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Financing solutions

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Banco Inbursa is a subsidiary of Grupo Financiero Inbursa which was established in Mexico 44 years ago, and since its foundation the same controlling shareholders have been managing the group.

The bank has a strong balance with a 21.1 percent tier 1 capital ratio and loan loss reserves that cover 3.6 times its non performing loans, which represent 2.6 percent of the total loan portfolio. This strength is reflected in the BBB rating that Standard & Poors has recently given Inbursa; BBB being the country ceiling.

Low operating costs are key principles for Inbursa, which translates into higher profitability, as well as into a strong capability to offer better conditions for clients.

Inbursa’s management structure is very lean in order to be as close as possible to our clients. The main benefit for our clients is the quality of service as well as the quick response to their needs.
Commercial lending has been an important activity for Inbursa, providing financing solutions to large corporations as well as to small and medium enterprises (SMEs). The loan portfolio has been growing consistently during the last 15 years at a yearly average compound growth rate of 34 percent, reaching the equivalent of $12bn in 2009. This gives Inbursa a 15 percent market share in Mexico.

Our clients find in Inbursa a tailor-made solution to their financial needs, as we are able to provide them loans from very simple short term working capital needs up to complex, long term structured deals, as well as all the range of products related to cash management, foreign exchange, treasury, investments, leasing, hedging, etc.

Innovation is always in Inbursa’s strategy. In terms of deposits we developed a product that provides all the transactional capabilities of a checking account and at the same time pays a competitive interest rate that compares more to a fixed income fund than to a checking account. In terms of lending, Inbursa developed a parametric product for selected SMEs that has benefited more that 21,400 companies in the last year, in which liquidity and availability of financing has been very restricted.

Retail banking represents an important growth opportunity for Inbursa, so in 2008 a strategic alliance was reached with Criteria, a subsidiary of La Caixa de Barcelona, who is the largest retail bank in Spain, with more than 5,500 branches, Ä176bn in its loan portfolio and 10.7 million clients. Their expertise in the retail business has contributed to accelerate the growth of Inbursa in this market.

With 198 branches in major cities in Mexico, Inbursa has a strong presence for supporting the transactional banking needs of its more than 7.2 million clients around the country.

Difficulties on the horizon

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Under the current economic environment many countries are confronted with the need for rigorous budget measures to meet deficit-cutting targets. The enormous government debts, resulting from the accumulated government deficits over several years, or in some cases even decades, is causing severe problems. The common denominator in the budget measures that are currently being introduced in many countries, in particular in the European Union, is the combination of serious spending cuts with tax-boosting measures. In addition to increasing tax rates and changes in the tax regulatory frameworks, an increased and more stringent focus on transfer pricing can very well be approached by governments as a tax-boosting opportunity. In order to avoid double taxation, taxpayers should be prepared and have full control over their transfer pricing in order to make sure that their transfer pricing policies can withstand the expected increased scrutiny.

Transfer pricing risks
Already for more than a decade, transfer pricing is considered the most important tax issue for multinational enterprises. There are various reasons why transfer pricing stands out as the number one tax issue and why transfer pricing issues are becoming more challenging and more controversial. The international accepted standard for transfer pricing is the arm’s length principle, which entails that the conditions (pricing) in a transaction between affiliated parties should not be different than the conditions (pricing) in a similar transaction between unrelated parties. Nonetheless, the underlying application and interpretation of this principle triggers complex questions and thorny issues.

Although most jurisdictions (especially OECD member countries) follow the arm’s length principle in regulating transfer prices, tax authorities interpret and apply this principle in different ways. International enterprises are often “caught in the middle”, while authorities argue over which jurisdiction should be allowed to tax the profits of an enterprise (ie everyone wants a bigger piece of a company’s profits). These dynamics add to the complexity of effective transfer pricing strategies, especially when coupled with the prevailing attitude held by many tax authorities that international enterprises use transfer pricing schemes to minimise or even avoid taxation. In addition, the number of countries that have introduced specific transfer pricing legislation and/or specific transfer pricing documentation requirements has grown dramatically since the mid nineties.

The already increased audit activity across the globe has resulted in more transfer pricing controversy. The resulting adjustments can be so high that some of these cases actually gain significant media attention. Such high profile cases can be found in a growing number of countries. A couple of years ago, the GlaxoSmithKline case in the United States set a new record in terms of the largest transfer pricing case ever. The increased pressure on governments to cut deficits will most likely accelerate the trend towards more aggressive transfer pricing audits.

Finally, transfer pricing compliance (ie meeting transfer pricing documentation) is becoming more challenging due to different regulatory frameworks that exist. Transfer pricing compliance is very much intertwined with effective implementation of transfer pricing planning and design concepts. The true risks embedded with transfer pricing documentation go beyond merely meeting the local documentation requirements for the avoidance of penalties or other negative consequences. The consistency of transfer pricing documentation both across years and across countries but also in relation to legal agreements, transfer pricing policies and internal communication regarding transfer pricing, the inclusion of the right and relevant data and the efforts undertaken to demonstrate how the arm’s length principle has been applied all very much influences a company’s chances of successfully navigating through tax audit reviews.

Transfer pricing under control
In light of the complexities and ambiguities of transfer pricing, even more so in an environment whereby the primary focus of governments is to meet deficit-cutting targets, it is inherently important that a multinational enterprise is in control of its transfer pricing. This can prove to be a true challenge in view of the fact that transfer pricing is typically the domain of different stakeholders within a multinational organisation.

Transfer prices are not only a necessity in cross-border transactions from a tax/legal and accounting perspective but also typically govern transactions among divisions (or separate business units) of an organisation (regardless of the legal status of the different divisions/units). The level of control that tax/finance functions on stand-alone basis can assert over transfer prices very much depends on the importance of (statutory) transfer prices from a business and managerial perspective (eg setting targets and measuring performance). In order to manage the tax related risks regarding transfer pricing, the tax/finance function typically needs to work closely with the other transfer pricing stakeholders within the organisation.

In order to have control of the tax related aspects of transfer pricing, it is critical that the fax/finance function is involved (upfront) in material intercompany transactions such that it can ensure a consistent implementation of a transfer pricing policy and manage the underlying compliance aspects.

In order to have an efficient and workable framework for transfer pricing management, it is recommendable that multinational enterprises have at a minimum the five following elements incorporated in such a framework.
»    Establishing a transfer pricing policy. This should entail a clear definition of the transfer pricing policy of the organisation that is effectively communicated to the relevant stakeholders.
»    Establishing a process for transaction mapping/identification. This process should enable the identification of material cross-border transactions that take place within the organization and typically necessitates communication protocols.
»    Establishing a process for transfer pricing risk identification. Such a process should enable organisation to both quality and quantify transfer pricing risks and needs to be founded on clear rules that defines risk attributes and weight factors.
»    Establishing a process for transfer pricing risk management actions. Such a process defines the rules and procedures for dealing with identified risks. To illustrate, for certain defined high-risk transactions, a company’s policy could be to obtain an advanced pricing agreement with the tax authorities.
»    Establishing a protocol and work model for transfer pricing compliance. Such a model should provide for an effective approach to both producing and maintaining transfer pricing documentation as well as defining the responsibilities for transfer pricing documentation within the organisation.

Conclusion
Regulatory changes, the impact of financial reporting requirements and the increased exposure to transfer pricing related financial statement risks have all contributed to the trend towards more strict transfer pricing control frameworks for international enterprises which also resulted in the need for additional transfer pricing resource requirements across the last couple of years. The current, and expected long-term, focus of governments to meet deficit-cutting targets, including the need for tax-boosting measures, will increase the exposure to transfer pricing controversy. Such increased controversy exposure will further necessity that international enterprises have a greater grip on their transfer pricing models and underlying risks. It is inherently important that international enterprises establish effective frameworks for transfer pricing management, which includes a framework for managing and risks and a solid and consistent approach to transfer pricing compliance. When organisations realise the required level of transfer pricing control, then they will be in good shape to defend their transfer pricing positions and mitigate the exposure to double taxation, even during difficult times with governments determined to boost their tax revenues.

Danny Oosterhoff is Partner, Transfer Pricing and Tax Effective Supply Chain Management Group, at Ernst & Young, Amsterdam

The challenge of growth for microfinance

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In 1984 a group of Bolivian entrepreneurs with close links to the micro-enterprise sector came up with the concept of establishing an organisation that would support the development of small businesses within Bolivia.

The premise of the project was that one of the principal factors hindering the growth of micro enterprises was the lack of access to financial resources – mainly credit – because there was no formal financial or banking infrastructure in place. Two years later, having gained support from a group of both Bolivian and international investors, the ‘Fundación para Promoción y el Desarrollo de la Microempresa’ (The Foundation for the Promotion and Development of Micro Enterprises) was established, taking the form of a Non Governmental Organisation (NGO).

In the beginning, the company provided small-scale, working-capital loans using the ‘Crédito Solidario’ (solidarity-based credit) scheme. As CEO Kurt Koenigsfest says, ‘From the outset our aim was to provide loans to the self-employed and to family-owned small businesses, which would otherwise have had no access to capital other than from family members or even loan sharks. Our principle was to provide financial assistance to small enterprises in a country that did not have such a system in place.’

Over the next six years the institution had accumulated a portfolio of some 17,000 clients and loans totalling $4m. It had also established subsidiaries across Bolivia in La Paz, El Alto, Cochabamba and Santa Cruz. At this point the company began to realise that in order to fully satisfy the financial and credit needs of its clients some fundamental changes would have to be made.
 
