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July
2008
Credit Suisse To Court
Japan's Super-Rich
Credit Suisse plans to start offering financial services for the moneyed
classes in Japan, rolling out by the end of the year private banking
services for those who own 1 billion yen or more in financial assets. As
earnings from investment banking operations have dropped in the wake of
the U.S. subprime mortgage problem, foreign financial institutions are
putting more efforts into private banking operations, which deliver stable
commission revenues. They face intensifying competition with Japanese
rivals, which are also foraying into this growing field. Credit Suisse's
private banking services will target the nation's billionaires and offer
not only stocks, bonds, real estate and other investment products, but
will also dispense advice on business succession and handing down family
assets. According to Nomura Research Institute Ltd., 865,000 households
own 100 million yen or more in financial assets in Japan. The number comes
to 52,000 for those with financial assets worth at least 500 million yen.
The private banking business is a key part of the Swiss firm's global
operations, serving roughly 2.5 million customers and managing assets
totaling around 100 trillion yen worldwide. In Japan, it will provide
private banking services via its Tokyo branch and Credit Suisse Securities
(Japan) Ltd. as soon as registrations with the Financial Services Agency
are completed. In the future, it will consider offering the services in
locations outside Tokyo. Hong Kong and Shanghai Banking Corp. helped
pioneer private banking services in Japan, entering into the business in
1996. Now targeting people with 300 million yen or more in financial
assets, the firm hopes to be managing 1 trillion yen or so in assets for
its private banking customers by the end of 2010. UBS AG offers private
banking services to those worth at least 200 million yen in Tokyo as well
as in Osaka and Nagoya. Among Japanese megabanks, Mizuho Financial Group
Inc. provides private banking services through subsidiary Mizuho Private
Wealth Management Co. Mitsubishi UFJ Financial Group Inc. serves customers
with 100 million yen or more financial assets via Mitsubishi UFJ Merrill
Lynch PB Securities Co., a joint venture with Merrill Lynch & Co. of
the U.S. In addition, Nomura Holdings Inc. and Daiwa Securities Group Inc.
offer services and products for wealthy people through their brokerage
units. (The Nikkei; Friday, July 11, 2008)
Promise To Issue Up To Y60bn
Euroyen Convertible Bonds
Promise Co. said Tuesday it has decided to offer up to Y60 billion of
seven-year euroyen convertible bonds. Between July 24, 2011 and May 1,
2015, the bonds may be redeemed if the closing price of its shares on the
Tokyo Stock Exchange is at more than 130% of the conversion price for 20
consecutive sessions. The company plans to use the proceeds from the
convertible bonds for repayment of a short-term loan used to buy Sanyo
Shinpan Finance Co. The bonds will settle on July 24 and mature on July
24, 2015. （Dow Jones; Tuesday, July 8, 2008）
Dollar Gains Vs Euro As Oil
Prices Go Under $140 A Barrel
The dollar is a bit firmer against the euro Tuesday morning in New York as
oil prices dipped below the psychologically significant $140 a barrel
mark. But against the yen, the dollar is little changed after investors'
appetite for risk was reduced overnight by a drop in global stock markets.
The MSCI Asia Pacific index fell 1.8% Tuesday while Japan's Nikkei plunged
2.5%. Shares in European bourses also declined across the board. This
prompted investors to pursue safe haven currencies like the yen and Swiss
franc. U.S. stock markets are expected to open lower in response to the
declines in global markets overnight. "Investors' focus will now
increasingly shift to the second quarter U.S. earnings season," said
currency analysts at UBS, in a research note. "The impact of
heightened energy prices and depressed consumer sentiment on corporate
earnings will be closely watched." Tuesday morning in New York, the
euro was at $1.5665 from $1.5720 late Monday. The dollar was at Y107.28
from Y107.17, while the euro was at Y168.04 from Y168.47, according to EBS.
