Global Finance

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Opportunity Knocks

If this year's crisis has shown people anything, it is that the current model of the global financial system is broken. There are so many aspects of it that don't work that it's hard to know where to begin fixing it, but one of the most important is the fallacy of self-regulation. What is needed now is a measured approach to the creation of a global regulatory system that oversees the increasingly global marketplace. Building such a system is a huge task, but a glance at the mess created by t...

Milestones: Taking Note

Imf Seeks to Buff Up Tarnished Image

The International Monetary Fund (IMF) is not likely to win any popularity contests anywhere in the world these days. Like a private company looking to salvage its brand, the IMF has now hired two public relations firms to help improve its image. Hill & Knowlton will work to improve the IMF's external communications in the Middle East and Asia, and Amo/Euro RSCG will implement a similar strategy in Africa and Latin America. Its public image may be hurting, but the IMF's self-esteem appears...

Global Accounting Standard Moves Closer

More than 100 of the largest US public companies could be using international accounting standards by the end of next year if the Securities and Exchange Commission (SEC) pushes ahead with a plan that reflects the increasing integration of the world's capital markets. The commission was expected to hold a 60-day public comment period this fall on the so-called "road map" for conversion after voting unanimously on the proposed timeline in late August. The SEC proposal would give a small group ...

Oil Prices Slide Below $100 a Barrel, but Support Looms

Crude oil prices, which reached nearly $150 a barrel in July, fell below $100 a barrel for the first time in six months in mid-September, as market participants were preoccupied with increasingly gloomy global economic news. According to a report by the Asian Development Bank (ADB), the recent decline in oil prices will be short-lived, and fast growth in developing nations of Asia will keep prices elevated until at least 2020. High oil prices are here to stay, and the sooner that developing A...

Western Ally in Caspian Wins Kudos

The regulatory reform movement that has been thriving in Central and Eastern Europe in recent years is spreading eastward into Central Asia, with Azerbaijan taking the title of the world's leading reformer of business regulations this year, according to a report published in September by the IFC and World Bank. Azerbaijan president Liham Aliyev has introduced a pro-business program to help diversify the country's economy, which depends heavily on oil and gas production. Regulatory reforms are...

Emerging Markets

Infrastructure Fund in Controversy

Following the controversial reelection of president Robert Mugabe in June, Zimbabwe has fallen into even greater economic chaos. Officials said annual inflation leapt to 11.2 million percent in June, fueled by high food prices and ongoing sanctions against the government in Harare. Having not started any projects in more than a year after its launch, the Nigeria-based Africa Finance Corp (AFC), created to fund infrastructure development projects in Africa, ousted its president in late August....

Heavy-Handed Tactics Cause International Alarm

Russian markets have been in turmoil for a month after the country signaled its intent to move back up the geopolitical pecking order by marching its troops into the breakaway region of South Ossetia in the Caucasus country of Georgia. In a slightly better development for investors, the long-running battle between oil major BP and its Russian partners over control of the TNK-BP oil joint venture appeared to finally come to an end when the two parties agreed to launch an IPO of TNK-BP and to c...

Inflation and Growth Decline

China's consumer price index grew by only 4.9% in August, its mildest pace in more than a year, and export growth slowed to 21%, according to China's National Bureau of Statistics. The lower inflation and export growth numbers could inspire policymakers to loosen monetary conditions, as their focus shifts from inflationary control to economic stimulation. The Olympic Games may have influenced the market, with consumers delaying big purchases until after the conclusion of the games. Higher fue...

India's Companies Continue Aggressive Acquisition Spree

According to a survey by consultant KPMG, India's companies are among the world's most aggressive in buying companies based in the developed markets. Indian automobile manufacturers have benefited from a booming domestic market, but political protests are seriously hampering Tata Motors' growth plans. Tata recently made headlines when it purchased British auto brands Jaguar and Land Rover from Ford for $2.3 billion and then rattled the Indian and global automobile world when it unveiled the N...

