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					                                                                                                                                                                          INVESTMENT BANKING GROUP

                                                                            N E W S W I R E                                                   Issue 19 - July 2010


                                                              A. A new securitisation deal out of the MENA region
                                                              The comeback of the regional securiti-                    principal guarantee, which are then                        of initial portfolio balance, as well as
                                                              zation market has been marked lately                      issued as repack notes from another                        an excess spread trapping mecha-
           CONTENTS                                           by the issuance of ¥24Billion                             vehicle. The obligations of repack are                     nism; other enhancements include
                                                              (~$270Million) JPY denominated,                           then unconditionally and irrevocably                       portfolio eligibility criteria and rapid
    A. A new securitisation deal out                          senior secured, auto-loans backed                         guaranteed by the Japan Bank for                           amortization triggers. The transaction
        of the MENA region                                    notes on behalf of Emirates NBD                           International Cooperation. The equity                      has been assigned a provisional Aa2
                                                              bank. Emirates NBD Auto Finance                           tranche has been retained by the                           rating by Moody‟s. It is worth noting
    B. The European stress test                               Limited is a jersey based Asset Pur-                      originator. The notes give exposure to                     that securitization of auto loans has
                                                              chase Company that had purchased a                        a highly diversified portfolio of UAE                      already been tested for companies in
    C. Real estate: foreign ownership                         portfolio of ¥30Billion auto loans re-                    individual and commercial obligors,                        the Middle East and mainly in Leba-
       or investment?                                         ceivables from the originator, and                        with maximum concentration per obli-                       non thanks to a favorable legal frame-
                                                              issued 2 tranches of notes: a senior                      gor not exceeding 0.10%. The struc-                        work and to the continuous support of
    D. Lebanese Turkish free trade:                           tranche A representing 80% of the                         ture involves a 3 year revolving period                    the Central Bank for this type of trans-
        competition or cooperation                            total portfolio and an equity tranche of                  and an FX swap which has been put in                       actions; the market witnessed so far
                                                              20% fully subordinated to the senior.                     place to swap the AED income into                          at least 4 auto-loans backed issu-
    E. Gold: the race is on                                   The tranche A has been fully sub-                         JPY. The transaction provides various                      ances which were not rated, but which
                                                              scribed to by the Japan Bank for Inter-                   levels of credit enhancements, among                       could however demonstrate the effi-
    F. Headlines
                                                              national Cooperation, which had also                      which, an overcollateralization of 20%,                    ciency of such tool for both originators
                                                              wrapped a portion of the notes with a                     a non amortizing cash reserve of 2.5%                      and investors■

                                                              B. The European stress test
           CONTACTS                                           The Committee of European Banking                         The U.S conducted similar tests in                        books, where securities are assumed
                                                              Supervision (CEBS) conducted a stress                     March 2009 as the financial crisis was                    to be held to maturity. This questions
                                                              test on the EU‟s biggest financial insti-                 still in full swing. The test results reas-               the credibility of the test because the
    3rd Floor, Block A,                                       tutions, in order to see how exposed                      sured investors in the health of the                      majority of sovereign bonds are held in
    Two Park Avenue Building,                                 they are to the sovereign debt prob-                      country‟s 19 biggest financial institu-                   the banking book and would only suf-
    Park Avenue, Minet El Hosn,                               lems of the PIIGS* that have troubled                     tions, and helped spark the stock                         fer a writedown if there was serious
    Beirut, Lebanon                                           the continent since December 2009.                        market rally that saw the Dow gain                        doubt of an issuer‟s ability to repay.
                                                              The move came as investors were                           36% by April 2010.                                        In any case, whether the test was a
    Phone:         +961 1 997998                              growing more fearful that the sover-                      Some however, believe the European                        genuine attempt at gauging the Euro-
    Fax:           +961 1 994801                              eign debt crisis would put the banks‟                     stress test‟s assumptions were too                        pean financial sector‟s strength or a
    Email:         contact@bsec-sa.com                        solvency into question. The test was                      optimistic: The test assumed a 23%                        publicity move to ward off bond vigi-
    Website:       www.bsec-sa.com                            performed on 91 of the EU‟s financial                     loss on Greek bonds. Many believe a                       lantes, the market response was rela-
                                                              institutions (65% of total market), and                   25-60% would have been more realis-                       tively modest; CDS spreads for Euro-
                                                              tried to gauge the loss they would                        tic. Furthermore, the test only as-                       pean financial institutions tightened
                                                              incur following a haircut on their gov-                   sumed losses on government bonds                          slightly, and the spread between Ger-
                                                              ernment bond holdings.                                    held on the banks‟ trading books; a                       man bonds and other European na-
                                                              Seven (7) banks failed the test after it                  survey by Morgan Stanley suggests                         tions such as Greece and Spain also
                                                              was shown that they wouldn‟t meet                         that only 10% of Greek government                         tightened. The response in the stock
                                                              the Tier 1 capital ratio of 6% in the                     bond holdings are in the trading                          market was less conclusive as the
                                                              case of a sovereign debt crisis. These                    books, while 90% are held to maturity                     European Stoxx 600 Index remained
                                                              banks, having about $4.5 billion short-                   in their „bank‟ books. Haircuts how-                      relatively flat■
                                                              fall from meeting the requirements,                       ever, are applied only to the banks‟                      * Portugal, Ireland, Italy, Greece and Spain
                                                              include 1 German bank, 1 Greek bank,                      trading books, which are marked-to-
                                                              and 5 Spanish savings banks.                              market, and not to their banking