The U.K. pound was at $1.9737 from $1.9773, and the dollar was at
CHF1.0292 from CHF1.0261 late Monday. The dollar was supported by softer
crude prices, which fell over $2 Tuesday in London. A speech Tuesday
morning by Federal Reserve Chairman Ben Bernanke had little impact on the
market. He didn't give any hint about interest rates, focusing instead on
the need to build more resilient and stable financial markets. Traders
will be looking ahead to data on U.S. pending house sales for May, due at
10 a.m. EDT. Economists are expecting a 2.8% decline, from the 6.3% rise
in April. Later Tuesday, Richmond Fed President Jeffrey Lacker is expected
to speak about the economic outlook at a forum in Arlington, Va. (Dow
Jones; Tuesday, July 8, 2008)
Austrian Bank Registers
Samurai Bond Shelf At MOF
Austria's Oesterreichische Kontrollbank Aktiengesellschaft, or OKB, filed
a shelf registration at Japan's Ministry of Finance last week to issue
Samurai bonds over the next two years, documents filed at the ministry
showed Monday. Samurai are yen-denominated bonds issued by foreign
borrowers in Japan. OKB and Norway's Kommunalbanken AS also registered to
issue Uridashi bonds - which are issued offshore in foreign currency and
sold to Japanese retail investors. Meanwhile, seven Japanese firms filed
shelf registrations to sell domestic corporate bonds over a two-year
period. (Dow Jones, Monday, July 7, 2008)
Forex: Dlr Flat Vs Euro; All
Eyes On ECB, U.S. Data
The dollar was little changed against the euro in Asia Thursday ahead of
key U.S. and European events later in the day, which could trigger the
greenback's plunge and the single unit's rally. Tokyo dealers said all
eyes will be on U.S. June non-farm payrolls data due at 1230 GMT and
European Central Bank President Jean-Claude Trichet's press conference
starting at 1200 GMT. "Players are poised to sell the dollar and buy
the euro after the two events," said Hideki Amikura, a senior dealer
at Nomura Trust and Banking. "There are so many reasons to push the
euro/dollar up. Players are just waiting for an excuse." Trichet's
media conference will follow the bank's monetary policy meeting, at which
the bank is expected to hike its rates to 4.25%. "Because of what
Trichet has been saying recently, speculation that the ECB to hike rates
again as early as September is growing," Amikura said. Trichet, cited
by a German newspaper overnight, said inflation there may
"explode." Meanwhile, the U.S. non-farm payrolls data may show a
fall of 55,000 jobs in June after the drop by 49,000 in May, according a
Dow Jones poll of economists. "A weak U.S. private-sector jobs report
overnight suggests that non-farm payrolls are likely to be a factor to
sell the dollar," said Tsuyoshi Ueda, head of FX trading at
Gaitame.com, Japan's one of largest margin trade brokers. Overnight,
Automatic Data Processing and consultancy Macroeconomic Advisers said jobs
dropped 79,000 in June, much worse than economists' forecast for a 20,000
decline. "It looks like many players share similar scenarios (for the
U.S. data and ECB), but they want to make sure that their bets are
correct," Ueda said. "If the results of two events come in just
as players expect, currency moves will be volatile." Dealers said the
dollar may fall below Y104, while the euro may rise above $1.6 and Y170 if
the conditions are met. The euro's current lifetime highs are $1.6020 and
Y169.47. If the two events prove to contradict the expectations, the
dollar may rise, but that gives dollar-bears a good chance to sell, Ueda
said. "There are lots of dollar-selling orders above Y106.50, so it
won't be able to rise above Y107 for a while," he added. As of 0450
GMT, the dollar stood at Y106.13 from Y105.95 in New York late Wednesday.
