Global Finance (April 2005)

56 Pages·2005·2.463 MB·English

KAZAKHSTAN LOOKS COSTLY COMPLIANCE: RISK MANAGEMENT:
FOR OPPORTUNITIES COMPANIES APPEAL INSURERS ADAPT TO A
BEYOND OIL & GAS FOR HELP CHANGING WORLD
PAGE 39 PAGE 41 PAGE 43
S U R V E Y W O R L D ’ S B E S T D E V E L O P E D M A R K E T B A N K S
APRIL 2005
A revitalized industry prepares
for a bumper year
PPRROOJJEECCTT
FFIINNAANNCCEE
RREEAACCHHEESS FFEEVVEERR PPIITTCCHH
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CONTENTS
APRIL 2005 | VOL.19 NO.4
COVER STORY PROJECT FINANCE
REGULARS
BY GORDON PLATT
12 Project Finance Activity
Reaches Fever Pitch 2 Dear Reader
The project finance industry had a A letter from the editor.
banner year in 2004.This year looks
set to be even better. 4 Newsmakers
Colombia’s finance minister, Alberto
Carrasquilla, battles in vain to keep his
FEATURES
BEST DEVELOPED country’s currency from rising against the
16 Best Developed Market MARKET BANKS slumping dollar; and Sir Howard Stringer,
BY PAULA L. GREEN &
Banks the Welsh-born head of Sony America,
ANITA HAWSER
becomes chairman and CEO of the
Global Financeunveils its annual list
Japanese parent company.
of the best banks in developed
markets around the world.
6 Milestones
Mystery money from the Caribbean and
24 Roundtable: Turkey
Bermuda sends the dollar on a wild ride;
At a recent meeting in Istanbul, ROUNDTABLE: and the People’s Bank of China pulls out
Global Finance brought together TURKEY
all the stops in its attempt to cool the
some of the key figures in Turkey’s
country’s property market.
banking and finance industry to
discuss the country’s prospects.
8 Emerging Markets Roundup
The latest news from China, India,
30 Global Custody Buyer’s
Russia and Brazil.
Guide
In our 15thannual listing,we GLOBAL CUSTODY 10 EM Investor
provide a comprehensive guide to GUIDE Key information for investors in emerging
the services of the world’s top
markets.
custodians.
45 Focus: Mergers & Acquisitions
39 Country Report: Kazakhstan
The European private equity market is
Kazakhstan has immense energy growing rapidly, as US buyout firms seize
reserves,but its government is opportunities to help restructure
determined to diversify the corporate Europe.
country’s economy.Its efforts are COUNTRY REPORT:
KAZAKHSTAN
bearing fruit—slowly. BY PAULA L. GREEN 49 Foreign Exchange
Asian central banks may tilt the US yield
41 Costly Compliance curve upward by cutting back on their
As the full demands of complying buying of US treasury bonds.
with Sarbanes-Oxley become clear,
companies are increasingly calling 51 Corporate Debt
for help in reining in the costs. Samurai and kangaroo bonds are hopping
COSTLY COMPLIANCE as US companies seek to diversify their
43 Insurers Seek New Role BY PAULA L. GREEN sources of funds.
In A Changing World
52 Global Equity/DR
Insurers are getting more involved
in helping their corporate clients A growing number of Israeli companies
understand the risks they face. are listing their depositary receipts on the
London Stock Exchange instead of on
Nasdaq.
2005 APRIL 1
TLFeBOOK
DEAR READER
APRIL 2005 | VOL.19 NO.4
Place Your Bets
W
ith corporate misbehavior and accounting shenanigans
KFBOEARYZO ASONKPUDHPR SOOTVRIALTE NU&Y NLGOIAWTOISEKO S SPRAGLE 3D9’SCCF OOOBRSMET PHLSAYETNL CI PEODSME APVPLEIPALENAOCLPPAEG:EE 4D1 MRICNHIASSAUKRNR KGMEIEARNNSTG A AWGBDEOAAMRPNLETDNK TTSOP:A GAE 43 apparently under control,the focus of the conversations
EDITOR IN CHIEF AND CHAIRMAN: PAOLO PANERAI
among the financial chattering classes has moved on.In
APRIL 2005
PUBLISHER AND PRESIDENT:JOSEPH D. GIARRAPUTO
fact,it has become a dual focus—on the fall of the USdollar and
A revitalized industry prepares on the rise of the hedge fund industry.
