denotes premium content | Jan 9 2009 Trade & Forfaiting Review magazine archive
Volume 10 Issue 8
Ten years ago this month saw the start of the Asian financial crisis in Thailand, Indonesia and South Korea, followed by the subsequent global crisis with the collapse of the Russian rouble and the Brazilian real. According to some commentators, many of the market characteristics in place today are similar to those seen in the lead-up to the 1997 crisis.
US economist Joseph Stiglitz noted recently that “before the 1997 crisis there had been rapid increases in capital flows from developed to developing countries – a six-fold increase in six years”. After the crisis broke, capital flows to developing countries stagnated. Some would argue the glut of global liquidity is producing a similar picture today: low risk premia and a resurgence of capital flows. In addition, as Stiglitz points out, before the Asian crisis risk premia for developing countries were “irrationally low”. Sound familiar?
This month Trade & Forfaiting Review analyses up-and-coming trends in the global commodity finance market and discovers that non-traditional commodities are beginning to come to the fore.
While ethanol, for example, has been an emerging asset class for some time, carbon emissions finance, the ‘new kid on the block’ of commodity finance, looks set to develop beyond ethanol’s niche asset class status. In fact, according to some, carbon credits are rapidly emerging as the underlying asset to watch. Fortis, for instance, is already pioneering a number of facilities in the area of emission rights and trading.
HSBC, too, is in the process of closing a deal that it believes could mark a landmark for carbon emissions trading. It is using a prepayment structure on a company that is receiving a carbon credit under the Kyoto Protocol and then selling it to an offtaker. But, on the creation of the credit, the bank is taking the pre-export risk, which includes both classic performance risk and regulation risk – Erika Morphy reports in our cover story ‘A clean sweep?’.
On a separate note, voting has now closed on our annual TFR Awards for 2007 and we’ll be announcing the winners next month. Good luck to all those involved. In the meantime, we hope you enjoy this issue.
Michele Martensen, Editor
Features
The need for speed
Technological advances and regulatory changes are helping to accelerate the pace of global trade. That gives organisations significant scope to improve the management of working capital, says Adnan Ghani, Global Head of Trade at ABN AMRO.
The Expanding CFO Agenda
By sourcing products in low-cost countries, businesses have sharpened their competitive edge. But with higher-value products and services set to be sourced globally, chief finance officers need new supply chain solutions to align with their company’s agenda for driving growth and shareholder value, writes Daniel Cotti, Head of Global Products, Transaction Banking, ABN AMRO.
Post-UCP 600, whither the online LC?
UCP 600 has closed more loopholes that result in maddening discrepancies for its users. For similar changes to come to online LCs, though, corporates will have to look outside the banking system for relief.
The next incarnation
Structured export finance appears to be in a resting period for the moment during which banks and corporates absorb the many changes that have occurred over the past year. However, no one in the industry expects the quiet period to last much longer. Erika Morphy reports.
A clean sweep?
Emissions trading, upstream customers cutting their own commodity finance deals and supply-chain considerations have characterised many commodity finance deals this year. Erika Morphy questions whether the more traditional structures are becoming obsolete.
Following KME’s lead
Several months ago KME orchestrated a complex multi-step, multi-provider transaction applying structured commodity finance tools to solve its working capital needs. Now other companies and bankers are getting ready to follow suit.
The first goal of Islamic trade services is to facilitate trade
The Middle East requires trade services that, first, remove trading constraints and improve cashflow. They should also be Islamic. Nam Hariharan Sahasra of Falcon Trade Corporation in Dubai worries that the current emphasis is in the wrong place.
Regulars
Letter from Hong Kong
I wonder how many people who drink Chinese wine for lunch every day die of liver failure? Not for the first time I saw my Chinese hosts staggering around like weebles (they wobble but they don’t fall down). And after seeing us off in the car they would retire to beds in the little rooms behind their offices to sleep it off, before waking up to continue to run the factory or the city for a few more hours before dinner and some more wine...