Saudi Market Opens to Foreign Investors

The opening of Saudi Arabia's stock exchange, the largest in the Arab world, to investors from outside the Gulf Cooperation Council couldn't have come at a better time. Saudi stocks have been beaten down, with a decline of 27% for the year-to-date through September 10, which means that valuations are attractive, according to local brokers. Under terms of the swap agreements, foreign investors will gain no voting rights on company boards, since the Saudi intermediaries will remain the owners o...

Oil Find Promises to Fuel New Economic Boom

The Brazilian government is grappling with the reality of new offshore oil discoveries that could produce an estimated 50 billion barrels of oil, according to private sector analysts in a country that has already achieved energy self-sufficiency. Jose Sergio Gabrielli, CEO of Petrobras, the country's state-controlled oil company, says he favors placing new debt to finance the development of the new offshore oil fields, instead of issuing new stock. Despite signs of an economic slowdown, Brazi...

Emerging Markets Begin to Feel Pain

Infosys Climbs Up the Value Chain

Russia's Electricity Spin-Offs Create 11 New Dr Programs

Cover Story

Stepping Up

On a July 2008 report the World Bank assessed its own infrastructure engagement over the past 20 years and acknowledged it has learned an essential lesson: There is no longer a debate about whether infrastructure has a role to play in poverty reduction; it is crucial, the bank concluded. Modern, cost-effective, reliable and affordable infrastructure services are critical for sustainable development. Although South Africa does not have the water for hydroelectric power plants, other African co...

Corporate Financing News: Mergers & Acquisitions

European Mergers Gain with Pair of Big Deals

Europe passed the US in corporate dealmaking in August thanks to two large transactions, including a spin-off and a hostile bid. The total of US mergers and acquisitions for the year to date of $849 billion, however, remains ahead of Europe's $778 billion, according to Thomson Reuters. Geneva-based Richemont, the luxury goods group that owns Cartier and Piaget jewelry, agreed to spin off its stake in British American Tobacco in a move prompted by tax changes in Luxembourg. Richemont, which is...

Annual Survey

World's Best Banks 2008

Global Finance has identified the best banks in 118 countries, as well as the best banks globally in 10 key banking categories. We have been presenting these awards since 1997. In selecting this year's winners, Global Finance's editorial team as usual considered factors that range from the objective to the informed subjective. Objective criteria included growth in assets, profitability, geographic reach, strategic relationships, new business development and product innovation. Subjective crit...

Central Banker Report Cards 2008

Recent shifts in energy and commodity price trends and the resurgence of the dollar add new elements to the equations that central bankers rely on to chart their courses. One thing that is clear from recent events, however, is that central banking remains as much an art as a science. It differs from country to country, depending on the circumstances and the monetary tools available. There are common standards of excellence, nonetheless, such as a determination to fight inflation to provide a ...

The World's Safest Banks 2008

In compiling this year's list of safest banks during the most volatile month in recent history, This publication are aiming at a moving target. Questions have emerged over the credit ratings of many of the world's banks -- some of which appear on this list. As always, the ranking has been constructed based on size and credit quality. The publication began with a pool of 500 of the world's largest banks by asset size to which it applied the most recent available ratings from Fitch Ratings, Moo...

Corporate Financing News: Foreign Exchange

Stronger Dollar Will Take Bite Out of Overseas Earnings for Us-Based Multinationals

Get ready for some unpleasant surprises on the earnings front as a result of the dollar's sudden recovery from a record low of $1.60 against the Euro in mid-July. By early last month the Euro was trading at an 11-month low of $1.42. The unusually sharp dollar advance against the Euro and other major currencies means that many corporations will likely experience dramatic negative impacts to profitability due to foreign-exchange-related losses, which will be reported in the current earnings sea...

Corporate Financing News: Global Equity/Drs

Hong Kong to Trade Drs to Boost Foreign Listings

Hong Kong's stock exchange has put a framework in place to begin trading depositary receipts, which will make it the only Asian exchange to allow DR issuers to target retail investors. Hong Kong Exchanges and Clearing (HKex) says the listing facility makes Hong Kong the fifth DR market in Asia, along with Japan, Singapore, South Korea and India. Prospective issuers of Hong Kong DRs must follow the same rules as for the main board and will not be allowed to list on the exchange's Growth Enterp...

