Search results for

Although markets in Japanese equity derivative products started to appear at the end of the 1980s, due to the lack of a complete regulatory framework general knowledge about these products remained very limited in Japan until the start of the Japanese Big Bang in 1998. During most of the 1990s, domestic players remained virtually absent from the market, except for a handful of corporate end-users dealing in complex hybrid products. Japanese banks and securities companies rarely participated in these transactions and, as a result, foreign investment banks used the know-how that they had gained in foreign markets in order to acquire a quasi-monopoly on offshore equity derivative transactions and domestic hybrid structures.

Hong Kong-based Investec Asset Management, with USD500 million in assets under management, is in talks with Hong Kong's Securities and Futures Commission about creating mutual funds that will use over-the-counter equity derivatives. Stewart Aldcroft, managing director in Hong Kong, said it aims to roll out the funds later this year to meet strong interest from investors. Investec Asset Management, which primarily invests in Hong Kong and Chinese equities, will look to use options to leverage exposure, he noted.

Lehman Brothers has hired Giancarlo Saronne, a credit derivatives structurer and marketer covering the Italian market at J.P. Morgan in London. Officials at Lehman in London did not return calls. Calls to J.P. Morgan were referred to a spokeswoman in Milan, who was unable to provide information.

Credit default swap spreads on troubled telecommunications and electronics outfit Marconi doubled last week and offers dried up as trading in the company's shares was suspended. Traders said the price of five-year protection widened from 150 basis points/170 bps Wednesday to trade at 350bps on Thursday. It nudged back to 280bps/330bps Friday. Standard & Poor's and Moody's Investors Service put Marconi on credit watch Thursday following a string of bad news from the company, including a disappointing price it generated in the sale of Koninklijke Philips Electronics. S&P rates the company triple-B plus and Moody's rates it A3.

Goldman Sachs executed some EUR10 billion (USD8.47 billion) of euro interest-rate swaps and several billion euros (notional) of basis swaps a week ago Friday in the London market. The move sparked speculation that Goldman was positioning to provide a hedge to cover the financing of a cross-border M&A transaction, widely believed to be on behalf of German utility E.ON. The trades "looked and smelt like an investment banking deal," according to City swappers. E.ON is known to have a substantial war chest, is believed to be interested in making a U.S. acquisition and has a relationship with Goldman. Officials and press officers at Goldman Sachs did not return calls. E.ON officials declined to comment.

Nordic Investment Bank recently entered a cross-currency interest-rate swap with Citibank in Taipei to convert the proceeds of a TWD8.5 billion (USD203 million) bond issue into a floating rate U.S. dollar-denominated liability. In the swap, NIB pays LIBOR-floating U.S. dollars and receives fixed Taiwan dollars, said Kari Kukka, v.p. and head of funding at NIB in Helsinki. Kukka declined to reveal the rates. The Nordic bank decided to top up what was originally a TWD7 billion issue with a further TWD1.5 billion issue last week to meet strong investor demand.

Société Générale plans to continue rolling out capital guaranteed securities based on the performance of a range of international markets over the coming months following its recent launch of the first such product in the Australian market. Moghseen Jadwat, associate director in Sydney, said that falling equity markets are driving demand for capital guaranteed products, such as SG's capital protected equity-linked securities (CaPELS).

Standard Chartered has hired Kua Wei Jin, an interest-rate derivatives trader at Barclays Capital in Singapore, according to Mike Bass, head of interest-rate derivatives in Singapore. Bass declined further comment. Jin was hired as a replacement after two traders quit for ABN AMRO and Citibank (DW, 6/25), according to an official close to the firm. Kua, who is expected to start July 16, could not be reached.

Schroder Salomon Smith Barney believes structured notes issued by France Telecom to investors in telecom company Equant are trading below fair value and is recommending investors sit on long positions or snap up the instruments. France Telecom last month acquired a 54% stake in Equant and last week issued the notes, known as contingent value rights (CVR), to investors. The three-year CVRs consist of a long and short put on Equant's stock, giving protection against a sell off in the stock price following the acquisition, according to Dharmendra Patel, equity derivatives strategist in London.

American Express Financial Advisors, which moved aggressively into spread product earlier this year (BW, 3/19), plans to continue to add slightly where it sees select buying opportunities. Colin Lundgren, portfolio manager of $7 billion in taxable fixed-income, cites Ford Motor Company paper as an example of his overall corporate strategy. Accounts under Lundgren's management currently contain $70 million in Ford bonds, largely the 73Ž8% of '11, which were trading at about 188 basis points over treasuries--a weighting that is consistent with his benchmark, the Lehman Brothers Aggregate Index. The Ford paper has traded in a range between 170 and 220 basis points over treasuries this year, and, on the assumption that it will continue to do so, Lundgren will add another $70 million if yields climb to over 200 basis points above treasuries, after which point he would ride the spreads in to 170-175 over on the expectation that the cycle would begin again. However, a credit-specific event could cause him to alter his strategy. Most of the corporate holdings under Lundgren's management are from the top 100 issuers, though occasionally he will buy less-liquid paper if the price is right, as was the case in a recent issue by Citizens Communications. Lundgren says he expects the overall corporate market to continue to perform well as the stock market recovers.

Principal Capital Management, although already overweight corporates compared to the Lehman Brothers aggregate, is selectively buying bonds with new money rolling in.Lisa Stange, portfolio manager in Des Moines, Iowa, said there is room for additional spread tightening, and notes that, overall, the performance of the corporate sector has been very good and should continue that way as corporate profits improve.