A fundamental change
In 1992 the Fundación para Promoción y el Desarrollo de la Microempresa took a vote to decide whether to change its status from an NGO to a bank. This was not an easy decision to make, and caused a division between both directors and investors. Principally, there were a number of issues at stake. Firstly, as an NGO, the company could rely on government grants and other state contributions to fund its activities, whereas as bank these donations would not be available. Secondly, as a bank, it would be free to open its doors to accessing capital from a wider audience of shareholders and investors, which would further aid its ultimate goal of providing otherwise unobtainable funding to small businesses.  

Koenigsfest recalls, ‘When we first started we had no intention of becoming a bank. But in order to achieve our social and financial goals we needed a wider pool of investors, and that was something we could not secure as an NGO. As a bank we would be able to raise capital from both deposit accounts and new shareholders. One of the major concerns expressed by our members was that as a bank we would risk losing sight of our original objective of being committed to social responsibility. But once the decision was taken and the transition made we quickly realised it was the right way forward.’

As a result, in 1992, the Fundación para Promoción y el Desarrollo de la Microempresa reinvented itself as ‘Banco Solidario’, Bolivia’s first commercial bank specialising in microfinance. As a banking institution it was able to expand the range of services it provides to its clients, which today ranges from deposit and savings accounts to micro-insurance, from, housing loans for foreign-based nationals to money transfers. Back in 1986 the principally focus of the organisation was small-business loans and asset-based finance, whereas today 97 percent of business is in personal loans such as working loans, housing loans and home improvement loans.
 
Success reaps rewards
BancoSol has grown in popularity and credibility and it is for these reasons that today it is one of only two banks in Bolivia that boasts a triple-A rating, accredited by Moody’s. Koenigsfest explains: ‘It is probably thanks to our stability as an institution that we have achieved the position we are in today. Although we have broadened our shareholding, we have nonetheless retained the same group of investors who backed us as an NGO. This reassures our clients that we remain committed to the same values as we have always had.’
A closer look at the figures reveals the true nature of the bank. There are approximately 800,000 micro enterprises – largely in urban sites – that form part of the Bolivian economy, which together generate over 1.7 million jobs. BancoSol’s clients operate in the informal economy, which contributes more than 20 percent of GDP and generates employment for over 65 percent of the employed population. Entrepreneurs with a small capital base but with dynamic adjustment capabilities are the core clientele of BancoSol. Additionally, women play an important role in terms of the volume and value of loans, accounting for 46 percent of BancoSol’s clients and 40 percent of its loan portfolio.

Another key factor is the specialism of the bank’s ownership structure, as the core of BancoSol’s backers are experts in microfinance, not just in Bolivia, but globally, with varied interests in, for example, the Indian and South East Asian markets. Also, BancoSol benefits from having installed from the outset a solid corporate governance structure, the likes of which are not easy to find in an emerging market such as Bolivia. Finally – and probably most importantly – the bank’s socially-responsible origins counts for a lot in the eyes of its customers. Koenigsfest explains: ‘Given our background as an NGO, and in view of recent occurrences in the global banking industry, our clients have faith that we are less commercially-driven and more socially-orientated than our competitors.’

A further reason for BancoSol’s continued success is its willingness to embrace new technology. In a country which is not at the cutting edge of technological developments, BancoSol has nonetheless been quick to roll out a range of services to customers, in the form of new ATMs, credit cards, foreign exchange facilities and even online and cell phone banking.

After nearly 25 years of trading, BancoSol has provided some $2bn across more than 1.5 million micro-enterprise projects. Currently, the Bank has more than 130,000 clients which account for a total loan portfolio of over $355m. In addition, BancoSol has almost $335m in deposits taken from over 260,000 clients. The Bank has a presence in eight of the Bolivia’s largest cities, including La Paz, Cochabamba, Santa Cruz, Oruro, Tarija, Potosí, Sucre and Trinidad, over a network of some 120 branches, employing around 1600 employees.
 
Looking to the future
And the future is looking bright for BancoSol. In three of Bolivia’s biggest cities, annual growth in the micro-entrepreneurial sector is estimated to be around five percent. Added to this is the fact that Bolivia has been relatively unaffected by the global recession, so tourism – one of the core recipients of microfinance – has remained buoyant throughout. Finally, the figures speak for themselves: the total value of the Bolivian commercial banking sector is $3.5bn, of which $1.5bn is in microfinance, showing just how important a part of the Bolivian economy microfinance plays.

Far from resting on its laurels, BancoSol is looking to broaden its service, and reach out to a new segment of Bolivian society that to date has been relatively underserved in terms of financial assistance; the rural community. To this end, BancoSol is planning to launch – as early as mid-2011 – a strategy to penetrate the rural areas of the country, providing loans for the agricultural community. This strategy has been carefully planned, and is driven by a team of analysts and branch manager who are from the rural areas so know their territories best.

From its origins as a Non Governmental Organisation, to its current status as a fully-fledged bank offering a full range of services, BancoSol has nonetheless adhered to a strict policy of social responsibility within the microfinance sector. At a time when many global banking institutions are under close scrutiny BancoSol can safely say that it is driven not by greed but by a sense of duty towards small businesses that otherwise would not have been able to grow and flourish.

Investing in the sustainability megatrend

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Sustainability is no longer a fad. Rather, it is a powerful trend that stands to revolutionize the way the world does business in the coming years. Like the industrial and IT revolutions before it, sustainability has altered the way companies create and market goods at every point from initial production to final sale. In the coming years, institutions that succeed in incorporating sustainable practices into their business model will thrive, yet those who fall short will surely fall behind.

As corporations worldwide begin to adjust to the sustainability trend, new opportunities for investment are created daily. In the US alone, over 11 percent of all assets under professional management, amounting to over $2.7trn, are invested in the socially responsible investment market. As capital continues to enter the sector it will further the sustainability trend, expanding the market and increasing returns.

Pluris Sustainable Investments focuses on identifying investment opportunities with businesses that have found a way to embrace sustainability as a means of offering superior returns. In a quest for returns that satisfy the “triple bottom line”– people, planet, profit – Pluris Sustainable Investments constantly reaffirms its dedication to ESG considerations through the application of its unique Green Investment Mandate across all investments. The mandate requires that each investment promotes sustainable practices, first, by falling into one of the five sectors of the WCARE investment universe, and second, by qualifying, wherever applicable, for independent, audited third party certifications.

Investing with care
Pluris maintains a diverse portfolio by investing globally in five sustainable sectors: Water Infrastructure/Treatment, Carbon-Emission Reduction, Agricultural Sustainable Growth, Renewable Energy, and Environmentally Sustainable Properties. Collectively, Pluris Sustainable Investments refers to these sectors as the WCARE (or “with care”) investment universe. These five sectors were carefully selected at the asset management company’s inception to generate superior returns within the parameters of certified sustainable investing. All potential investments are originally identified based on their operation within one of the WCARE sectors. Each sector allows for unique opportunities to capitalise on the expansion of sustainable markets and to ensure continued growth of investments in strong, cutting edge, and ever-evolving markets.

Water infrastructure /treatment
Global water infrastructure is seriously lacking, with over one billion of the world’s people still devoid of access to safe drinking water. Most efforts to extend clean water access worldwide are headed by charitable organisations. Pluris Sustainable Investments seeks to encourage the privatisation of these efforts with investments in this sector, maximising economic, environmental and social benefits.

Carbon-emission reduction
As carbon resources continue to disappear at astonishing rates, governments worldwide respond with new mandates and regulations limiting carbon emission. These environmental and legal demands have led to the creation of new and unique investment opportunities in the global race for carbon emissions reduction.

Agricultural sustainable growth
Population growth and harmful farming practices threaten the global agriculture industry more and more with each successive growing season. Pluris Sustainable Investments works to support sustainable farming and environmental protection while increasing crop yield with its investments in this sector. All of Pluris’ agricultural investments derive additional financial benefit from qualification for independent third party certifications, enjoying price premiums and entry into niche markets.

Renewable energy
As energy from fossil fuels loses viability, the renewable energy sector – including hydro, wind, solar, wave energy and biofuels – has enjoyed rapid growth. Investments in renewable energy enjoy worldwide support in the form of tax breaks, cash grants, and feed-in tariffs. When this support is coupled with a strong, innovative business platform and rapid industry growth, investments in the renewable energy sector offer the potential for maximum returns. Pluris Sustainable Investments looks to capitalise on this opportunity as the renewable energy sector grows to replace the rapidly outdated and ecologically unstable fossil fuel market.

Environmentally sustainable properties
Environmentally sustainable properties seek to maximise traditional benefits from property development by applying sustainable practices to reduce costs and energy requirements. Further opportunity for financial returns comes from the unique position sustainable properties hold to meet the demands of the environmentally-minded consumers. Involvement in this sector allows Pluris to encourage the incorporation of sustainability across industries.

Third party sustainable certifications
After identifying investment opportunities in one of the five WCARE sectors, the investment selection process continues with extensive research into both the viability and sustainability of each opportunity. The Green Investment Mandate’s requirement for third party certifications is a vital aid to this research. Pluris Sustainable Investments itself uses third party sustainable and ethics certifications as a means of ensuring that investments meet the highest standards in sustainability and ethical practice. Certifications further serve as a signal to investors that assets management continues to adhere to our Green Investment Mandate. And for investments themselves, third party certifications allow for price premiums and access to specialised markets.

Pluris is focused on investments which qualify or are under review for four of the most universally respected sustainability certifications: Forest Stewardship Council Certification (FSC), Rainforest Alliance Certification (RA), Fair Trade Certification, and Leadership in Energy & Environmental Design (LEED). Pluris Sustainable Investments itself is currently under review by Ethics, a third party certification service monitoring corporate adherence to ethical principles above and beyond the law. Qualification for the Ethics Certification denotes an outside recognition of in-house commitment to responsible, ethical conduct and indicates an incorporation of ESG into not only investments, but also Pluris’ own operations. Though not a certification, Pluris’ asset manager is also a signatory of the United Nations Principle for Responsible Investing, a commitment that further indicates a belief in high economic, social, and governance standards.

