Search results for

Australia finds itself in an unusual position as its bond markets prepare to be flooded by liquidity later this year. By Bina Brown.

As world markets weaken and the country's exports decline, Australia risks losing its competitive edge. Bina Brown reports.

The pile of assets on the desk of Laksamana Sukardi, Indonesia's new minister for state-owned enterprises, has multiplied to include the whole of the country's public sector and a substantial chunk of the private sector. Getting those assets off his desk again will not be easy. Sukardi is faced with two challenges following the decision by his party leader, president Megawati Sukarnoputri, to give him direct control of the Indonesian Bank Restructuring Agency (IBRA), the body charged with cleaning up the mess resulting from the 1997 financial crisis. He needs to raise more funds from the privatization of original state enterprises, and he needs to sell companies held by IBRA as a result of their debts to state-owned banks.

Reliance Industries, one of India's most popular success stories, has announced an ambitious diversification programme. Can the company scale new heights, or will its ability to court controversy hamper its grand expansion plans? Saibal Dasgupta reports.

Bank of Bermuda has launched a hedge fund incubator aimed at Australian fund managers in what may well be the first of a series of umbrella-type services designed to promote hedge funds in the region. The offshore incubator, called the Kangaroo Fund, brings together the specialist services hedge funds need to get off the ground, providing managers with economies of scale and reduced costs. Deacons will provide legal support, PricewaterhouseCoopers accounting services and Goldman Sachs prime brokerage, alongside Bank of Bermuda's custody and fund administration expertise. The venture may cut start-up costs to one tenth of normal levels.

The Malaysian government's takeover of the country's most indebted conglomerate, Renong/United Engineers Malaysia (UEM), has seized the attention of investors. The flurry of corporate activity in recent weeks has sent the Kuala Lumpur Composite Index (KLCI) up more than 70 points, from 580 in early July. In an attempt to gain control of the debt-laden Renong, the government's investment arm, Khazanah Nasional, is taking over UEM which holds a 32% stake in Renong (Renong in turn has a 38% controlling stake in UEM in a complicated cross-shareholding system). Analysts are generally in favour of the deal – the bid price of RM4.5 a share is seen as fair value and there is no sign of bailing out Renong chief Halim Saad, a protégé of the former finance minister Daim Zainuddin. The takeover will cost the government RM3.8 billion (US$1 billion). Khazanah intends to privatize the company to restructure the RM23 billion debt owed by Renong/UEM to various public funds and financial institutions. The huge debt burden has been cited as a contributory factor to the lacklustre performance of the country's stock market since the Asian financial crisis in 1997.

When a scandal blew up early this year over the questionable purchase of shares by India's largest mutual fund UTI, the country's financial markets and its government had expected redemption pressure so substantial they feared it could threaten the company's existence. The inextricable link between the fate of UTI and that of India's mutual fund industry and stock markets would mean the knock-on effect would have been disastrous for the country. Over 20 million investors have bought its units, and it manages assets worth Rs575 billion (US$12.23 billion) – about two-thirds of all assets managed by the Indian mutual fund industry. To avoid this situation, UTI itself came up with a special plan for the redemption and repurchase of units from small investors beginning August 1. As it transpired, however, few investors showed interest. Between August 1 and 16 the company received repurchase requests for only 82 million units from the 63,523 investors of the US64 scheme (the largest of the company's 87 schemes, which was at the centre of the controversy). This is approximately the same number of redemption requests it gets for US64 under normal circumstances.

When a low growth company's stock is priced at a high 38.9 times multiple in a floundering market such as Japan's, it's not particularly surprising when it doesn't perform well. McDonald's Japan is in a competitive market with limited growth prospects, say analysts. Yet its shares were priced at an expensive ¥4,300 (US$35.75) when it launched the country's largest IPO this year. With all the hype with which the slick US-controlled company is accustomed to advertising its bargain burger meal deals, McDonald's and its lead managers Daiwa SMBC and UBS Warburg made a point of targeting the retail investor. And they were successful. With a brand name that needed no explanation, retail investors picked up most of the 12 million new shares on offer as well as the 14.2 million privately held shares for sale. Yet their enthusiasm was short lived. Launched on the Jasdaq, Japan's over the counter market, the deal initially enjoyed a 9% rise only to tank in the following days. Retail investors took fright at the overpriced shares and started dumping them in the market, and saw the price fall still further. Notes Takanashi Yanahira, retail analyst at ING Barings Japan: "The McDonald's Japan IPO was successful for this company – given it managed to finance itself at the price it did." He adds: "Obviously it wasn't good for investors."

The Singapore dollar bond market, already the most positive new capital markets story in Asia this year, has broken new ground once again with a S$1.3 billion (US$741.6 million), 15-year non-call-10 subordinated bond issue by UOB. The Singaporean bank issued the bond, the largest ever in Singapore dollars, as part of the financing for its acquisition of local rival OUB. JPMorgan, Merrill Lynch and UOB Asia were joint bookrunners for the upper tier two deal.

Traditional mortgage backed deals and more innovative transactions from the likes of Canary Wharf have put sterling's structured finance market on the map. UK banks and corporates have endorsed the flexible and innovative funding options that securitisation offers - and most have chosen to bring their deals in the local currency. But as supply in the asset backed market looks set to break new records, some concerns have been noted

Until recently, for international houses to even think of competing with UK banks in the long dated sterling market was simply not cricket. But the rules are changing, and non-UK banks these days are showing little respect for conventional roles in this strategically important market. The picture may dismay traditionalists, but even the UK's strongest batters seem unable to prevent international houses - with their beefed-up sterling teams - from picking up business

The UK's leveraged loans market has seen rapid growth over the last five years. Banks can now underwrite over £1bn of debt for a single deal. Lending banks have avoided the trouble afflicting equity and bond markets, and are looking forward to a continuing supply of deals. But the market has been driven by LBO activity, supported by the aggressive private equity sector, where losses are now being reported