                                                              C. Real estate: foreign ownership or investments?
                                                              The Lebanese economy attracts for-                        foreigners over the ability to own a                       Although foreign ownership is con-
                                                              eign investments and liquidity through                    property in their home land.                               trolled by Lebanese law, there remain
                                                              several sources inter alia tourism,                       Here comes the dilemma: on one                             multiple gaps that need closer atten-
                                                              services sector, financial sector, expa-                  hand the Lebanese economy greatly                          tion and analysis. In this regard, vari-
                                                              triate remittances, and most impor-                       needs to have foreign cash inflow from                     ous mechanisms have been imple-
                                                              tantly through the sale of real estate                    the most vibrant sector, the real es-                      mented by other countries in order to
                                                              assets. The recent Lebanese real                          tate sector; on the other hand Leba-                       attract foreign investments in real
                                                              estate boom and the upsurge in prices                     nese nationals are struggling to keep                      estate, while at the same time control-
                                                              have further encouraged land owners                       their natural right of real estate owner-                  ling the ownership conditions and
                                                              to sell real estate assets to foreigners                  ship in their home country. Conse-                         levels. Restrictions could be loosened
                                                              in order to make higher gains, which                      quently, it is important to differentiate                  in investment areas such as manufac-
                                                              also increases the cash inflow into the                   between foreign ownership and for-                         turing areas, agricultural areas, touris-
                                                              country. Looking into the cash inflow                     eign investment in real estate. The                        tic areas, while they could be tight-
                                                              in itself, it provides prosperity and                     former transfers ownership of property                     ened in other non-investment areas
                                                              growth and it is an indicator of a                        to foreigners in an unrestricted man-                      such as residential areas, natural
                                                              strong economy, but only if such inflow                   ner and over an unlimited period of                        locations, etc. Other countries have
                                                              is derived from real goods and ser-                       time, while the latter allows the owner                    more stringent restrictions on owner-
                                                              vices provided by the Lebanese econ-                      to utilize the underlying real estate                      ship, for example restriction on inheri-
                                                              omy such as manufacturing, agricul-                       asset for a certain period of time and                     tance amongst foreigners, and restric-
                                                              ture, financial services, tourism, etc.                   to enjoy economical benefits, but                          tions on years of ownership. Govern-
                                                              However, selling real estate assets is                    ultimately returning ownership to                          ments might also be expected to
                                                              analogous to selling parts of the coun-                   Lebanese nationals. Any reforms in                         forego a portion of the tax revenues, in
                                                              try itself and its limited resources in an                this regard need to be focused on                          order to entice foreign investments in
                                                              almost irrevocable manner. In addi-                       attracting foreign capital through for-                    light of the increased ownership re-
                                                              tion, Lebanese nationals are put in                       eign investment in real estate, instead                    strictions■
                                                              direct and unfair competition with                        of being through foreign ownership.
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Disclaimer: NewsWire is a private document owned and published by BSEC S.A for your information only and is not intended as an offer to buy or sell any securitisation or any structured financial product. Although all
information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, no representation or warranty expressed or implied, is made to its accuracy or completeness.
This NewsWire is prepared for private circulation and for general information only. The contents of this NewsWire, including all intellectual property, trademarks, logos, design and text, are the exclusive property of
BSEC S.A, and are protected pursuant to copyright and trademark laws. No material from BSEC S.A NewsWire maybe modified, copied, reproduced, repackaged, republished, circulated, transmitted, redistributed or
resold directly or indirectly, in whole or in any part, without the prior written consent of BSEC S.A. The consequences of any action taken on the basis of information contained herein are solely the responsibility of the
person or organization that may receive this NewsWire.
                                                                                                                                                                          INVESTMENT BANKING GROUP

