Top Stories
Paulson's plan for regulatory overhaul raises concerns
Treasury Secretary Henry Paulson will unveil proposals for overhauling the regulation of U.S. markets that include giving broader powers to the Federal Reserve to oversee "market stability." The proposals would also merge the Securities and Exchange Commission and the Commodity Futures Trading Commission. "It would be Congress and the president essentially giving a blank check to a regulator over which they have very little power," said Michael Greenberger, a former CFTC official and a professor at the University of Maryland in Baltimore. Bloomberg (31 Mar.)
Accelerated growth of sovereign-wealth funds likely to continue
The highest-profile sovereign-wealth funds have $3.3 trillion of assets under management, according to estimates by the International Financial Services London. That figure is expected to grow to $10 trillion by 2015. However, there are other investment vehicles that are controlled by governments, including Japan, Sweden and the U.S., that account for roughly $3 trillion.
Financial Times (30 Mar.)
India emerges as global player
India has gone through a transformation in recent years following the demise of the state-run socialist system. A new middle class has emerged with a large appetite for goods and services, reshaping the country and triggering an economic boom. Indian companies are using their increased earning power to make overseas acquisitions. The development is part of an overall strategy to announce the arrival of India on the global scene. International Herald Tribune/Associated Press (30 Mar.)
Pernod Ricard acquires Absolut parent for $9.24 billion
Beating out other bidders including Bacardi, Fortune Brands and Diageo, Pernod Ricard has reached a deal to buy Vin & Sprit, which makes Absolut vodka, for $9.24 billion. The Swedish government, which has been pushing privatization of government-owned businesses, put Vin & Sprit up for sale. International Herald Tribune (31 Mar.)
Hops shortage spells trouble for brewers
A severe supply shortage of hops is forcing some brewers to make adjustments, including ingredient substitutions and decisions to brew different types of beers. The shortage is a result of poor yields in the U.S. and Germany, flooding and droughts around the world and a switch to corn and other crops by some farmers. MarketWatch (28 Mar.)
Thai bank selects JPMorgan for new trade mandate
Thailand's Kasikorn Bank has chosen JPMorgan Treasury Services as its trade-processing partner. JPMorgan will provide risk-mitigation and financing services to support the growing trade business needs of the Thai bank's clients. In return, JPMorgan will gain access to Kasikorn's Thai network, credit support and infrastructure. FinanceAsia.com (31 Mar.)
National Bank of Kuwait plans Islamic bank in Switzerland
National Bank of Kuwait is working with a Saudi Arabian financial institution to develop an Islamic private bank in Switzerland. Islamic banking has experienced strong growth despite the credit crunch. Moody's said industry assets are up about 20% since last summer. Ibrahim Dabdoub, chief executive of NBK, said the bank has applied for regulatory approval. Financial Times (30 Mar.)
HSBC's new private banking services in China to target wealthy
HSBC Holdings said it has received approval from Chinese regulators to offer private banking services in Beijing, Shanghai and Guangzhou. The bank said the minimum initial deposit from clients will be $1 million as it focuses on individuals with a net worth of $10 million or more. Numerous foreign banks are striving to enter China's market for services aimed at affluent individuals. International Herald Tribune/Reuters (31 Mar.)
Market Activity
Asian markets fall as "global funding woes" continue
Declines in shares of financials dragged down Asian markets today, with exporters adding to the fall in Japanese stocks. The Nikkei 225 Average was down 2.3% and the Topix index fell 2.5%. The Shanghai Composite lost 3%, a reflection of investors' disappointment that rumored measures by the government to boost the stock market did not materialize. Meanwhile, the Hang Seng Index fell 1.9% and South Korea's Kospi and Australia's S&P/ASX 200 index each ended up 0.1%. MarketWatch (31 Mar.)
Australia's benchmark index posts worst quarter ever
The S&P/ASX 200, Australia's benchmark share index, plunged 15.5% in the first quarter as the credit crunch and concerns about a U.S. recession raged. The index became the benchmark in 2000. Meanwhile, the All Ordinaries index, the former benchmark, fell 15.7%. "The debt market issue has to be resolved before we get more clarity on financial stocks and markets generally," said Greg Goodsell of ABN AMRO. "I suspect there are more losses to be written off there." The Sydney Morning Herald/Reuters/Australian Associated Press (31 Mar.)
China's once-booming IPO market nearly grinds to a halt
Last year, China overtook the U.S. as the largest market in the world for initial public offers of equity. Concerns about oversupply and falling stock prices have caused the market to slow significantly. "The bubble is bursting after rampant speculation pushed prices of newly listed shares to ridiculously high levels at the peak of China's stock bull run late last year," said Zheng Weigang, head of research at Shanghai Securities.
Reuters (28 Mar.)
States investigate troubled auction-rate bond market
Officials in Massachusetts and other states are starting to look into the ongoing trouble in the auction-rate bond market as recent failures have driven interest rates up as high as 20%. On Friday, William Galvin, Massachusetts' secretary of state, said he is investigating how dealers, including UBS, Merrill Lynch and Bank of America, marketed the auction-rate securities. Meanwhile, UBS dropped the value of its clients' auction debt by about 5%. Bloomberg (31 Mar.)
Economics
Economists say Europe's central banks may lend Fed a hand
Economists at Royal Bank of Scotland Group and Lloyds TSB say the Bank of England and European Central Bank are about to take steps to boost liquidity and spur lending. Cuts in interest rates could be next, they say. "If the European central banks were to adopt more Fed-style measures, it would go a long way to helping the Fed tackle the crisis," said Neil Mackinnon, chief economist at ECU Group Plc. Bloomberg (31 Mar.)
Spain takes steps to ease fallout as housing boom ends
The Spanish government has introduced a number of tax breaks and other benefits to cushion the blow as the country's housing boom grinds to a halt. Jose Luis Rodriguez Zapatero, the Spanish prime minister, is accelerating government spending to prevent a fire sale on real estate. Spain has a home-ownership rate of 86% and the housing market meltdown is dragging on the economy. Bloomberg (28 Mar.)
German agency predicts up to $600 billion in global shortfalls
BaFin, the Federal Financial Services Authority in Germany, cautioned that global financial institutions may see shortfalls of as much as $600 billion before the financial crisis ends. The agency also fears the crisis may spread to "other financial institutions outside of the banking sector," including hedge funds, retirement funds and insurance companies. Spiegel Online (29 Mar.)
Geopolitical/Regulatory
Brown, Bush to create working group on banking issues
President George W. Bush and U.K. Prime Minister Gordon Brown are planning a working group that will propose regulations and oversight of the banking system. The group will include senior treasury and regulatory figures from both countries. The leaders are also expected to discuss greater co-operation between London and Washington on financial issues when they meet at the NATO summit in Bucharest this week. Financial Times (30 Mar.)
China urges banks to assess investors' risk tolerance
Following the liquidation of a qualified domestic institutional investor fund, the China Banking Regulatory Commission is once again urging banks to fully assess the risk tolerance of their investors. The regulator said it will require banks to highlight risk warnings in investment product manuals and agreements. People's Daily (China) (28 Mar.)
Financial Products
Barclays woos investors in Hong Kong with Legends fund
Barclays is striving to entice investors in Hong Kong with its new Investment Legends Fund, which will invest in commodities, funds and companies owned by well-known managers including Warren Buffett, Bill Gross and Jim Rogers. The fund will start out with 40% of its assets in commodities, 40% in equities and 20% in fixed-income products, according to a Barclays brochure.
Bloomberg (31 Mar.)
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