The euro stood at $1.5874 from $1.5880 and Y168.45 from Y168.29. (Dow
Jones; Thursday, July 3, 2008)
June
2008
Forex: Euro Hits All-Time
High Vs Yen On Expectation Of Rate Hike
The euro rose to an all-time high against the yen in the lower 169 yen
zone and firmed also versus the dollar Thursday morning in Tokyo as
investors shifted their attention to interest rate gaps between the
eurozone and elsewhere. The U.S. dollar, meanwhile, remained firm against
the yen, moving narrowly at the upper 107 yen level as investors refrained
from actively trading on receding expectations of an interest rate hike in
the United States in the immediate future, traders said. At noon the euro
traded at $1.5677-5682 and 169.25-30 yen, against late Wednesday's quotes
of $1.5662-5672 and 168.88-98 yen in New York and $1.5561-5564 and
168.03-07 yen in Tokyo. The dollar was quoted at 107.96-108.01 yen,
compared with 107.77-87 yen in New York and 107.96-99 yen in Tokyo at 5
p.m. Wednesday. Dealers said the euro firmed to as high as 169.33 yen, its
highest level against the yen in Tokyo since the single currency was
introduced in 1999, surpassing its previous record high marked in July
last year. The single currency began appreciating in overnight trading in
New York after the U.S. Federal Reserve left its key interest rate
unchanged at 2 percent. The Fed decision fueled speculation that gaps
between U.S. and eurozone interest rates would widen, given that eurozone
officials have remained hawkish recently, they said. In New York on
Wednesday, the single European currency also marked a local high of 169.16
yen. In Tokyo, Masafumi Yamamoto, head of foreign exchange strategy in
Japan at the Royal Bank of Scotland, said, ''The latest Fed decision
turned the spotlight onto the interest-rate differentials.'' ''Although
the economy in the eurozone shows slight weakness, the spread in interest
rates is the focus of attention in the market right now.'' The dollar's
move was limited versus the yen, however, as many market participants
think it will be difficult for the U.S. central bank to implement an early
interest rate hike amid growing uncertainty about the U.S. economy,
dealers said. In the post-policy meeting statement, the central bank
mentioned inflationary risks but failed to indicate when or if a rate hike
was coming. Meanwhile, the European Central Bank is widely expected to
raise its key interest rates as early as next Thursday when it holds its
monetary policy meeting as ECB President Jean-Claude Trichet has indicated
that the central bank may raise its key interest rate from the current 4
percent as early as July. (Kyodo News; Thursday, June 26, 2008)
METI To Urge Use Of
Investment Funds For Long-Term Financing
The Ministry of Economy, Trade and Industry plans to promote the active
use of investment funds to satisfy long-term corporate financing needs by
stressing their merits in a report to be published soon. The report by a
ministry panel will likely recommend that Japanese firms seek long-term
financing for capital spending and R&D activities from investment
funds. It is expected to give a positive assessment of the funds in
general, saying that many of them can provide large amounts of capital on
short notice, at a time when domestic banks are loath to take lending
risks. Many domestic companies remain reluctant to accept financing from
investment funds, believing they are only seeking short-term gains. The
panel, comprising academics and financial market professionals, will also
recommend that the government revise the tax code to make it easier for
overseas entities to set up investment funds in Japan. In the report,
investment funds will be classified as venture, hedge or buyout types.
Though buyout funds are often likened to vultures and do not have a good
image in Japan, the panel will assess these private equity funds more
positively, saying "this type of fund often helps companies grow by
getting deeply involved in their management." METI has not always
been so sanguine about the motives of foreign investment funds, calling
U.S. fund Steel Partners a "greenmailer" and preventing the
U.K.-based Children's Investment Fund from doubling its stake in Electric
Power Development Co., commonly known as J-Power, to 20%. Many investors
subsequently criticized the ministry for being overly cautious about
overseas investment funds, and the report is likely designed to ease such
concerns. However, it will also say that it is too early to determine
whether activist shareholders like Steel Partners actually help companies
increase their corporate value. (The Nikkei; Sunday, June 15, 2008)
Japan, U.S. To Take
Cooperative Action Toward Forex Stability
Japan and the U.S. will coordinate efforts to stabilize currency markets
and work closely together to deal with the risk of a global economic
recession, Finance Minister Fukushiro Nukaga said Friday after meeting
with U.S. Treasury Secretary Henry Paulson in Osaka. The dollar's weakness
was one of their main topics of discussion. According to government
sources, the American side stressed that stable currency markets are
essential not only for the U.S., but also for global economic growth.