                                                                            N E W S W I R E                                                   Issue 19 - July 2010


                                                              D. Lebanese Turkish free trade: competition or cooperation
                                                              A decade ago the Lebanese and the                         among Lebanese industrialists owing                       results as tourism boosted between
                                                              Turks would have never imagined                           to Turkey‟s strong manufacturing                          the two countries add to technological
                                                              themselves working together on politi-                    exports that could drive local busi-                      spillover and FDI. The Syrian example
                                                              cal or economical levels. The Euro-                       nesses out of the market. The ques-                       could set an example that Lebanon
                                                              pean delay to Turkey‟s EU member-                         tion of whether the agreement shall                       and Turkey can apply it in ancre Leba-
                                                              ship coupled with other factors mainly                    proceed in same line as Jordan and                        nese sectors, not to mention as well
                                                              growth in the Middle East market have                     Syria has posed doubts on the future                      the expected increase in the trade
                                                              paved the way for Turkey to see its                       of Lebanon‟s already weak industrial                      volume between the two countries.
                                                              Eastern Neighbors in a different way                      sector when faced with a mass of                          As rapid globalization could cause
                                                              than it did in the last 50 years and to                   Turkish products entering the market                      small countries to exhibit disturbances
                                                              move towards a regional integration.                      with no tariffs or any sort of legal ob-                  in the short run, protective market
                                                              The region namely comprising Turkey,                      stacles.                                                  policies may be no less harmful espe-
                                                              Syria Jordan and Lebanon is witness-                      Other views seem more favorable                           cially in the long run. A more prag-
                                                              ing a process that is - to a certain                      regarding the proposed agreement. As                      matic approach to economic collabora-
                                                              extent - similar to the process of how                    Turkey and Lebanon have similar                           tion between states may be regional
                                                              EU was formed in the mid 20th cen-                        features in terms of reforms and                          pacts where economies can comple-
                                                              tury. The four states have already                        demographic and consumption                               ment each other. Whether the four
                                                              lifted visa requirements for individuals,                 growth, the two states remain fairly                      states cluster, which is known in Tur-
                                                              in addition to numerous bilateral                         different in the driving force of the                     key as ShamGen (in reference to
                                                              agreements including the free trade                       economy. Turkey has the most ad-                          Schengen zone), will emerge as a
                                                              agreement, which has not yet been                         vanced economy among the four                             regional economic and political power
                                                              accomplished between Lebanon and                          states, is candidate to be the main                       is an interesting question that the
                                                              Turkey.                                                   economic dynamo of the cluster. Bilat-                    coming years will answer■
                                                              The free trade agreement that is yet to                   eral agreements between Syria and
                                                              be signed has triggered some fears                        Turkey have already shown positive