Investments must further adhere to Pluris’ own strict risk management execution mandate, which is a key and fundamental element of the group’s investment thesis.  Foreign exchange and commodity hedging programs through advance derivate trading have been part of the manager’s added value offering over 40 years of combined experience. Additionally the team benefits from the consulting industry’s gold standard, with senior associates adding both depth and breadth to quantitative and qualitative business analysis.  

Incorporating ESG
Pluris’ newest investment opportunity is a prime example of how the Green Investment Mandate works to incorporate ESG considerations into all investment decisions. As a sustainable timer extraction operation, this new investment falls under the Agriculture Sustainable Growth sector of our WCARE universe. All products merchandised by our partner in country are Forest Stewardship Council certified.

Operating in Nicaragua, Pluris’ new investment thesis is based on a timber salvage effort in the RAAN (North Atlantic Autonomous Region). Nicaragua is an environment ripe for the expansion of sustainable forestry practices. The RAAN is not only Central America’s largest lowland tropical forest but also Nicaragua’s richest area in terms of natural resources. However, the average per capita annual income in the area stands at an average of only $28. Within this dichotomous region, our investment partner has already acquired approximately 13,000 hectares of forest damaged by Hurricane Felix in 2007. This natural disaster created an immediate need for the removal of felled timber to prevent the conversion of damaged forest into agricultural areas and to allow for full ecosystem recovery. Pluris’ investment will translate this need into an opportunity by supporting the creation of a  sustainable timber extraction operation.

Amongst others, we are joined in our efforts by multi lateral development banks such as the International Finance Corp. of the World Bank who foster private sector investment in developing nations. Financial support from groups such as the IFC shows widespread affirmation of Pluris’ belief that this investment will offer enhanced returns from price premiums and niche market access with FSC Certified products, while also benefitting the local Nicaraguan society and economy through sustainable, ethical business practices. Thus, the investment will allow Pluris Sustainable Investments to invest not only in local economic, enviromental and social change, but to also encourage the expansion of sustainable forestry at large.

From inception, Pluris Sustainable Investments was created to incorporate environmental, social, and governance concerns into investments and operations. Indeed Pluris attracts investors with an ability to maximise returns through environmentally and socially sustainable investment opportunities. The Green Mandate functions as an internal guideline in the investment selection process. It also serves to guide Pluris Sustainable Investments towards the “triple bottom line”. As the Sustainability trend grows, Pluris Sustainable Investments will increasingly rely on the Green Mandate, and particularly third party certifications, to avoid “greenwashed” opportunities in favor of those that truly show dedication to economic, environmental and social sustainability.

For more information tel: +41-21-340-6526; email: info@plurisinvestments.com;
www.plurisinvestments.com

Multinationals target developing countries

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The economic crisis slashed global FDI flows by around 40 percent in 2009, affecting, albeit to a varying extent, all countries, all sectors, and all forms of investment.  Mergers and acquisitions in high-income countries were the quickest to contract soon after the sub-prime mortgage crisis in 2007. Gradually the contagion spread and affected new, greenfield investment, and expanded geographically from the Western industrial countries to the emerging markets and developing economies. Still, developing countries faired marginally better during the crisis. According to UNCTAD, a UN agency, FDI flows to developing countries in 2009 declined by 35 percent, slightly less than the 41 percent fall in high-income countries. As the graph below indicates, they still show a robust increase over the levels of five or more years ago.

Strong growth in FDI to developing countries
The contribution of developing countries to the global economy is rapidly increasing.  In 2004, less than a fifth of the value of the world’s economic output was produced in developing countries. By 2008, this figure reached almost 30 percent.  In other words, over the last 20 years developing countries have grown faster than developed economies. The global economy grew at 3.5 percent per year during the five-year period prior to the financial crisis.  During this same period, the GDP of high-income countries rose only by 2.4 percent each year, while developing economies expanded three times as fast, at 7.3 percent. The gap between growth rates of developing and high-income countries has widened steadily since 1999 (see graph overleaf).

Developing countries increase FDI
Rapid growth and industrialization in the developing world has also given birth to new multinational companies (MNC) from these countries. Brands such as Samsung, Hyundai, Cemex, Embraer, Infosys, Tata, Lenovo, PETRONAS or Standard Bank have now become ubiquitous. According to UNCTAD’s 2009 World Investment Report, seven of the world’s 100 largest MNCs now come from developing countries. Their relative size has also grown rapidly.  In 2007, assets of the 100 largest MNCs from developing countries rose by 29 percent from their level in 2006. In comparison, this figure reached only 16 percent for the 100 largest MNCs worldwide.  Developing country MNCs are increasingly becoming significant market players in their domestic, regional as well as global markets, leading to rapid growth in South-South FDI. 

MNCs from all parts of the world are usually attracted to developing countries by lower costs, strong growth prospects, and in many cases untapped natural resources. In other areas which are typically key drivers of foreign investment – political and macroeconomic stability, quality of infrastructure, and rule of law, among others – most developing countries still have a lot of catching up to do.  By some measures, however, developing countries are making quite a bit of progress.  According to the Doing Business project of the World Bank Group, between June 2008 and May 2009 low- and lower-middle-income countries introduced twice as many reforms in their business environments as high- and upper-middle-income countries.  By this measure, the top 10 reforming countries over the last few years have mostly been developing countries, such as Egypt, Rwanda, Colombia or the Kyrgyz Republic.

Developing countries are not a homogenous group, however.  The larger the country, the more opportunity for business, and hence more opportunity for investment: top performers are the BRIC countries as well
as other large economies such as Mexico or Turkey.

While China does very well on an absolute basis (first data column), its FDI per capita and FDI as a share of GDP are relatively low compared to the other leading recipients of FDI in the developing world. Bulgaria, Chile, and Romania stand out on a per capita basis (second data column).  In addition to these three countries, in Russia, Thailand, Egypt, and Malaysia, FDI constitutes a relatively large share of the domestic economies. 

Sub-Saharan Africa’s vibrant development
FDI to low-income countries has also grown significantly faster than in high-income countries.  Average inflow to low-income economies during the five-year period before the crisis (2003-2007) was more than 100 percent higher than during the five year period at the turn of the decade (1998-2002).  The comparable figure for the high-income economies is only 14 percent. Two key factors are simultaneously at play here.  Firstly, many developing economies are starting from a low base, so even a couple of large investments can easily double or treble a country’s performance over the year before.  Secondly, and more encouragingly, multinational companies are increasingly confident about returns on investment in developing countries, including Sub-Saharan Africa.

According to the Africa Competitiveness Report 2009 published by the World Economic Forum, Africa’s FDI stock nearly doubled between 2003 and 2007, and annual GDP growth averaged 5.9 percent during 2001-2008.  Furthermore, most African economies have steadily improved their competitiveness during this period.  The report notes that the most significant improvements have been in goods market efficiency, greater market openness, quality and quantity of higher education and training, and greater sophistication of business practices.  On the other hand, infrastructure, macroeconomic stability, and health conditions have either not improved, or have regressed in some African countries.

This positive trend for Africa is echoed by the Doing Business report.  Last year the report found that Sub-Saharan Africa was the second fastest reforming region in the world, after Eastern Europe and Central Asia.  Two out of every three countries in Africa made at least one reform, many of which were supported by World Bank Group advice.

The recent financial and economic crises have changed, at least temporarily, investors’ outlook and perception of risk.  Results of a recently conducted investor survey of political risk, reported in the 2009 World Investment and Political Risk report by the Multilateral Investment Guarantee Agency, paints a mixed picture.   On the one hand, the report states that “the global economic downturn … has exacerbated specific political risks in the most vulnerable investment destinations.”  On the other hand, the study concludes that “… [the economic crisis] does not appear to have led to a reassessment of emerging market risk across the board… As the global economy recovers, concerns over longer-term political risks will remain prominent, even though some of the perils directly related to the fallout of the crisis recede.”  Political risk is of course only one determinant of FDI decisions.

Investment flows to rebound
Most recent indicators signal that 2010 will be a slightly better year for FDI than 2009.  UNCTAD’s Global Investment Trends Monitor report from early 2010 predicts that gradually rising profits of multinational corporations and an uptake in the global demand for goods and services “will ultimately encourage companies to revise upward their international investment plans for 2010 onward, which in turn should give rise to growing FDI flows.”  A slightly more nuanced picture of the future FDI flows is provided by the sentiment of senior executives polled by the consultancy A.T. Kearney for its regular FDI Confidence Index.  Business leaders give high marks to the largest BRIC economies, but are less sanguine about investment prospects in other emerging markets.  Several advanced high-income economies last year rose in the index, pushing down the ranks many middle-income developing countries which had done well during the bullish years before the crisis.

One of the principal implications of these trends for the 100+ developing countries which do not yet feature prominently on most multinational companies’ investment maps is that they will have to try even harder to get on investors’ radar screens.  Competition for foreign companies’ attention has heightened, and investors’ business decisions are more carefully calculated than before.  What are then some of the key actions that developing countries can take to become more attractive destinations for FDI? 

Improving FDI competitiveness
In the short-run, developing countries can send convincing signals to the business community that they are open and ready for investment through actions which do not require significant amounts of time or resources:

» First, countries can improve their business environments by removing regulatory and administrative red tape, which is often an impediment to entry and operation of companies.  Onerous start-up procedures, excessive licensing and permit requirements, and time-consuming export and import processes can make a country less attractive to FDI.  The World Bank Group’s forthcoming Investing Across Borders report compares many of these barriers across countries.
 