for a bumper year
EDITOR:DAN KEELER
The two came together last month with speculation that hedge
EUROPE EDITOR/LONDON:ANITA HAWSER
funds had been buying up US securities in such quantities that
PPRROOJJEECCTT CONTRIBUTING WRITERS:
their purchases were reversing the downward trend of the dollar. GORDON W. PLATT, JR., SANTIAGO FITTIPALDI,
FFIINNAANNCCEE PAULA L. GREEN, AARON CHAZE, FRASER RICHARDSON,
(See Milestones,page 6.) At first glance,that seems a pretty strange
KIM ISKYAN, LAURENCE NEVILLE
RREEAACCHHEESS FFEEVVEERR PPIITTCCHH
PAGE 12 thing to do,given that hedge funds are more likely to want the
dollar to fall further so they can ride it down.Currency markets
PRODUCTION MANAGEMENT (MILAN):GIULIANO CASTAGNETO
had already been seriously rattled by reports that Asia’s central
ART DIRECTION:ER CREATIVITY/ENRICO REDAELLI,
bankers were starting to diversify their banks’holdings away from CLARA CIOCCHINI
dollars,but the revelation of the near-$40 billion purchases helped COPY EDITOR: TINA ARIDAS
reassure the markets that the dollar wasn’t about to fall off a cliff—
and marked the start of a 10-day dollar rally.
VICE PRESIDENTS, SALES:SEBASTIAN CAZEIRO,
It is not easy to see how hedge funds could benefit from propping LEWIS GALATI, PETER RIORDAN, THOMAS GEORGIADES,
GRAEME McQUEEN, SALES DIRECTOR, EUROPE AND ASIA,
up the value of the dollar,but there are some intriguing echoes of RICHARD SCHOLTZ, SALES MANAGER, EUROPE
1992.That was the year that George Soros catapulted hedge funds MKT’G COORD, SPECIAL PROJECTS/EVENTS:
into the limelight with his raid on Sterling that forced Britain’s NATASHA TRAJKOVA
currency out of the European Exchange Rate Mechanism—and left PUBLISHING ASSOCIATE:
LAURA GALLETTI
the Bank of England out of pocket by about a billion pounds.Soros,
MANAGING DIRECTOR, OPERATIONS:
who believed Britain’s currency was significantly overvalued,had a CHRISTOPHER GIARRAPUTO
simple strategy:borrow billions in Sterling and then use it to buy
ACCOUNTING MANAGER:YAWO GBEGNEDJI
Deutschmarks and French francs.The selling pressure forced the
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By temporarily pumping up the value of the dollar,hedge funds
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and currency speculators could be setting the stage for the mother Agency. China: Mary Yao, Media Gateway International Ltd. Germany: Erhardt
Eisenacher, Eisenacher Media. Hong Kong, Malaysia, Singapore:Godfrey Wu,
of all currency raids.If they are,and they pull the plug any time
MHI Limited. India:Faredoon Kuka, Ronny Mistry Assoc. Pvt Ltd. Indonesia:
soon,the effects will be dramatic and painful.Any organizations Rita Jayadi, PT Mediarep. Israel:Asa Talbar, Talbar Media. Japan:Shigeru
Kobayashi, JAC Media. Mexico & Costa Rica:Xavier Romero Goytortua.
that have not yet hedged their exposure to the dollar would be Pakistan:Imran Ahmad, Pace. Philippines:Abdel Teodoro. Russia/CIS Baltic
wise to remember that it is not only the Alan Greenspans of this States:Arkady Komarov. South Korea:Heinz Kim, Heinz Communications Inc.