                                                              E. Gold: the race is on
                                                              Gold has often been considered as the                     printed money flows into the economy                       phase” of global financial crisis. Ac-
                                                              last resort in times of crisis rather than                it has the effect of pushing up overall                    cording to the IMF, “Higher debt levels
                                                              an ongoing investment. Unlike most of                     price levels. One of the main factors                      have the potential to impact financial
                                                              the other commodities, it is produced                     that would lead to the increase in                         stability.” In his latest book, Georges
                                                              for accumulation, not consumption.                        money printing, hence increase in                          Soros discussed the handling of the
                                                              Unlike most of the financial instru-                      inflation levels, is war. “The world                       2008 financial crisis stating that: “This
                                                              ments, it has proven to be immune to                      smells war in the Middle East”: as                         is a grave misinterpretation of the
                                                              credit crunches as it has little correla-                 repeatedly heard lately. In case of war,                   current situation. Humpty Dumpty
                                                              tion with overall market performance                      gold prices are expected to further                        cannot be put together again.” Else-
                                                              and with corporate performance. Gold                      increase because wars are funded by                        where in the book Soros writes, “I
                                                              has also proven to be a hedge against                     borrowing which increases the need of                      regret to tell you that the recovery is
                                                              inflation and a safe haven in times of                    money printing, and therefore further                      liable to run out of steam and may
                                                              financial crisis. As a result, the de-                    increasing inflation.                                      even be followed by a „double dip,‟
                                                              mand for gold in recent years has                         On the second angle, and following the                     although I am not sure whether it will
                                                              been largely driven by the need of                        subprime crisis, the capital markets                       occur in 2010 or 2011”.
                                                              such hedge in a recessionary econ-                        are still struggling in the recovery                       Consequently, and in such prevailing
                                                              omy; and the concern is that both                         phase that, according to many ana-                         market conditions, as investors find
                                                              inflation and financial crisis might                      lysts, might be followed by a further                      difficulty gaining confidence in the
                                                              have not bottomed yet.                                    deterioration of the world financial                       financial markets again, demand for
                                                              On the first angle, inflation is not rising               system. The latest announcement                            gold seems to have no foreseen limits.
                                                              prices; it is a fall in the value of money                from the International Monetary Fund                       Investors, rather than watching the
                                                              due, among other reasons, to the                          (IMF) stated that Greece‟s financial                       adjacent chart, are more inclined to be
                                                              printing of an excess of it. As newly                     crisis could be the start of a “new                        a part of it■


                                                              F. Headlines
                                                                    Banque Audi approved to purchase a 90% equity stake in the Egyptian Arabeya Online “AOLb” company which is
                                                                     considered to be the largest online securities trading company in Egypt.
                                                                    Abu Dhabi‟s crown prince Sheikh Mohammed bin Zayed Al-Nahyan is still considering an investment in BP. The oil
                                                                     company is looking for funds in order to ward off potential takeover bids after its share price lost 40%* of its value
                                                                     following the Gulf of Mexico oil spill.
                                                                    UAE said that it would suspend BlackBerry mobile services like e-mail and text messaging beginning in October due
                                                                     to BlackBerry‟s highly encrypted data system which offers security to users but makes it more difficult for govern-
                                                                     ments to monitor communications.
                                                                    Facebook to put off its initial public offering (IPO) until 2012 giving more time to gain users and boost sales.
                                                                    Google loses 13.2% of its market share in China, most of it to Baidu, as it struggles to keep advertisers who are
                                                                     weary of the company‟s future in the country.
                                                                    SEC fines Citi $75M for failing to disclose to investors $40 billion in risky mortgage assets.




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Disclaimer: NewsWire is a private document owned and published by BSEC S.A for your information only and is not intended as an offer to buy or sell any securitisation or any structured financial product. Although all
information and opinions expressed in this document were obtained from sources believed to be reliable and in good faith, no representation or warranty expressed or implied, is made to its accuracy or completeness.
This NewsWire is prepared for private circulation and for general information only. The contents of this NewsWire, including all intellectual property, trademarks, logos, design and text, are the exclusive property of
BSEC S.A, and are protected pursuant to copyright and trademark laws. No material from BSEC S.A NewsWire maybe modified, copied, reproduced, repackaged, republished, circulated, transmitted, redistributed or
resold directly or indirectly, in whole or in any part, without the prior written consent of BSEC S.A. The consequences of any action taken on the basis of information contained herein are solely the responsibility of the
person or organization that may receive this NewsWire.

				
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