» Second, while focusing on new investments, countries should not forget about the companies which have already invested in their economies.  Reinvested earnings account for over 30 percent of global FDI flows.  Especially given the recent decrease in new FDI projects, countries should pay due attention to investor aftercare and retention, and work directly with existing companies to help resolve problems, strengthen retention, and encourage expansions.

» Third, targeting and promoting specific sectors for FDI can have a powerful effect.  Naturally, different countries target different sectors depending on their comparative advantages and industrial composition of their economies.  Sectors with strong growth potential and relevance for many developing economies include clean energy, agribusiness, business process outsourcing, healthcare, and tourism.

In the medium- and long-run, countries should aim to improve their overall competitiveness for sustained investment and economic growth.  Here the strategic needs of each country will be different and dictated by a mix of socio-economic realities and political priorities. 

FDI prospects
In 2010 and beyond, foreign companies are likely to pursue further geographic diversification. While the larger developing countries will continue to have strong appeal for investors, other developing countries with improving investment climates, including in regions such as Sub-Saharan Africa or North Africa, are also likely to benefit from companies’ regained confidence.

Foreign direct investment in the appropriate economic sectors should result in a win-win situation for all parties.  For the recipient countries, it brings foreign capital, technology and managerial know-how resulting in enhanced access to foreign markets and increased competition. For multinational and regional corporations, FDI can mean greater efficiency, lower costs and access to new markets and resources resulting in more efficient and effective global production networks. As FDI flows rebound and within a few years regain pre-crisis levels, both countries and companies stand to benefit.  Keeping markets open and appropriately regulated should increase the likelihood of renewed FDI flows.

Pierre Guislain and Peter Kusek are director and investment policy officer at the Investment Climate Department, World Bank Group

Islamic finance stakes position

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No Islamic bank needed to be bailed out during the credit crisis and no tax-payer cash was needed to prop up feckless and reckless lending. Many banks, like the Jordan Islamic Bank (JIB) actually increased deposits and upped market share.

In fact, H.E. Mr Mohammed Abu Hamour, the Minister of Finance, turned to JIB itself for a loan recently, so impressed was he with Islamic banking’s success during the credit crisis.

No wonder, then, that some Islamic banks rapidly became safe havens for investors disillusioned with the western banking model. And while western banks slowly recover from the carnage, the Jordan Islamic Bank is an example of a bank consolidating commitment to shareholders, investors and employees, and at some speed.
Sharia law, based on sound conservative, classical banking principles, is also fast turning into one of the most fast-growing banking models. You can’t grow your business in the 21st century without the latest cutting edge technology – or genuinely innovative products.

“It’s about commitment in applying the latest innovative products in the banking industry and technology,” says Jordan Islamic Bank Vice Chairman, CEO and general manager Mr Musa Shihadeh, “as well as looking forward to gaining the trust of all people in our distinguished services in line with recent variables and changes within the framework of compliance with our Islamic sharia.”

Mr Musa Shihadeh says that one major priority is to continue the process of developing and updating JIB’s communication systems, networks and lines as well as equipment, including the application of the new banking system (ICBS) and the introduction of new techniques to the banking business. Bonds will take a key role here, as we shall now examine.

Emphasis on bonds
Mr Musa Shihadeh knows huge opportunities exist for the development of Islamic bonds by JIB. Islamic bonds remain fundamentally different to conventional bonds (the issuance of Muqarada bonds, for example are issued enabling specific projects to be run within a company).

Huge financial centres like London are increasingly looking to issue shariah-compliant bonds to ensure they retain their financial clout. (Britain, for example, has adjusted its tax regulations to enable Islamic bonds − or Sukuk − to be held and traded.)   

Islamic bonds in brief
Islamic finance is interest-free. However Islamic bonds, sometimes known as Sukuk, take an investment return from assets used to support them.

This approach is substantially from a typical corporate bond which pays a fixed rate of interest to investors.
Generally this means Islamic bonds tend to have a bias towards real estate and commodities – tangible, substantial assets. Islamic bonds are also based on the basis of risk and reward, within certain parameters.
But the success of any financial market place, be it Islamic or not, depends on the trust its shareholders, customers and employees places in it. What is the quality of its products? How transparent are its processes? How well does it perform in the market place compared to its rivals?

Mr Shihadeh says that JIB is proud of the trust placed in it since the bank’s establishment, and this is reflected in its impressive credit rating, not to mention the rash of awards it can point to: JIB recieved World Finance’s Best Islamic Retail Bank in the World for 2009 and 2010. The bank has an ‘AA’ sharia rating (SQR), international scale foreign currency is rated BBB- long term and A-3 short-term. Fitch Ratings have awarded JIB an ‘BB-’ grade for the long term and a ‘B’ grade for the short term, foreign currency and a ‘Stable’ outlook.   

Technology to the fore
What is less known about Islamic banking players is the high level of technology innovation offered clients. Here, says Mr Musa Shihadeh, JIB are well ahead of the competition. “We provide a full SMS service through mobile networks to inform clients data about their accounts such as returned checks, withdrawals and balances as well as salary crediting.”

Additionally, SMS services to the holders of Visa cards are also offered − clients can receive a message within seconds to confirm the acceptance or the refusal of a transaction. Video cameras operate in all branches and Smart Visa Electron Cards (VSDC) using Chip Technology provide superior security and protection to card holders.

“It is worth mentioning that JIB was the first local bank that offered such cards in-house,” says Mr Shihadeh. “We have also implemented the Electronic Clearing System to JIB’s branch network, together with all local banks.”

JIB’s e-banking service
This enables retail clients to easily check:
» Balance of their account
» Request statements from their account
» Order a cheque book
» Stop payment of any cheque
» Transfers between customer accounts
» Transition from the current Money Gram system to a Western union system via the internet to introduce a swift money transfer service
» Implementing the Verified by Visa (VBV) service which enable Gold and Silver Visa card holders to shop via the internet securely

A growth-based future
A priority for Musa Shihadeh is exceeding expectations by bringing new ideas and solutions to customers. It’s a strategy of widening the customer base and increasing market share.

But it’s also about how a company behaves to the wider community that is also important to JIB says Shihadeh. “We undertake to coutinue to be a pioneer in Islamic banking services according to the glorious sharia principle, to be sincere and faithful to our shareholders and customers by bringing new ideas and plans.”
Certainly Mudaraba-based tools and investments – Mudaraba offers specialist investment services in which the bank and customer can share any profits − is a tool actively promoted by Mr Musa Shihadeh and JIB to the benefit of all parties.

Mudaraba also provides an interest-free mechanism to support skills and mobilise resources. It’s an especially useful tool for SMEs and small traders he says, helping to reduce long-term and short-term unemployment in the community.

“We are continuing to finance many projects and the requirements of a broad range of craftsmen and craftswomen,” confirms Mr Shihadeh. “The idea of this program is to support young craftsmen and women to build their future and to have their own projects, although they have no ability to finance their projects. But our bank is ready to finance them in order to help reduce poverty and solve the problem of unemployment.”

Real benefits
The on-the-ground facts of this kind of support are deeply impressive: the JIB’s Financing Craftsmen (Personal Retail Social Service) has now financed more than $2.466m for small businesses.

JIB also continues to donate funds to many social and cultural events, from the Jordanian Hashemite Fund for Human Development to various charity commissions and collective wedding parties. In fact, JIB donated more than $380,000 last year to such services.
 
This socially responsible attitude is also underlined by several core JIB beliefs, namely:

» JIB’s customers are its guests
» The bank is the family bank
» JIB is an experienced partner
» Increasing share in the local market
» Increasing profits
» Supporting the national economy
» Playing a key role in developing society

Truth is in the numbers
The last financial year proved another successful period for JIB with shareholder value rising 10 percent. But more impressive than that was a 21 percent rise in deposits (to $2.722bn) and an 18 percent rise in assets ($3.079bn). That’s a stunning achievement in a very difficult year. “That’s also down to the fact that there is more demand from our citizens to deal with an Islamic bank,” says Mr Musa Shidaheh. “But it’s also about being satisified with our customer services and ensuring that they are compliant with sharia prnciples.”

Liquidity mitigates volatile market

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As the fifth largest financial institution in Paraguay measured by loans and deposits, Sudameris Bank, provides a full range of commercial and retail banking and insurance products and services.

The last 18 months was one of the most challenging times in recent years for Paraguay. A rebalancing of domestic financial market liquidity and the sharp economic downturn internationally brought it challenges.  

Late 2008 and early 2009 were marked with liquidity shortages as international institutions brought liquidity home to shore up their respective domestic positions; hence driving up funding rates in Paraguay. This was then reversed by: (i) substantial capital repatriation as domestic investors in international equity and fixed income portfolios salvaged what remained of their portfolios post crash; and, (ii) the Central Bank also provided substantial disincentives to placing funds with it.  The combination brought a substantial drop in rates by late 2009 early 2010.

In late 2008 and early 2009 some defaults were seen in international trade of soft commodities as some of the international trading houses sought to lay off some of the losses on their long positions on (Paraguayan) domestic exporters.

Whilst market conditions were at times challenging, Sudameris Bank has continued and consistently maintains a policy of high levels of capitalisation, high levels of liquidity and substantial voluntary generic provisions.  This allowed Sudameris Bank to gain market share through the crisis as it was able to service existing and new customer needs.  

History
Sudameris Bank was founded in Paraguay over fifty years ago and has always been a European owned bank. Formerly a subsidiary of the European consortium bank, Banque Sudameris, it was acquired by Banca Commerciale Italiana in 1994 and was in turn acquired 78 percent by the Abbeyfield Group in 2004. In 2008 Abbeyfield increased its holding to 98 percent by issuing an exchangeable convertible in Abbeyfield Financial Holdings. The balance of Sudameris Bank is held by minorities through a local listing on the Asuncion Stock Exchange.