Paulson apparently sought Japan's understanding on the recent American
push to stem the dollar's slide, but Nukaga declined to share details of
their dialogue on the greenback. "We discussed the matter, but I
would like to refrain from commenting on it," Nukaga said. The
Japanese government is expected to welcome a strengthening of the dollar
up to a certain point. It sees the possibility of further economic chaos
in the global economy if U.S. consumer prices continue climbing and the
Federal Reserve Board is forced to raise interest rates. But Tokyo is also
concerned that inflationary pressure in Japan may intensify via higher
import prices if the yen weakens too far as the result of a stronger
greenback. The U.S. is believed to be prepared to intervene in currency
markets if such action is necessary for propping up the dollar, but it
remains to be seen whether the Japanese and European authorities share
this sentiment. Nukaga and Paulson agreed that China needs to revalue the
yuan further. They also shared the view that the U.S. financial market has
regained calmness, but still needs careful monitoring. Finance ministers
from the Group of Eight nations are convening in Osaka for a two-day
meeting. On Saturday, they are expected to discuss such issues as the
dollar's weakness and the rising threat of inflation stemming from surging
prices of crude oil and food. (The Nikkei; Saturday, June 14, 2008)
Citigroup To Offer Up To
Y100bn In Samurai Bonds Next Month
Facing a tough fundraising environment in the U.S. and Europe, Citigroup
Inc. has decided to issue as much as 100 billion yen in samurai bonds on
July 1, The Nikkei learned Monday. With interest rates low in Japan, the
U.S. financial giant has determined that it can raise funds under
favorable terms and that the yen-denominated bonds will attract interest
from Japanese retail investors. This will mark Citigroup's first samurai
bond issuance for retail investors since its 50 billion yen offering in
September 2000. Nikko Citigroup Ltd. will lead manage the three-year
bonds, which will be marketed through Nikko Cordial Securities Inc. and
other institutions, beginning Friday. The bonds are expected to generate a
2-3% annual yield, with a minimum unit costing 1 million yen. By
comparison, the return on Japanese government bonds that mature in three
years is hovering around 1%. The U.S. institution intends to use the
samurai bond offering to attract retail investors and strengthen its
Japanese operation. Due to fallout from the U.S. sub-prime mortgage
turmoil, financial institutions are facing difficulty raising funds from
the market. In April, Commonwealth Bank of Australia issued 40 billion yen
in samurai bonds for retail investors. (The Nikkei; Tuesday, June 10,
2008)
Individuals
Turn Away From Dollar To Euro In Bond Investment
Foreign bond investment trusts, popular with Japanese individual
investors, saw their holdings in the euro top those in the dollar for the
first time in January. The outstanding balance of investment in euro bonds
has almost doubled to nearly 6 trillion yen over the past three years,
while that of investment in dollar bonds has fallen below 5.5 trillion yen
from a peak of nearly 6.8 trillion yen in early 2007. Worries about the
dollar remain strong in view of the U.S. subprime crisis and a possible
slowdown in the U.S. economy. Countries in Asia and the Middle East are
raising the percentage of euros in their foreign exchange reserves, and
Japanese individual investors are joining the shift to the unified
European currency. Investment in euro-denominated bonds has increased
along with the growth of demand for foreign bond investment funds. While
the euro has accounted for around 30% of total foreign bond investments
since 2005, the ratio of the dollar has declined from nearly 50% to a
little less than 30%. Many major funds have 30-40% of their holdings in
the euro, with Global Sovereign Open, the biggest of them, having nearly
2.4 trillion yen in assets denominated in the euro. A fund managed by
Mitsubishi UFJ Asset Management Co. has the highest ratio of euro
holdings, at 57%. According to an international benchmark for bond
investment, the ratio of euro-denominated bonds is a little more than 40%.
Excluding Japan, which issues government bonds on a massive scale and
accounts for 30% of the index, the ratio is almost 60% against a little
less than 30% for the dollar. The ratio of the euro is held to around 30%
overall because popular funds are turning to countries with high interest
rates, such as those in Northern Europe and Oceania as well as emerging
economies. Amid booming investment in emerging economies, the euro has
maintained a stable position while the dollar is being replaced with the
currencies of countries with high interest rates. But even some funds that
invest in high-rate nations hold the euro to ensure stable management.
While low interest rates in Japan are behind booming sales of foreign bond
investment funds, exchange gains from the euro's appreciation in recent
years has also added fuel to the currency's popularity. How the currency's
value will move against the yen will greatly affect the returns for
individual investors. (The Nikkei; Tuesday, June 3, 2008)
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