Germany Special Report 2012
The eurozone crisis has proved to be a sprawling saga that matches anything staged at Bayreuth. Germany, our chief protagonist, rests on the laurels of continuing growth led by robust exports. But the demons of political instability lie lurking in the wings and threaten to blight the feast.
Delicate balancing act
Chancellor Angela Merkel is an increasingly lone voice. Several eurozone governments have fallen and the change of president in France has threatened to put pay to austerity politics.
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Leading the pack
German car manufacturers dominated the corporate primary market at the start of the year and now have the luxury of reacting to market conditions rather than their funding needs.
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Standing tall
The agency has stood in a league of its own – if any agency is going to be able to withstand the turmoil in Europe this year, it’s KfW.
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Burning issue
Despite the headline-grabbing prospects of green energy, new conventional power plants will be needed to meet German demand but indebted utilities may be reluctant to invest and some are issuing exotic hybrid bonds to address shaky finances.
Eurozone darling
The German syndicated loan market continues to be a favourite among German and foreign banks thanks to the country’s stable economy in the ailing eurozone and blue-chip companies that supply the loan market with jumbo deals.
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Precision on a smaller scale
Removed from the fierce competition among the global financial centres, Frankfurt’s raison d’etre is to serve the German real economy, currently the brightest beacon of hope for European growth. Most global banks have a presence there, yet the city retains a village-like charm.
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Losing speed
With German Pfandbrief issuance seemingly getting worse, hopes from German investors that issuance will be picked up by France and Scandinavia look unlikely.
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Sun block
When the German government shut down much of its nuclear capacity after last year’s Japanese earthquake and tsunami, many predicted a boom for renewables in general and solar power in particular. It hasn’t worked out that way.
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Home of the jumbo
Germany’s equity capital markets dominated Europe in 2011 with proceeds more than twice that of runner-up Italy, even though the largest IPOs never happened. The pipeline remains bloated with multi-billion euro IPOs which will ensure this is repeated in 2012 – as long as further crises can be avoided.
League Tables
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SSA Report 2012
Once the stable bedrock of the markets, the SSA sector found itself rocked to the foundations as concerns mounted about the ability of sovereigns to deal with the crisis that engulfed asset classes across the board – something largely viewed as self-inflicted in the first place.
Waiting for the storm to pass
The European sovereign debt market emerged from a chastening second half of 2011 to start the year brightly, at least for healthy issuers. But the plight of Spain in mid-April served as a reminder that sentiment is still very fragile, and the market is unlikely to ever look as it did before the crisis.
Difficult journey
The tug-of-war between dealers and their sovereign clients over the posting of collateral relating to swaps exposures has entered a constructive new phase but with some banks stepping in with aggressive strategies, a solution is not yet guaranteed.
Coming into their own
Earlier this year Indonesia and the Philippines joined the club of emerging market nations able to borrow larger amounts of money for longer periods on the international capital markets – proving they have come into their own on the international debt scene. But sustaining investor enthusiasm against a challenging global backdrop will require an unwavering commitment to structural reform.
The insatiable Mrs Watanabe
The retail-targeted Japanese primary bond market has undergone thorough changes resulting in a wider variety of issuers offering higher credit risk. Global and local market conditions have transformed the appetite of the Japanese retail investors, which in turn, pulled in different sets of SSA issuers.
Under the spotlight
Less than sterling performances by credit ratings agencies during the debt crisis increased pressure for the EU to act. In March the new CRA watchdog, the European Securities and Markets Authority, completed its first review of the big three: Moody’s, Standard & Poor’s and Fitch. Several areas of improvement were identified but will the review lead to restoration of confidence in ratings?
League tables
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Carpe diem
The EIB took advantage of a liquid and highly receptive market for its paper over the first quarter. And while other supranationals and agencies were not slow in spotting the opportunity, it was the EIB that maintained what at times seemed like omnipresence in the market. This approach has enabled it to fund more than 60% of its total annual fundraising allocation of €60bn.
From the fjord into the mire
During the dark days of November when financial markets were in thrall to the eurozone sovereign crisis and Spanish and Italian bonds were in virtual free-fall, propped up by the central bank, the SSA sector was stung by a sudden and dramatic downgrade to Eksportfinans to junk. In addition to massive mark-to-market volatility, it triggered a sudden and frantic reappraisal of its peer group.
A changing landscape
Fears of counterparty risk have reshaped the landscape for banks involved in sovereign debt deals.
Bouncing back
SSAs’ return to the Kangaroo market en masse, but Basel III rules restrict local demand and chances of return to previous peaks
Providing a safety net
Questions remain over the roles of the EFSF and ESM and whether they can really end the eurozone crisis for good, but for now the bazooka has done its job.
Turkey 2012
As Turkey gets to grips with hefty economic policy challenges – and shrugs off the complications of living in a volatile region – it exudes a self-belief hard to find elsewhere.
Taking the next step
In an exclusive interview with IFR, Mehmet Simsek, Turkey’s Finance Minister, talks frankly about the issues his country faces.
Safe journey on a stormy sea
The Greek effect – Turkey’s unprecedented stability has turned it into a magnet for investors – but it is in a rough neighbourhood and political risk is likely to creep up the agenda this year.
Darkest before dawn?
Relative to the size of its economy, Turkey’s equity market has consistently failed to deliver on its potential. But after 2011 which was the definition of a false dawn, could that finally be about to change?
Slow but steady start
Turkish issuers’ reluctance in issuing sukuk will not disappear in the immediate future, but as politicians and businesspeople are laying the groundwork to facilitate issuance, there is hope that obstacles will be overcome.
Banks scrap over Turkish jewels
Deleveraging is forcing global banks to think the unthinkable about their positions in one of the world’s most attractive banking markets.
Against the tide
Sometimes it pays to be different. That is certainly the belief of the Turkish central bank, which hopes its unorthodox and controversial monetary policy regime is starting to reap rewards.
Answering the doubters
The sovereign has relieved the funding pressure with a flurry of issuance following a challenging 2011.
Seeds of growth in foreign soil
Turkish banks were the envy of many of their foreign counterparts when the financial crisis squeezed hardest. Their more conservative approach to the business than many banks elsewhere was reflected in their balance sheets. It is early days, but now the banks are utilising their strength to expand beyond borders, and ambitions are global.
More spice for covered bond recipe
Sekerbank’s pioneering efforts in launching a covered bond in July last year has set a precedent for others to follow and although progress is being made, there are still some obstacles to overcome.
Ready to fly
International lenders’ confidence in syndicated loan opportunities throughout Turkey’s telecoms, financial and infrastructure sectors is clearly reflected in the US$6.5bn-plus worth of volume circulating the market.
No losses please
As a country that has seen frequent currency devaluations over time, Turkey has long had a thriving derivatives business, unsurprisingly revolving around FX and rates. But today’s investor has different concerns with capital protected products on the rise.
Latin America Special Report 2012
One wonders how your average Latin American policymaker has avoided developing a squint, having to keep one eye firmly on domestic markets while the other is fixed so intensely on Europe’s unfolding Greek tragedy. Yet it is a measure of how LatAm financial markets have bolstered their resilience to foreign shocks that at this juncture a squint is likely to be the worst byproduct of the eurozone crisis.
IFR Awards: Celebrating Success
As many of you may know, the IFR Awards dinner took place on January 18 in London. IFR has been giving out awards for more than a quarter of a century, but the glittering event we now host is in its 17th year. Almost 1,200 people packed into the Grosvenor House Hotel in London to attend this year’s dinner, which has become the marquee event in the global capital markets calendar. We have printed a selection of photos from the evening in the following pages.