In the last five years the balance sheet has growth at a compound average growth rate (CAGR) of 19.5 percent and productive assets have been raised to 87 percent bringing Sudameris Bank to have the second highest level of earning assets in Paraguay.

With a current Tier 1 ratio of 20 percent, Sudameris Bank is the most solvent bank in Paraguay. Its NPLs stand at 0.5 percent which ranks No 2 in the market and it nonetheless maintains a pool of Loan Loss Provisions, 86 percent of which are voluntary, at 3.7 percent reflecting a prudent approach to solvency. 

The efficiency ratio is 61 percent with a target of 50 percent for 2010. Fee and Commission income currently represent 49 percent of the Net Intermediation Margin.  Over the last five years Net Income has a CAGR of 23.1 percent and the 2010 forecast is for 25.9 percent return on average equity (ROAE).

Quality and innovation
The bank’s quality balance sheet approach to growth has placed it as one of the best performing institutions in the financial system with solid financial ratios, sound asset quality and important market share gains.

This has been possible through a client driven strategy where account executives are focused on acquiring client relationships as opposed to placing products; and the culture of the ‘excellence of delivery’ rather than pricing as a competitive advantage.

Funding and credit products have been adapted to the ‘funds flow’ needs of clients and this has allowed the bank to introduce products which truly meet the needs of clients.  Innovation continues to be the focus and this has brought the bank naturally to better segmentation of clients rather than ‘one size fits most’.

Financial strength
With over 80 percent of funding derived from retail deposits the bank has a very stable funding base.  In recent times, it has joined the Inter American Development Bank Trade Finance Programme and has received long term funding from the IIC. It is also joining the IFC Trade Finance Programme and is preparing to receive long term funding from the FMO. The Bank is also supported by AFD and Oikocredit.

Although very well capitalised, Abbeyfield Financial (the Irish holding company) will make a capital increase in 2010 to maintain the bank well capitalised for future growth.  A strategic plan developed in 2009 calls for an annual 1 percent increase in market share until reaching 10 percent. When Abbeyfield entered the capital of the bank in 2004, it had a three percent market share.  After completing a two year reorganisation, the bank has advanced its market share by almost 100 basis points per annum; most recently consolidating its position surpassing HSBC and Citi.

Market position
Sudameris Bank has taken advantage of market opportunities to consolidate its position: In the corporate sector, it continues to be a lender of environmental, maintenance and improvement capital as well as providing multi-currency cash management, forex and working capital requirements. It has been a leader in developing the domestic currency forwards market (on a delivery basis) and a provider of innovative solutions on trade.

With substantial liquidity on hand as the global financial crisis unfolded, Sudameris Bank was able to sustain its clients from the volatility of their international funding.  This also allowed for substantial new client acquisition.  At the beginning of the crisis, the bank shut down any funding mis-match until it had negative gap; consciously sacrificing earnings for solvency. The bank acquired a reputation for looking after its clients in bad times as well as good.

In individual banking, great strides have been made. The Bank has been a pioneer in the residential mortgage market and has gained a No 2 position despite a LTV ceiling policy of 80 percent.  In credit cards, the Bank has deepened its hold on the upper segment of the individuals market being the only issuer of premier (black) cards in the market.  For the middle market it has the best ‘advantage points’ programme on its Privilege credit cards and has been acquiring substantial market share with its no frills ‘Sudameris Light’ credit card.

Looking forward
Paraguay has a bright future. Its population demographics are highly favourable with 48 percent under 20 and 63 percent under 30. Mobile phone penetration is almost 1:1.

With relatively low land prices, abundant water supply and a low cost labour environment, it has grown to become the fourth largest exporter of soy beans and is a major exporter of wheat, corn, sunflower, sesame seed, meat and electricity.

It is a low tax environment which is now seeing the early stage development of manufacturing, assembly and facon industries as a platform for MercoSur. As part of an assistance programme from the EU, it also enjoys favourable tarrif regimes on many exports.

With a strong consistent monetary policy, the are no capital or foreign exchange restrictions and it has an ‘open door’ policy for foreign investment. Sudameris Bank offers an entry portal for FDI in Paraguay.

Sudameris Bank will continue to invest in its staff and in its IT.  These are the core two pillars of its Strategic Plan 2014. 2010 has seen the commencement of the offering of insurance products and the business has been profitable in its first three months of operation. The group is also exploring the pensions and life insurance needs of its clients.

Singapore broker expands trading network

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OCBC Securities is one of the leading stock and futures broking firms in Singapore providing full brokerage services for equities and derivatives trading.  Having been in the business for more than 20 years, it employs state-of-the-art technology to deliver speedy multi-market electronic execution of trades for investors.

As early as 2005, OCBC Securities offers a single trading platform firm-wide to enable institutional execution standards for retail investors.  Since then, they have been continuously upgrading their global trading capabilities to offer a full suite of services to meet investors’ evolving needs. Today, investors have the option of trading in multiple global markets as well as access to a direct custody network offered by a global custodian through OCBC Securities.  

What opportunities are available to private and corporate investors?
Increasingly, investors are looking beyond the local marketplace for investment opportunities.  It is therefore vital that we offer them an efficient and resilient trading platform to help them capitalise on market opportunities whenever they arise. Our focus has always been on leveraging on technology to provide our customers with end-to-end solutions for all their trading needs.  

With that in mind, we first introduced direct market access (“DMA”) connectivity to foreign securities exchanges such as Bursa Malaysia and HKEx in 2007. We have since expanded the network to 13 securities exchanges including the key markets of China, Japan, the US and the UK.  

Moving forward, we expect the trend towards investing in the global markets to continue. This is why we have also rolled out other key initiatives that will underpin our global trading strategy. 

 In 2008, we were the first Singapore brokerage to partner with Citibank N.A. to offer direct custody services across 14 equity markets to our customers. This partnership has enabled us to offer our customers greater peace of mind when they trade in these 14 foreign markets as they can tap on Citibank’s experience in the custody business and established track record to enjoy greater service consistency that is of global standards.

Late last year, we introduced a multi-currency share-financing service that offers investors trading in foreign equities leveraging opportunities in currencies such as AUD, HKD and USD that their securities are denominated in. Before, share financing services were available in SGD only.

What new products and services can OCBC Securities offer to its existing clients?
As global markets continue to evolve, investors are presented with different investment opportunities across countries and markets.  Since extending our direct market access network to 11 key exchanges in September 2009, we have seen our monthly trade value in these key securities exchanges rise by more than 50 percent. As a result, we feel it is timely to introduce iOCBC TradeMobile as it gives investors greater control over their investments since they can now effectively capture market opportunities on the go, as long as they have their iPhones.

iOCBC TradeMobile was first introduced in May 2010. We are the first in Singapore to offer iPhone application-based mobile trading access to 14 local and foreign securities exchanges. Investors can refer to www.iocbc.com for more details.

With the new iOCBC TradeMobile, investors interested in trading in foreign markets such as US and UK can do so with greater ease.  Using their iPhones, they can now monitor the markets and execute their trades whenever these markets are in session.  They are also no longer confined to their desktops or notebooks as iOCBC TradeMobile provides all the key functionalities and features that can be found on iOCBC, OCBC Securities’ internet trading platform.

What issues must investors take into account when trading globally?
When trading globally, investors should work with a broker that offers an efficient and reliable trading platform that can offer fast trade execution which will enable them to capture market opportunities in a timely manner.  Ideally, the broker should offer a wide range of market choices for portfolio diversifications.  It should also offer investors the flexibility in adopting various trading strategy that meet their needs.  More importantly, the broker should offer competitive trading and financing costs so that investors can have greater control over their investments.

What are the risks of investing outside of one’s local market?
One should only venture out of his local market provided he understands the risk exposure when investing in foreign securities. Some foreign markets are much more volatile than the home market, and this can have adverse consequences for orders designated “at market”. Volatility can be particularly high in markets that continue to operate outside normal trading hours in other countries. Timely and accurate information about the foreign companies may also be not as readily available compared to companies listed in the home country. Some regulations in foreign countries can affect both investments and any bank accounts set up in that country, for e.g. restrictions on fund transfers and taxation. Other risks to note include exchange rate risk, liquidity risk and country risk. It’s always pertinent that the investor asks for copies of risk disclosure statements issued by the brokerage that he plans to execute his foreign trades through.  This way, he has a clearer understanding of the risks involved when trading in the particular foreign market.

How can OCBC Securities help both expanding businesses realise their growth ambitions, and investors to streamline their investments?
Both institutional and retail investors can leverage on our extensive DMA trading platform to access multiple markets and wide range of asset classes such as Gold/commodities ETFs that are currently not available on the Singapore Exchange.

The main advantages of trading through OCBC Securities DMA network is the speed and accuracy of transactions.  Investors can now participate in foreign bourses by placing their orders directly to the central exchanges without the need to go through local dealers or foreign brokers. They also have multiple channels to execute their trades as our DMA network is available not only through our Trading Representatives, but also via our internet trading platform, iOCBC, and our newly launched iPhone application, iOCBC TradeMobile.
In addition, through our partnership with Citibank N.A., we are able to offer direct custody service to 14 equity markets, what this means is that our customers can be assured of timely delivery of corporate actions, dividend payments and updates of regulatory changes for their foreign shares holdings.

Finally, investors can also tap on our multi-currency share financing service and multi-currency trust accounts to better manage their investments in foreign markets.