Taiwan:Keith Lee, Advance Media Services Ltd. Thailand:Nartnittha
world who can move the markets. Jirarayapong, N.J. International Media Company, Ltd. Turkey:Lemi Tanca
GLOBAL FINANCE MEDIA INC
CHAIRMAN: P. PANERAI
Expanded Emerging Markets Coverage
VICE CHAIRMAN:A. BASODAN
On page 10 of this issue you’ll find a new section:EMInvestor. DIRECTORS:G. CAPOLINO, J. GIARRAPUTO,
A.MATTEI, I. MAJEED, V. TERRENGHI
covering subjects of interest to investors looking to put their SECRETARY:L. PANERAI
money into emerging markets.We’re excited about our expanded FOUNDING EDITOR:CARLG.BURGEN
emerging markets coverage and we hope you find it interesting April 2005, Volume 19, Number 4. Global Finance (ISSN 0896-4181/USPS 006-578) is
published monthly except a combined July/August issue in July by Global Finance
and,most of all,useful. Media Inc, 411 Fifth Avenue, New York, NY 10016. Telephone: [phone]. Fax: 1-212-
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INTERNATIONAL R
2 APRIL 2005
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NEWSMAKERS GLOBAL F FINANCE
AROUND THE WORLD
COLOMBIA
JAPAN
FINANCE MINISTER CAN SIR HOWARD STRINGER
GET SONY BACK ON COURSE?
WRESTLES WITH AN
IRREPRESSIBLE PESO
Sir Howard Stringer,
Finance minister Alberto benchmark rate down to the Welsh-born head
Carrasquilla of Colombia 6.5%,but still the peso rose. of Sony America, has
been named chair-
has pulled out all the Last December,President
man and CEO of the
stops to keep the country’s Alberto Uribe signed an
Japanese parent
currency from rising against executive order restricting the
company. The gaijin
the slumping dollar.Sadly, inflow of short-term
CEO, rare in Japan
nothing seems to work. investments by requiring
and a first for Sony,
The peso rose 16% last international investors to keep may implement
year,making it one of the their money in the country some drastic turn-
strongest currencies in the for at least a year.The capital around measures
world,to the chagrin of the controls proved virtually that would have
country’s exporters,who useless in stemming the peso’s been difficult for a
complain they are losing their appreciation and will be Japanese manager
to implement.
competitiveness despite a abandoned within the next
The genteel Sir
new free-trade agreement few months,Carrasquilla said
Howard, known for
with the US. in a recent interview with US
his people skills and
“Nobody wants to buy news service Bloomberg.
sense of humor, will Sir Howard Stringer
dollars because buying means The latest plan is for
wield the corporate
losing money,”Carrasquilla Colombia’s central bank to axe with an iron hand and kid gloves. He also will have to re-
says. sell the government at least solve Sony’s identity crisis. Is it an entertainment company or
Last year,the government $1 billion in foreign reserves, an electronics company, or both?
and the central bank bought which the government will Now that the Sony Walkman has been displaced by the Ap-
more than $3 billion in US use to help prepay ple iPod, the Japanese company is losing its reputation for be-
currency in an attempt to international debt, ing first to market with the latest technology and quality
products.
curb the peso’s rise.The Carrasquilla says.The dollar
The Oxford-educated executive was appointed to Sony’s top
central bank slashed interest reserves were accumulated
position only weeks after the company warned that profits at
rates three times,bringing the during the central bank’s
its electronics division would fail to meet their target for the
foreign exchange market
second straight year.
intervention.
