GTR Magazine - November/December 2008

Multilaterals look to give trade a helping hand

Keeping credit lines open for the financing of trade was one of the key topics at the IMF and World Bank meetings held in October. IMF’s managing director Dominique Strauss-Kahn spoke of his concerns about the impact of the financial crisis in the advanced economies on trade in the emerging markets.

Speaking at a press briefing ahead of the meetings, he disputed that the theory of decoupling was ever a likely scenario, before adding:

Appetite for local currency deals tumbles

The previously fast-paced movement in the emerging markets towards raising funds in local currency has been brought to an abrupt halt by the financial crisis.  With fear entrenched among investors, most are extremely hesitant about funding trade deals or projects in local currencies.  Ted Kim takes a look at when or even if this market might recover.

Perhaps one of the hardest hit areas of the meltdown in the global banking system has been emerging market local currency financing programmes that had, at least for most of this year, been gaining critical momentum among issuers and investors alike. 

Trade assets tarnished by securitisation scare

With securitisation markets abandoned by investors, Helen Castell investigates whether there is any appetite at all for securitised, high quality trade assets.

With capital markets in crisis, once-lauded risk-sharing structures have never had it so bad. Shouldered with a large share of the blame for the current financial mess, securitisation suddenly finds itself a dirty word.

Roundtable: Help needed -The market turns to insurers

GTR assembled 10 well-known brokers, insurers and bankers in London in mid-October to discuss the most topical trends and market issues in the trade credit and political risk insurance industries. Coming as financial markets were undergoing some of their greatest turmoil for decades, the talk around the table touched upon a range of key talking points. JLT Risk Solutions kindly hosted the discussion for GTR.

Godier: At last year’s roundtable, Charles Berry elegantly predicted that the sub-prime crisis was “the beginning of a long slow-motion train crash in the financial markets, which is beginning to impact in emerging markets.” To what extent is the insurance industry suffering as a result of the fallout? Are you somewhat de-coupled, and what is the impact on your businesses and upon your market?

Creeping back to private insurance market

Global woes, including the demise of the equity markets, are likely to crank up the demand for private market insurance, which is available in ever-greater capacity, writes Kevin Godier.

Rising demand for the many types of political risk insurance (PRI) cover offered by private sector underwriters has been matched over recent years by a steady increase in the capacity that the market has made available for single situation trade and project risks.

Miga forecasts slowdown if foreign direct investment stalls

The potential impact of the current financial crisis and slowdown of foreign direct investment (FDI) could be devastating for emerging economies, according to the Multilateral Investment Guarantee Agency (Miga), the political risk insurance arm of the World Bank Group.

Miga’s acting executive vice- president and chief operating officer James Bond believes emerging markets have so far been spared the worst from the turmoil.  But the crisis is far from resolved.

Providing a safety net in unstable markets

With more risk on offer in all markets and far fewer risk takers, export credit agencies (ECAs) are seeing greater demand for their services, writes Kevin Godier.

In normal circumstances, many of the state-backed ECAs that support national exports and outward investments act mainly as ‘last resort’ entities that keep open the channels of international trade and investment into developing and emerging markets.

Nigeria takes small steps to a bright future

For decades Nigeria has been a hobbled giant, its vast resources held hostage to corruption, violence, and underdeveloped infrastructure. However, there is optimism that government reforms will help rejuvenate the economy and trade. Zoe Alsop reports on country eager to make a break from its past.

When international observers termed April 2007 elections flawed, it looked as though Nigeria might hold onto its reputation as perhaps the world’s most dysfunctional state. But, 18 months later, there is cautious optimism among bankers and financial analysts, who say there’s been real progress towards normalising a once mercurial business environment.

Reformed Nigeria is drawing in the ECA crowd

Export credit agency (ECA) financing is enjoying a renaissance in Nigeria. Richard Hodder, director, Sub-Saharan Africa at HSBC Bank, reports on a growing pipeline of transactions.

The market for export credit agency (ECA)-supported finance in Nigeria has grown massively during the course of 2008.  At present the project and export finance division of HSBC Bank is arranging loans with a combined value in excess of US$750mn and expects to sign 15 individual loans with Nigerian counter-parties with ECA support in 2008.

Nigerian Banks in the UK: London Calling

Only two Nigerian banks had a presence in London before 2007. Then Zenith Bank’s launch of a UK subsidiary last July opened the floodgates. Access Bank, Intercontinental and GTB followed within months, with more lining up at the door. And trade finance seems to be the reason they want to come, writes Rupert Sayer.

When Nigeria’s Zenith Bank opened a UK subsidiary in London – Zenith Bank (UK) – early in 2007, it was the first Nigerian bank to open up a new shop in the country for 25 years.

Defiant Turkey faces up to the crisis

The Turkish trade finance market is facing a problem familiar across the globe: a lack of affordable short-term financing. With the country far better equipped to deal with this economic downturn following its 2001 banking crisis, the hikes in pricing on trade deals are no longer reflecting the real risks of doing business in Turkey, writes Rebecca Spong.

Turkey offers a country risk profile of a developed country but with emerging market growth,” remarked Mehmet Simsek, Turkey’s minister of economy, at a press briefing in mid-October at the British-Turkish Chamber of Commerce’s offices in London. 

Australia-China trade links resist turmoil

One market that has proved strong throughout the first year of global market mayhem is Australia. Rich in natural resources, supported by strong and relatively baggage-free domestic banks, and with an expanding China sucking in its exports, the country seemed living proof of the de-coupling theory, writes Helen Castell.

“Australia’s trade finance market is weathering the storm,” says Michael Wood, senior manager, structured trade and risk, international products at Westpac Banking Corporation.

Brazil and CPR deals: A Sure Thing?

The safety and certainty of the cédula de produto rural (CPR) has been an unassailable tenant in Brazil’s commodity markets – until a recent cluster of high-profile failures, writes Erika Morphy.

t has been a tedious day for a certain attorney in Sao Paulo. He has spent the morning meticulously double-checking paperwork for a transaction, which until recently could have been considered routine – and utterly safe.

Sibos Review: SCF plays on in the face of crisis

Despite the financial meltdown, delegates at Sibos managed to stay focused on the business at hand and many reported that supply chain finance deals are still being inked, writes Justin Pugsley. 

This year’s Sibos meeting in Vienna was unfortunately over-shadowed by the momentous events in the financial markets, among the most damaging of which was the US authorities allowing Lehman Brothers to go bust.