Singapore market outlook
Reflective of the pick-up in economic activities, the advance estimates by the Ministry of Trade and Industry (MTI) indicated that the Singapore economy grew 13.1 percent YoY in 1Q10, exceeding the consensus estimate for an 11 percent gain. This led the government to raise the nation’s 2010 GDP growth to 7.0-9.0 percent, barely two months from its earlier revision to 4.5-6.5 percent.

Due to the stronger economic recovery, MTI is now expecting the overall 2010 CPI inflation to fall within 2.5-3.5 percent, up from its projection of 2.0-3.0 percent previously. In addition, Singapore’s central bank also tightened its monetary policy by re-centring its Singapore dollar policy band upwards and by shifting its policy to modest and gradual appreciation for the currency.

On financial performance, Singapore-listed companies had also put on a strong showing for their 1Q10 results. As at 23 April, out of the 33 companies which had released their quarterly results, only one was in the red. Collectively, these firms chalked up a combined S$1.04b in group profits, representing a sharp 35 percent rise from the corresponding quarter a year ago.

Equity markets worldwide are not able to shake off the recent volatility and the uncertainty linked to the Greek debt crisis. Despite the bailout, there is now rising fears that this is threatening to drag down other Euro zone economies, especially other heavily indebted countries such as Spain and Portugal. There are also heightened fears now of a contagion sparked risk aversion.

Apart from this, recent moves by the Chinese government to tighten measures in the property market have also dented market sentiment as transaction volumes fell and property developers’ share price also dropped in tandem. This is part of the Chinese government’s move to curb property speculation. In addition, the Chinese government also announced moves recently to increase the required reserve ratio (RRR). The People’s Bank of China (PBC) recently raised the RRR by 50p for most banks on 10th May – this is the third 50bp move of the year. The combination of the Greece crisis and the tightening in China has an overall negative impact and led to more uncertainty in the market. This was clearly seen in the increase in the CBOE Volatility Index (VIX), which is commonly referred to as a gauge of investor fear.

Against this backdrop, share prices took a dive in early May. According to Ms Carmen Lee, Head of Research, OCBC Investment Research, until there is clarity, especially on the European front, market sentiment is likely to stay cautious. In terms of valuations, the Singapore market is not expensive. Current valuations for the Singapore STI are 14.3x for this year’s earnings and 13.1x for next year’s earnings with dividend yield of close to 3 percent. Stock pick strategy is critical at this level, and they advocate sticking with the blue chips at the present moment.

Investors look to Saudi

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Falcom Financial Services, a Shariah complaint Saudi investment bank, took the lead in providing clients within the Kingdom a flavour of the first ETF, the Falcom F30 thus opening the gateway to international investors who were not very happy with the SWAP route provided earlier. ETFs (exchange traded funds) are new to the region with only two listed thus far. Falcom has been working closely with the regulator and capital market authorities for the last two years to engineer the environment that supports the introduction of a sophisticated investment vehicle such as an ETF.
 
What are the challenges for the investment banks in general? And how is Falcom coping with it ?
We are all familiar with the crisis that scorched the financial services landscape globally but Greece has given the entire world another aftershock. Investors remain cautious amid weaker global stocks and oil prices. There is too much global uncertainty at the moment for the regional markets to sustain and build on gains. Germany’s decision to ban short selling in certain financial instruments sent the euro plunging to a four-year low against the dollar, and sparked an equities selloff, on fears that the euro-zone’s fiscal and debt crisis will be difficult to contain.

But then, I believe the best steel is made when the iron is hot! Everyone felt the heat to some degree. We saw the near meltdown of the markets once again few weeks ago, the blame game is over and now some serious regulations are being put in place, the hedge fund industry is coming under close scrutiny and the move the EU has taken is in the right direction the fees to get the passport may be a bit too high and the strict compliance with the regulations and declarations of bonuses will maybe make some of them take flight to safe havens but then this was awaited by all.

This will make the industry stronger and more resilient. Closer home, the Kingdom of Saudi Arabia proved to be more resistant than others as it is built on the solid foundation of oil. The Middle East alone produces 11 percent of the world’s petrochemicals. It is expected that this ratio will rise to be 16 percent in 2015. It is using its financial reserves to develop its infrastructure and manufacturing bases. As a Shariah complaint investment bank our business lines of corporate finance, brokerage and asset management have all delivered top class performance. We now have nearly 50 percent share of the on-line brokerage market amongst our peers. We have diversified our private equity portfolio with acquisitions in Greenfield business areas like insurance, real estate and installments. For us it was not about managing crisis or recovery, we were focused on our clients. We remained clear that we had to innovate and at the same time stay true our core of providing clients with a ring of secure investment strategies.  Some time ago, we collectively decided to create our own future and not to get carried away by the events around us, it is true that opportunities come dressed in challenges. The recent decline in crude prices amid the public debt problems in Europe hasn’t become a major concern for Saudi Arabia. Saudi Arabia has awarded 652 contracts worth SAR40bn for infrastructure projects in the first four months of 2010. As the Saudi economy diversifies away from oil, new opportunities will become available for private-sector players beyond the country’s traditional investment driver. Saudi Arabia’s latest budget, with projected spending of SAR540bn, is its largest ever, and has a project pipeline worth more than $692bn widely distributed across construction, petrochemical, oil and gas, infrastructure and power projects.

What are the changes taking place that will affect your bank in the future? Please give us a perspective?
The ETF launch itself is a big push. International investors are serious and we are already seeing them making their moves directly in to the secondary market. Today there are over 3000 ETFs and it has grown to become a trillion dollar industry. The country’s vision of becoming competitive in all sectors of the economy can only be realised by a open capital market that facilitates local and international investors.

At home we are experiencing an evolution with positive moves by the capital market authorities in spearheading the liberalisation process. Their efforts need to be lauded. We have also seeing stricter controls and implementation of listing regulations. Better transparency in disclosure of information to investors is being enforced.  The stock market today is providing more information on core investors and their holdings.  These are all moves in the right direction. Among the seven GCC markets, our country accounts for half of the total market capitalisation. With such a sizeable domestic market, a visionary budget, and a vibrant young population we are confident that our country can easily support the corporate growth that it has embarked upon. Saudi companies also enjoy a competitive advantage of subsidised power, comparatively lower inflation and better infrastructure. Based on the strong economic fundamentals, sound government policies, macroeconomic factors we are confident that we are well positioned for the future.
 
What are your plans to ensure that your early leadership is strengthened?
Innovation will be the key. With the ETF we had to invent as well as invest in a whole new risk management tool, as classical models fell short as derivatives and other hedging instruments are not allowed under the Shariah law neither is shorting allowed. This template was invented in our kitchen so to speak as innovation is embedded as a core value within the organisation. We laid the foundations and the financial capability that provide our clients with the very best here in the local market. We also innovated with our services by providing our clients with six delivery channels to trade. On the investor empowerment front, our information portal falcomwatch.com went through a comprehensive upgrade and this enhanced the site traffic. We are in the forefront of index development, with first licensed index by the Saudi stock market. Now you can see our investment empowerment and decision making technologies helping our clients in the region as we provide the platforms for Oman. ETF WATCH is also serving our client’s needs to check the INAV instantaneously. Today, we are fully equipped to meet the growing needs of our clients both locally and internationally. Our GCC footprint is expanding with an office in Oman. In order to be ready for the emerging opportunities, it is important for us to stay ahead of the race, with ideas that perform and a brand that is respected by our clients. We must respond to the changing times with innovation and constantly look for ideas that deliver value.

Profile
Falcom is a Shariah compliant investment bank that promises intelligent investment ideas. The bank is designed to deliver upscale investment banking and wealth management solutions. The bank has its corporate office based in Riyadh. It has eight investment centers in the Kingdom. The bank has its first international office in Oman. Falcom’s regional footprint will be complete in the immediate future to take advantage of the common currency emerging capital markets and cross border deal flows. As a pure play investment bank, the business lines are corporate finance, brokerage and asset management. The local brokerage business commands over 45 percent of the new player’s market share. Falcom’s local equity fund is the one of the best performing fund since its inception. The bank is equipped with a full fledged treasury operation and has the biggest team buy and sell side research in the Kingdom. Technology played a crucial role in building the brand’s touch point experience. Falcom premises are all designed to seamlessly deliver bespoke service to top tier clients.

Falcom Financial Services won 15 international awards during the course of two years. Global Finance magazine named Falcom the Best New Investment Bank globally for 2008 & the Best Islamic Investment Bank for 2009 and 2010. Falcom is a leader in investor empowerment in terms of knowledge, products and services-it also has the first Shariah index licensed by the stock market regulator.

Expertise, diversified

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The Alterego Group’s  worldwide client base includes governmental regulatory bodies, major overseas law firms, leading banks, financial institutions, fund managers and multinational corporations; in addition to a significant local and international private client base. The group has an international focus, are in a good position to service private and corporate clients globally, and have particular expertise in trusts, companies and partnerships, banking, structured finance, collective investment funds and employee benefits. By working with a wide variety of fiduciary structures and, by offering both legal and financial expertise under one roof, Alterego are able to add value to their client services.

Working closely with numerous professional advisers around the world, they assist corporate, institutional and private clients to establish innovative fiduciary structures for tax, estate and other financial planning purposes; optimising the advantages of using the world’s leading onshore and offshore centres. The Alterego Group place great emphasis upon developing and maintaining strong working relationships with their clients and advisers while providing a proactive, professional team approach led by experienced directors and senior management who are committed to providing the highest standards of client services in a cost-effective manner.

The company’s personnel, mainly British and Russian, operate from offices in Limassol, Cyprus. The group have invested in the latest information and communications technology systems to provide the most effective and efficient services to clients across different time zones and through the client’s preferred methodology.