Sir Howard already has been credited with breaking down
Colombia’s central bank is the management silos between Sony’s US entertainment and
independent by law,but electronics operations, and he just might have the vision to
Carrasquilla is president of its steer Sony successfully into the broadband age.
seven-member board.He says Last year, he oversaw the purchase of Metro-Goldwyn-
that prepaying debt will help Meyer and its film library. Now he has to find a way to con-
meet the International vince consumers to tap into Sony’s media cache with
advanced devices, such as the popular PlayStation Portable
Monetary Fund’s requirement
game console.
that Colombia trim its debt to
Sir Howard, a former journalist who became president of
less than 40% of gross
CBS, has nine individual Emmys to his credit and is firmly
domestic product.Draining
grounded in the content side of the business. However, the
off the central bank’s reserves
decorated Vietnam War veteran has the guts, the talent and
could also spur some peso the versatility to succeed in his latest multicultural, and mul-
selling.Meanwhile, ti-media, challenge of helping Sony to realize its global poten-
Carrasquilla says,the central tial. He plans to live in the UK with his family and travel
bank will keep buying dollars. regularly to Tokyo and New York.
Alberto Carrasquilla —Gordon Platt —GP
4 APRIL 2005
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MILESTONES GLOBAL F FINANCE
TAKING NOTE
UNITED STATES
CHINA
MYSTERY INVESTORS CENTRAL BANK PUTS THE BRAKES
ON AS ECONOMY SPEEDS AHEAD
BUY US SECURITIES
DESPITE THREAT OF
FALLING DOLLAR
The US Treasury mysterious.It didn’t come
International Capital from Asian central banks,at
Systems,or TICS,report least not directly.Japan was a
has become one of the most net seller of $5.6 billion in US
closely followed monthly data treasury securities.China and
series in the financial markets South Korea,other big holders
at a time when many investors of dollar reserves,also were
are worried about funding the net sellers of US treasuries.
current account deficit.The Net capital inflows from the
dollar jumped last month Cayman Islands of $18.6
Strong growth puts pressure on the yuan
when the report showed that billion in January included
foreign investors plowed a $6.7 billion of US treasury
The People’s Bank of China introduced new tightening mea-
near-record net $91.5 billion bonds.A $20.7 billion inflow
sures to cool the property market last month, as the economy
into US stocks and bonds in from Bermuda was mainly in
showed no sign of slowing and investment growth continued
January.That was more than US treasury securities. well above the government’s target. The central bank in-
$20 billion above the most- Recent large transactions creased the five-year benchmark mortgage rate from 5.31% to
optimistic of analysts’ through Caribbean tax havens, 6.12%. It also raised the required down-payment ratio from
forecasts. often attributed to hedge 20% to 30% in areas with rising prices.
The dollar dropped the next funds,could include some The average price for residential housing rose 15.2% last
day,however,on news that the central bank buying,Woolfolk year, much higher than the rise of other price indexes. A
spokesperson for the central bank said that the rise in hous-
US current account deficit says.“Why the central banks
ing prices could lead to financial risks, and that the rate rise
widened in the fourth quarter would redirect official flows
would help guide the housing sector down the proper track.
of 2004 to a record $187.9 isn’t clear,”he says.“It needs to
These were marginal steps, according to analysts, who ex-
billion.The deficit for all of be studied.”
pect the PBOC to raise other rates soon to slow the economy.
last year was $665.9 billion, —Gordon Platt
Last October, interest rates were increased by 27 basis points.
also a record.“Foreign China’s fixed investment rose at an annual rate of 24.5% in
investors have not lost their the first two months of 2005, still well above the govern-
appetite for US securities,”says ment’s 16% target. Along with other data reported for the pe-
Michael Woolfolk,senior riod, it appears that China’s economy is growing much faster
currency strategist at The than the government would like, analysts say.
Bank of New York.January Recent management changes at the country’s big state
banks seem to suggest that the central bank is breaking down
was the strongest month for
local governments’ resistance to tightening measures, accord-
net purchases of US equities
ing to analysts at HSBC Bank. This shows that Beijing is seri-
by foreign investors since May
ous about reducing the excessive amounts of investment in
2001.
the Chinese economy, they say.
According to Woolfolk,the
Premier Wen Jiabao said last month that government plan-
dollar’s recovery in January ners face a multitude of problems as they try to keep the
from record lows in December economy growing at a rapid but sustainable pace.
not only was a technical “Some people strongly demand that we raise the yuan’s
rebound,but was driven by value, but they haven’t given much thought to what sort of
real money flows. problems would ensue,” he said. “This is very irresponsible.”