Corporate Financing News: Corporate Debt

High-Yield Market Remains Shuttered

Less than $1 billion of US high-yield bonds were sold in August, one of the lowest monthly totals ever, as rising defaults and widening spreads above US treasury securities steered investors away from the market. Caribbean Restaurants, the exclusive franchisee of Burger King in Puerto Rico, sold $149 million of notes on August 13 with a 14.25% coupon and a spread of 1,197 basis points over benchmark rates. Jefferies and Credit Suisse managed the sale, which took place in the Rule 144A private...

Country Report

Balancing Act

When Turkey's constitutional court dismissed a move in July to outlaw the country's ruling Justice and Development Party (AKP), market players breathed a sigh of relief. Although an Islamist organization like the AKP might take an anti-business stance elsewhere, in Turkey it is regarded as the force behind a period of unprecedented economic growth. Yet while the political crisis may be over, Turks are still seeking the right balance between their traditional secularism and a mounting Islamist...

Focus

Risky Business

Fueled in part by soaring commodities prices and a socialist response to economic and political turmoil, a new brand of 21st century economic nationalism is engulfing multinationals, decades after anti-imperialist fervor swept the developing world and led to the outright takeover of foreign assets. This latest wave of expropriation has emerged largely in developing nations where oil, gas, metals and other commodities are extracted. Some of the events occurring in Russia, such as those surroun...

Newsmaker: Around The World

Medvedev Tries to Calm Russia Bears

In the second week of September Russia's president Dmitry Medvedev declared that it was "within the power of the government" to reverse the Russian stocks' losses this year. The challenge is huge. By September 12 the RTS index had lost 41.5% since January. Observers say this is a crisis of confidence rather than economics. Russia's oil and commodity-dependent economy remains in good shape despite sharp price falls. The rapid slide of the stock market and the ruble began with prime minister Vl...

Private Equity Investments Linked to Corporate Defaults

As private equity investors size up the new opportunities the credit crunch presents, companies in their sights might do well to consider a report published by Standard & Poor's (S&P's) in September. As well as noting that global corporate defaults have risen sharply in the first eight months of 2008, it shows that more than two-thirds of the companies that have defaulted this year were involved in transactions involving private equity. S&P expects to see private equity involvemen...

Way Cleared for Jacob Zuma to Run for President

South Africa's High Court last month dropped all corruption charges against Jacob Zuma, president of the African National Congress (ANC). Although the decision was based on a legal technicality, it cleared the way for the populist Zuma to run for the national presidency in April 2009, with a victory all but assured. Currency analysts say market participants are now fairly comfortable with Zuma, who has already met with foreign investors, and that the South African rand can no longer be counte...

Global Leaders Paint Bleak Picture

With Bank of America buying Merrill Lynch and Lehman's filing for bankruptcy, the global credit crunch is clearly far from over. In fact, a panel of banking heads and economists at the annual SWIFT Sibos conference in Vienna said worse could be yet to come in terms of a widespread recession in the non-financial sector. William Rhodes, chairman of Citi, added, they are in the eye of the storm and described the current crisis as the biggest challenge the US economy has faced since World War II....

Spotlight

Growing Pains

For much of the year emerging markets have continued to enjoy strong growth, and in 2007 the MSCI Emerging Markets Index rose by nearly 40%. Underlying structural change in many developing economies and huge increases in commodities prices have continued to buoy sentiment toward emerging markets, and many investors have seen them as a safe-haven investment. But in recent months the outlook for many emerging markets has become more pessimistic. Many commodities are down sharply from their peak...

Insight

The Threat From Within

While financial services providers have been busy fending off external threats, the incidence of internal fraud by employees has risen steadily. Even more alarmingly, for all the sophisticated technologies and anti-fraud measures companies have put in place in the wake of the Enron and WorldCom corporate scandals, ACFE's report indicates that occupational fraud is more likely to be detected by a tip-off rather than internal audits and controls. The most high-profile internal fraud cases tend ...