Commercial and banking
Alterego have a particular expertise in commercial matters including the use of trusts, companies and partnerships, banking, structured finance, collective investment funds and employee benefit arrangements. We use our experience and expertise to advise clients on all legal and commercial matters.  

Capital markets
The Alterego Group has considerable expertise in the establishment and administration of Special Purpose Vehicles for use in structured finance matters.

Investment funds
The group can advise on the set up and management of mutual and specialist funds for institutional or sophisticated investors and provides administrative and accounting services to a variety of collective investment funds, which may be structured as companies, unit trusts or limited partnerships.

Trusts
Alterego’s specialist knowledge in this field means that it is regularly called upon to advise on the establishment and use of trusts in a wide range of contexts. Through the group’s New Zealand-based trust company, Alterego Trust Company Limited, they provide the highest quality professional trustee services at competitive market rates.

Private clients
The Alterego Group are experts in the establishment and administration of trusts, companies and other entities to assist high-net-worth individuals and their families in estate planning and protecting their wealth. They administer a wide variety of structures on behalf of private individuals and families which are involved in areas such as:

» Portfolio investment
» Property holding, both for investment
purposes and for the use of family
» Property development
» Various types of trading activity
» Ownership of other types of assets

Corporate services
The Alterego Group regularly advises clients on all aspects of company law and assists in the incorporation of companies in a wide variety of jurisdictions. The group is extremely experienced in providing a full package of administrative, accounting and secretarial services to numerous corporate clients.  

Executive and employee benefits
Also with a highly experienced Employee Benefits team who establish and administer employee benefit structures that are designed to provide tailored and efficient benefit planning for international executives and sports personnel. The types of structures include:

» Employee Share Ownership Plans (ESOPs)
» Offshore Employment Companies
» Deferred Compensation Plans
» International Pension Plans

Islamic finance
Due to their location in the Mediterranean, Alterego has vast experience of working with financial institutions and private clients located in the Middle East. The team has considerable knowledge and expertise in dealing with Shari’a-compliant financial structures for collective investment funds, property financing structures and family estate planning purposes. They have particular expertise in the creation of specialist investment vehicles aimed at Middle Eastern institutions and investors and the issue of Shari’a-compliant Sukuk.  

For more information tel: 357 25 356600; email: info@alteregogroup.com; www.alteregogroup.com

Maltese bank expands reach

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As a very recent entrant to the Maltese market, Banif Bank (Malta) identified Malta as an opportunity given the fact that the Maltese banking sector presented an interesting business proposition for market growth potential, particularly following Malta’s accession into the EU and its subsequent entry into the Eurozone.

Given its competitive structure and banking penetration levels, there also seemed to exist room for additional players to enter the market and bring new customer value propositions in line with the future challenges and needs of Maltese companies and individuals.

Banif Bank (Malta) plc was incorporated on the 27th March 2007, initially as a fully-owned subsidiary of Banif SGPS, SA. In 2008, a number of local investors were invited to participate in the ownership of the company and were offered a subscription of 28 percent of the issued share capital.

Banif Bank’s success and rapid growth in such a brief period of time has surprised everyone, including the shareholders. Its rapid growth is particularly surprising in light of the fact that it was the first time in Banif Group’s history that a bank was set up and developed from scratch. In fact, Banif’s rapid international expansion in 17 countries worldwide was mainly attributed to mergers and acquisitions.

Strategy
Banif Bank (Malta) plc are adopting a differentiation strategy based upon high quality service standards; an innovative product portfolio; and advanced banking technology oriented towards efficiency gains. 

The bank’s initial priority has been to create a strong business structure based on solid internal processes. The next step was to focus on new customer acquisition and cross-selling, which led to network expansion and increased market share gains. This enabled the bank to consolidate itself and focus on improving the financial wellbeing of its loyal customers.

During the second year of operations in Malta, the bank experienced steady growth both in terms of its lending and deposit portfolios, and the resultant operating income. Heavy investment in the bank’s infrastructure in terms of the branch network and back office functional capabilities was also undertaken.

The past year proved to be challenging due to the financial crisis and global recession, which presented an added hurdle that the bank had to overcome. However, being part of an international group with good standing, the bank can rely on the full support of its parent company and is well positioned to navigate through difficult times. Despite the current economic scenario, the bank is still committed to execute the penetration and growth strategies outlined in its business plan.

Geographic spread
The bank continued expanding its infrastructure in line with the execution of its vision of achieving the set strategic objectives. Banif Malta continued to invest in its branch network and human resources to increase its business generation capability. This was complemented with significant investment in the supporting infrastructure both in terms of the service proposition as well as the enhanced service functionalities.

In just over two years the Bank has built a network around Malta and Gozo to provide a full range of commercial banking services to both residents and non-residents. This required a significant enhancement of the technical infrastructure together with an increased human resource complement both at front office and back-office levels. This was required in order to guarantee a high quality level of service coupled with exponential growth.

Results
During the past two years the bank reached important milestones with the launch of its personal credit cards, debit cards and internet banking portal. In line with its strategy, the bank also launched a number of innovative and very competitive deposit and lending products with the aim of increasing its market share.

To date, the bank has estimated to have already achieved a quarter of the target market share outlined in its original 5-year business plan. This has been made possible by establishing business relationships with various clients from different segments of the local market. As at 31st December 2009, the Bank’s deposit portfolio grew by 400 percent compared to the same period of 2008, whereas the lending portfolio increased by approximately 300 percent over the same period.

Future outlook
2010 will be characterised by further growth through the bank’s commitment in expanding its branch network and its corporate business. This expansion will be enabled by strengthening the supporting functions in order to meet the increased business demands. This will also be complemented by investment in IT infrastructure with a view to providing customers with a comprehensive and differentiated product offer.

The bank will also further its investment in what it considers core to the banking operations, the human resource base. This will be enabled through the recruitment of high quality, skilled and experienced persons together with ongoing development of the existent workforce.

Banif Bank will pursue a set of strategic initiatives that will shape it as a top performer in the Maltese banking sector. Banif will develop a broad offering which will be customised according to the needs of each target segment. The bank will also consider establishing partnerships with local and foreign providers in order to enrich its customer product and service offering. Banif Malta believes it can bring further banking product and service innovations to the Maltese market and will continue seeking to identify new market opportunities. Banif acknowledges that creating and sustaining competitive advantage in today’s market is mandatory for companies to remain successful and increase shareholder value.

In merely two years, Banif managed to exceed all its expectations by establishing itself as an alternative provider of banking solutions in the local market. It is of greater significance that the Bank has managed to do so notwithstanding the financial crisis and economic instability that surrounded the financial markets worldwide. Regardless that Banif has already left its mark on the local market there is still opportunity for improvement and ample work to be done in order to be able to provide high quality and innovative banking solutions focused on its clients’ needs. As stated by its credo – The Power of Believing, Banif believes that it can surpass all its goals and reaffirm itself as the Alternative Maltese Bank.

Bringing confidence to investors

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An estimated 7.5 percent of Angola’s population now hold a bank account, compared to only four percent four years ago. Why did the Banco Espirito Santo (BES) Group decide to open a company in an emerging market like Angola?
The post-war period revealed to the world an emerging economy and prosperous market, appealing to foreign investment. Angola’s rising growth in the past few years has led to the consolidation of business structures, financial stability and increased consumption. Furthermore, Angola is historically linked to Portugal and Portuguese investment, sharing the same language and cultural roots.

These circumstances sustained the group’s investment in Angola and the response couldn’t be more successful, as the bank accounts rate increased and the private investment gained breath. We are proud to be a part of Angola’s economic and social maturation, and to contribute to the sustainable development of our country.

Do you think that Banco Espirito Santo Angola (BESA) creating an entirely new bank in the country has had a positive effect on its connections to the global banking markets?
Yes. BESA’s integration in an international group and openness to foreign investment and global markets convey competitive advantages, as Angola is currently one of the most attractive markets to foster investment. This has been one of the most important gears for economic growth and BESA is reinforcing its position as a renowned partner for international business.  

How has BES been recognised for its work in Angola as an emerging market?
BESA bank is recognised for both positive financial performance and a serious commitment towards the sustainable development of Angola. Since its foundation, BESA has assumed social responsibility as one of the main pillars of its strategy, to the extent that we believe economic growth must be accompanied by effective measures for environmental preservation and social support, that only intertwined may ensure a better future for the country.

Financially speaking, the bank has been recognised by international and prestigious awards that honour and encourage us to move forward. Alongside the economic performance, we are proud to be one of the main allies of UNESCO on the promotion of sustainable development, as we were honourably nominated “Official Bank of Planet Earth”, by Planet Earth Institute of UNESCO for the next ten years.

Oil is the backbone of the Angolan economy, with oil production and its supporting activities making up around 55 percent of Angola’s GDP; what other investment opportunities are available to investors in the country?
It’s undeniable that oil has a major importance in the Angolan economy but as the economy stabilises and growth increases, they make room for diversification of production, economic decentralisation and a rise in consumption. The consolidation of important areas such as construction, health, education and the proliferation of tertiary services are triggering new and profitable investment opportunities.

And this is a tendency that will blossom in the following years, creating numerous and advantageous prospects for investors.

Angola’s economy is still deeply dependent on the oil sector, do you think it is necessary to develop industry in order to diversify Angola’s GDP structure and increase the domestic production rate?
The path to progress comprises diverse variables. In order to support growth and development not only should domestic production rate be encouraged, but also services, modern agriculture and basic infrastructures. A modern country and society can’t be anchored on specific sectors of economy, regardless of its worth. We want to grow on all social and economic spheres, and, as I mentioned before, this is currently a reality in Angola, that will only grow in the next few years.