The source of that money, —GP
US securities are still popular
however,was somewhat
6 APRIL 2005
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EMERGING MARKETS GLOBAL F FINANCE
EM ROUNDUP
BRAZIL INDIA
FOREX RESERVES SURGE WITH
CENTRAL BANK
FLOOD OF INVESTMENT
FINDS ITSELF
IN THE SPOTLIGHT
The McGraw-Hill Companies
The Brazilian government 12-month period to February, (MHC) made a long-awaited
may have put itself in a which is higher than the stated move and announced an inten-
tion to acquire a 55.67% stake
Catch-22 situation,as it 2005 target but below last year’s
in CRISIL, India’s leading credit
fights inflation through 7.6% and 2002’s 12.5%.Copom
rating agency, through S&P
interest rate hikes but is expected to increase rates yet
LLC, its wholly owned sub-
chills domestic demand and again in April,to a hefty 19.5%,
sidiary. MHC currently owns
cools economic growth in what may be the last upward
9.5% of CRISIL. Even though
Narendra Patni, CEO, PatniComputers
prospects.While Brazil’s adjustment for the year. SWItThZeE RprLoApNosDe,d G EinRvMesAtmNeYn,t is
hyperinflation of the mid-1990s In late February,an OECD small, at just $55 million, it is being viewed as a significant de-
remains a bogey for the report on Brazil noted,among velopment since it indicates S&P's growing confidence in the
administration,local business other things,that lack of credit Indian economy and could be a sign that more aggressive FDI
and labor leaders charge that and high interest rates could flows are on their way.
high interest rates are punishing threaten the country’s economic S&P’s move is by no means an isolated development.
Global banks, too, aresignaling their interest in investing in
jobs and investments. recovery by halting investments.
India by making small but strategic purchases of smaller re-
The central bank’s Meanwhile,Congress in March
gional Indian private sector banks or rapidly expanding their
monetary policy committee revived a decade-old debate on
own banking presence. Canada’s Scotiabank has recently ac-
(Copom) has been raising its granting the central bank
quired a 7% stake in the Bank of Punjab. The current regula-
Selic benchmark rate since autonomy.Opponents argue that
tions do not allow foreign investors to hold more than 10% of
September 2004,taking it to a central bank directors must be the voting shares of private sector banks, but the view being
17-month high of 19.25% in accountable to the government in taken is that this restriction will be eased soon. HSBC has said
March from a low of 16% in order to ensure that monetary that it would pump in $243 million to organically expand its
May 2004.While the hikes policy remains in line with public existing Indian operations.
aim to keep inflation under andprivate sector interests. High-quality listed Indian banks from the public sector, too, are
control,observers contend —Santiago Fittipaldi issuing equity, largely to provide an entry opportunity for foreign
institutional investors. Punjab National Bank, one of the nation’s
that the government’s 5.1%
larger banks, floated 80 million shares in the first week of March,
inflation target for 2005 may
attempting to raise $650 million, with a 50% reservation for for-
be ambitious.They point to a
eign institutional investors. That portion of the book was over-
15% minimum wage hike and
subscribed by 11 times within minutes of opening.
salary increases for judicial
The capital-raising bug is spreading to other sectors as well.
workers as ways in which the Patni Computers, one of the stellar IT hardware stories in India,
administration may itself be is looking at a $150 million ADR issue and a subsequent Nasdaq
fueling inflation. listing, cashing in on the growing demand for Indian equity.
There are signs that inflation As foreign investors continue to lap up the India investment
is already stabilizing,though, story, the foreign exchange inflow has continued unabated.
having risen by a modest 0.58% According to the Reserve Bank of India, forex reserves
climbed to a record $137.5 billion, largely due to sustained in-
in January and 0.59% in
vestment inflows. —Aaron Chaze
February.That still brings Brazil’s central bank president
annual inflation to 7.4% for the Henrique Meirelles
8 APRIL 2005
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