and the ratio of firms that were hiring in 2008 versus those that were shedding private banking staff was 4:1, the report says.

The report shows little evidence of a flight to quality through the worst of the crisis. Net new money results hint only that Swiss private banks may have seen a very marginal uptick in business, while some household names did not benefit at all.

It appears investors restructured portfolios among a number of different types of institutions when it was unclear which private banking institutions would emerge successfully from the banking crisis and which would fail.

The report points to five core strengths in the private banking model that enabled players of different types to perform well in difficult market conditions:

  • Ability to generate income from multiple sources rather than purely asset management
  • Wealth re-creation approach to business rather than exclusively wealth preservation
  • Ability to guide clients into high-quality specialist investments
  • Strength of brand and contemporary relevance to client requirements
  • Network leverage (either through branch systems or strong external partnerships) for new client access

“These five qualities are the future principles upon which the private banking industry can rebuild based on our analysis of business model performance,” says Catherine Tillotson, head of research at Scorpio Partnership. “The market champions will be those that concentrate on modernising the proposition using contemporary positioning tools to re-engage with the client and developing products and services that are committed to wealth re-creation. Institutions that opt to sit tight in 2009 and ride out the storm will sink.”

The Global Private Banking KPI Benchmark 2009 reviews the global wealth management industry. The annual report covers more than 248 private banking and wealth management firms.

Original article here

Source: AsianInvestor.net, 09.07.2009 by Rita Raagas De Ramos

Filed under: Banking, Library, Risk Management, Services, Wealth Management , , , , ,

• 2:09 am 0

VAM: Vietnam Monthly Market Analysis June 2009

VAM Market Update – Vietnams GDP is estimated to have grown by 3.9% in 1H09, meaning in 2Q09 GDP growth rallied to 4.5% up from 3.1% in 1Q09. The resilient growth story continues to be driven by industrial production, renewed momentum in construction, and consumer driven categories. The data suggests the 4.5-5% GDP growth rate consensus prediction for Vietnam in 2009 is on track.

Monthly inflation was again positive in June up 0.55%, but on a YoY basis has dropped to just 3.94%. The trade deficit for 1H09 is estimated at US$2.1 bn, equalling 14.7% in the same period last year with export growth down 10.1% and import growth down 34.1%. Vietnam has received capital inflows of roughly US$8 bn in 1H09 from FDI and ODA disbursement and overseas remittances keeping the balance of payments in a healthy position for the time being.

However, FDI which is a major driver in the Vietnam growth story is slowing down, with commitments in 1H09 estimated at US$8.87 bn down 77.4% on year and also on pace to fall below 2007 levels.  The local USD/VND exchange rate remains virtually unchanged.

The VN-Index was up 8.9% in June to 448.29, but corrected strongly down 12.5% from a June 9th peak of 512.46.  In June, the average daily traded value on the VN-Index surpassed the US$100 ml mark reaching US$108.3 ml per day, roughly 12 times the average daily traded value in February 09.  In other market news, the much awaited and delayed launch of the UpCom market occurred on June 24th with 10 OTC companies listed for the trial run which will run through July. It is expected the market will bring greater liquidity and transparency to the OTC market in Vietnam.

Read full article and market statistics at VAM Monthly Newsletter – Jun 2009

Source: Vietnam Asset Management 08.07.2009

Filed under: Asia, News, Services, Vietnam , , , , , , , ,