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Monday, 12 January 2009

STATEMENT ON THE RAMPANT FRAUDULENT ACTIVITIES ON THE STOCK EXCHANGE, THE INSURANCE AND PENSION FUND INDUSTRIES AND THE BANKING SECTOR

Yes, it’s Zim-time once again.

There are reports around that Zimbabwe plans to issue a series of Z$20bn and Z$50bn bank notes. But this seems a strange move: aside from the fact that virtually all goods and services in Zimbabwe are now priced and charged in foreign currency, the government there was already printing Z$100bn notes last summer. Maybe deflation has taken hold.

No matter. A related web search alerted us to this — another swivel-eyed take on the state of the African nation from Dr G Gono, governor of the Reserve bank of Zimbabwe.

Are things really that bad in China?

This is positive news for Chinese and Asian manufacturing in general - especially given the level to which Asian industrial production has fell in the past quarter - down some 32 per cent according to JP Morgan, roughly double the rate of decline in the Americas and Europe.

Furthermore, Goldman Sachs’ chief economist Jim O’Neil sees yet more reason to be positive about China on the back of such commodity-based indicators. He tells the FT in an interview published Monday that the fourth quarter of 2008 may very well have been the worst for the world economy, with 2009 likely not going to be as bad. On a relative basis he’s specifically positive about the outlook for the BRICs, China and India in particular.

Only the very fittest managers will survive

In the past year asset managers have been reeling from floods of redemptions and dwindling assets under management and are now in a battle for survival of the fittest. (PDF)

“Unprecedented levels of M&A activity are expected this year as a number of people are reassessing whether they want to remain in the asset management business. There will be fewer players in 2009,” says Martin Gilbert, chief executive of Aberdeen Asset Management.

Mr Gilbert has just contributed to industry consolidation with Aberdeen’s acquisition of Credit Suisse’s traditional fund management business in the past two weeks.

Hedge fund managers resigned to falling fees

Hedge fund managers accept that the fees they can charge for their services are likely to fall, according to a survey conducted by bfinance, a consultancy.

Until last year demand for hedge funds largely exceeded supply, allowing the typical fund to charge a 2 per cent flat fee and a 20 per cent performance fee, significantly greater than the charges levied by the vast majority of mutual funds.

However, after a dire year for the industry, with widespread losses prompting a wave of redemptions, fees are expected to come under unprecedented pressure. Hedge funds and funds of hedge funds surveyed by bfinance said they expected flat fees to fall to about 1 to 1.5 per cent, and performance fees to decline to 13 per cent.

Evidence emerges of investor flight to ETFs

Investors in the UK and Europe have been piling into exchange traded funds in the past year as outflows have risen from hedge funds and traditional long only funds.

BGI iShares, the biggest ETF provider, attracted net new assets of $25bn (£16bn, €18bn) in Europe in 2008, up more than 200 per cent on net inflows of $7.5bn in 2007. This offset the effect of falling markets on assets under management, which ended the year at $56bn, down from $58bn a year earlier.

Globally, net inflows increased to $89bn from $70bn the year before, but total assets declined from $403bn to $325bn.

Hedge funds cut down to size?

As hedge fund managers returned last week to their plush offices in London’s  Mayfair and Greenwich, Connecticut, many hoped to forget the industry’s worst year on record. But 2009 threatens to bring a detox diet for traders previously held up as among the world’s best – thinning the industry’s ranks and putting in jeopardy the fat fees that turned many “hedgies” into billionaires.

Dismal returns and investor panic are in danger of proving fatal for many funds, following the worst year since Chicago’s Hedge Fund Research started tracking returns in 1980. Losses reached 18.3 per cent as record numbers of funds closed and investors pulled tens of billions of dollars, even from those that made profits.

If that were not bad enough, the image of the industry was further tarnished by Bernard Madoff’s alleged $50bn (£33bn, €37bn) fraud – adding to demands from watchdogs and politicians around the world for tougher regulation.

Putin on airs

Russian television last week showed Alexei Miller, Gazprom’s chief executive, outlining to Vladimir Putin plans to reduce further the gas flow to Ukraine. “All right, I agree. Reduce it from today,” declared Russia’s prime minister. Who is in charge here? Such displays undermine Gazprom’s claims to be commercially driven, reinforcing impressions it is an arm of the Kremlin. Even if Gazprom is 51 per cent state-owned, Mr Putin is not a director (though a deputy premier is chairman, with two other ministers on the board).

With gas exports a sensitive diplomatic issue, high-level political involvement may be inevitable. But Mr Putin’s visible role still highlights a fundamental investment issue. With his administration having restored de facto and de jure state control, does Gazprom serve state or shareholder interests? In fact, shareholders have benefited since Mr Putin installed Mr Miller in 2001 – until Gazprom shares slumped, with the Russian market, last summer. The gas behemoth is less inefficient and ill-managed. It regained control of billions of dollars of reserves lost in questionable deals by previous management. The 2006 removal of restrictions on foreign ownership of the free float helped its value soar from $14bn in 2001 to a $360bn peak last May.

Probe into Dubai $100m fraud allegations

Police are investigating fraud allegations against the chairman of one of Dubai’s largest private real estate companies as dozens of aggrieved investors claim he defrauded them of more than $100m.

Kabir Mulchandani, the chairman of Dynasty Zarooni, was arrested last week on allegations of fraud and is helping with inquiries, police officers told the Financial Times.

At least 10 members of Dynasty Zarooni’s ”investment club”, which last year promised vast profits from the company’s preferential access to real estate deals, have lodged complaints against Mr Mulchandani, an Indian national, his Emirati business partner, Hilal Al Zarooni, their joint venture Dynasty Zarooni, and two other employees.

Loans dry up for small businesses

Dubai: Many of the UAE's small businesses, considered to be the backbone of the economy, are facing acute shortage of financing from banks, a study says.

Credit conditions have become difficult over the last few months, as events in the financial world have stirred credit markets across the globe.

Small and medium-scale enterprises (SMEs), which constitute more than 85 per cent of businesses in the UAE, have also been struggling to obtain credit.