Angola is becoming internationally recognised as one of Africa’s major centres of foreign investment, economic growth, and social development. What is Angola doing as a country to attract and retain foreign investment?
According to the International Monetary Fund (IMF), Angola’s GDP grew by over 20 percent in 2007, making it the second fastest growing economy in Africa and the fourth fastest in the world.

Its prime geographic location on the Atlantic Ocean and its abundant natural and economic development policies focused on private investment appeal to foreign investment.

How do you see Angola’s future in terms of foreign investment?
The State Budget predicts a growth of about 8.5 percent for 2010 and the IMF is more optimistic and predicts a growth of 10 percent. With these scenarios, we can be confident that GDP growth will positively affect the overall economy. Angola has still a wide scope for evolution and consolidation. 2009 was a tough year for the world economy, and Angola was not an exception. But 2010 brings new impetus for investment, market resumption and business development, which will definitely project Angola as one of the most attractive economies for foreign investment.

How has BESA succeeded in attracting some of Angola’s larger companies, giving you a difference clientele than the countries other new banks?
The services provided by BESA are based on a highly personalised relationship with customers. We provide financial advice through a team of highly qualified professionals. With high knowledge on financial market and close attention to the best investment opportunities in accordance with the international context and global economic outlook, these analysts draw up unique strategies to each client.

This costumed and closed client approach strategy has become a competitive advantage for BESA and is highly well accepted by our costumers, making us worthy of their trust and reliance.

How key is the banking sector for the sustainability of the country’s economy?
Financial intermediation is considered the “backbone” of the modern economy, as the financial system has an important role on mobilising and directing resources to productive projects, enabling both investment and productivity increase. An efficient financial system is essential for sustained economic growth. In fact, the contribution of a diverse and modern banking system drives development and if there is a healthy financial system, the circuit savings/ investment/economic growth develops naturally.

The development of the Angolan financial market has experienced successive amendments to its modernisation and adaptation to international financial standards on the one hand, and to meet the requirements that characterise the transition to a market economy, on the other hand. And this shift was crucial on the present economic development. Now, it is important to stabilise and consolidate the financial system, bringing confidence and optimism to investors.

Why do you think BESA is currently one of the most solid and stable banks in Angola?
BESA has positioned itself as the universal bank of reference in the Angolan market, especially to maintain the best levels of profitability and efficiency along with projecting an image of strength, confidence and excellent service to clients.

BESA’s strategy is based on the constant and sustained strengthening of its competitive position in the market, with total respect for the interests and welfare of its customers and employees. Being constantly attentive to the needs of its customers, the bank continuously promotes the development of new products and a wide coverage of the territory by bank branches.

How do you think the company has performed since BESA was first founded in 2001?
Since its foundation, BESA has developed a solid strategy and market approach as a pioneer in the country. From its international integration to its profound knowledge of the Angolan market and its needs, BESA stands out for its credibility, solidness and client care.

Our performance has been increasing year on year, maintaining high rates of profitability and efficiency. We are investing in technological modernisation and better client service, improving excellence and expertise; growing our branches to reach more and more clients. Angola’s fast growth must be sustained on a solid banking and financial system and BESA wants to take part on that development, growing and helping the country to grow.

Now, we are raising the bar and aiming higher as the first consolidated financial group with the diversification of services and inclusion of new business areas for better service, greater value and the overall interest of Angola.

It has been predicted that Angola’s banking system will experience tremendous growth throughout the year. In your opinion, do you think this is a likely forecast?
Yes, certainly. As you mentioned, the population now holding a bank account in Angola has grown significantly in the last few years, but there is still a long way to go. With the rise of investment, employment, business dynamics and consumption, banking will assume an increasing importance on economic and social development, in the way that we are obliged to support that growth and provide the proper financial instruments to a modern and sustainable economy. As the economy grows, banking grows – creating a cycle of progress and modernisation.  

How important is it to BESA that you support local projects and sustainable development in Angola?
The rapid economic development of Angola in the recent years has led to important social and environmental changes that have raised new challenges and responsibilities. These factors show up the continent’s vulnerability to climate change and environmental problems, as a result of the current unsustainable management of natural resources. As a financial institution, BESA has, from the beginning, assumed a compromise not only towards sustainable economic growth but also educational support, cultural preservation and environmental protection.

This is one of the most important pillars of our strategy. We believe that a healthy, long-term development must be based on solid foundations and built from the combined effort of different actors, whether governmental and non-governmental entities, companies or each one of us, individually.

How will BESA play a part in organising the African Forum for Sustainable Development, which is to be held in Luanda, Angola, in 2010?
BESA is the official partner of the Angolan Ministry of Environment on the organisation of first African Forum for Sustainable Development, which will gather high representatives from all African states with the purpose of defining concrete measures to a sustainability strategy at a global scale.

We believe that effective solutions for change can only emerge from the international agreement and the mobilisation of different countries for a common goal. And thus contribute decisively in the implementation of effective measures to address the African continent challenges and define a mutual strategy towards a more sustainable and responsible society.

In the future, how does BESA plan to grow as a financial group in the continent, and how do you plan on boosting your presence in the Angolan market specifically?
Banco Espirito Santo Angola is at an expansive phase, aiming to consolidate our position as a financial reference group in Angola. Currently we have 31 branches, 21 of them in Luanda and our growth strategy foresees that by the end of 2010 we will reach 53 branches across the country. This will mean more jobs, greater geographic coverage and provide better service to our customers.

At the beginning of the year, we launched a new business area dedicated to the management of pension funds and will aim at extending the business areas of the BESA areas of leasing and investment banking.

Furthermore we will invest in excellence service to our customers through personalisation and closer contact with these and affixed to the direct channels, namely the dynamisation of Internet Banking (BESAnet.)

Rewards in bull and bear

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The financial market is a living, breathing giant, which evolves, grows and at times, much like we’ve seen over the last few years recedes, leaving both destruction and opportunities in its path.

For Forex traders though, even volatile times can prove to be payday. This is why it is favoured by many traders in their constant search for yield. It would also explain the surge in popularity that Forex trading has seen over the last decade.

Forex has evolved massively over the last ten years. What was once a market for inter-bank trading has now opened up wide to the retail trader. Foreign exchange trading has gone virtual, with online dealing rooms, and 24 hour online brokerages offering literally no fees or commissions.

The advancement of technology and the internet means anyone who owns a computer and has internet connection can now become a forex trader. Trading patterns are changing, more and more people are trading and not just professionally any longer, but as a way to garner a second income.

It is these online brokerages which are swiftly changing the face of Forex. One such firm, Swiss-based bforex consider themselves the innovators of the next generation of Forex. The global firm recently underwent a complete restructuring and rebranding process, to bring their ideas in line with their offering.

These changes incorporated an award-winning new look website www.bforex.com, a new brand and language, and new cutting-edge trading technology. The company has already seen remarkable success from these changes, both an increase in business and has won many awards since the start of the year including, from World Finance, Forex Provider of the Year 2010 in Latin America and Australasia (the latter for the Forex CT brand), Best Financial Derivative Trading Provider 2010 and Sitecore’s Financial Website of the Year 2010.

The Forex industry didn’t always have such a shining image due to little or no regulation, ongoing scams, and no, one centralized exchange. That image has seen an overhaul as more and more companies become regulated and the CFTC takes on board more responsibility concerning the Forex FCM’s.  Forex is now considered a playground for traders and first-timers alike.

bforex Holdings who hold several regulated investment companies and are authorized by the Cyprus CySEC and Australian ASIC are pleased with the direction the regulators are going in.

“For a company like us the new tighter regulation is a very good thing, it weeds out the scam companies that have historically given Forex a bad name. Trust has been an issue with Forex traders who don’t know which companies to turn to. Some firms are not well capitalized, and others do not or cannot allow traders to withdraw funds”, explains the company’s President Ricardo Connelly.

“We recognized early on that the market is at a transition point, trading patterns are changing. For instance, there are many more female traders now, also people are investing more of themselves into the trading process. Education, for instance is playing a bigger role”, says Connelly.

bforex have recently started offering their customers the latest in cutting-edge trading technology, a fully customizable platform called PROfit. With PROfit, traders can select their level of expertise and see a version of the platform, built with their own trading level in mind. It also offers technical and trading support and resources directly from the platform.

bforex have recently run a series of attention-grabbing advertising campaigns. One of which encourages traders to visit the firm in their global-wide offices.

“We welcome visits from our traders or potential customers and have even started a concept called “Forexperts” which entitles every customer to their own personalized account manager.”

“The Forexpert who knows the customer personally can give them access to their trading history. This helps the trader to learn from their mistakes and improve their strategy.” says Ricardo Connolly.

bforex have put an emphasis on their slogan “Trade your Way”, which to the customer means customized trading at all levels; customization through the trading platform, and customization through the depth of content hosted on the site.

While the face of Forex is evolving, the customers’ needs evolve with it. Traders are taking it upon themselves to self-educate as much as possible. This can be seen by the ever-increasing amount of searches for the term “forex education” being conducted on Google.  

Many of the bforex clients have shown an increased interest in the bforex training products on offer including articles, “forexperts” one-on-one tutorials, and “The Insider” resource section of the website is the most clicked section of the site. “The Insider” offers regularly changing news and analysis as well as training videos.

“We agree that training and education is the way forward for our traders, which is why in the next phase of our website we will be focusing on offering an even deeper level of training. This will include webinars, which are online training seminars, and complete guides for all level of trader.

We understand that the more educated the trader, and the more seriously he takes his strategy, the stronger will his loyalty and relationship be with our company”

Thus, bforex has endeavored to create and build an analytical team. Part of bforex’s success has been putting together an excellent team of analysts which has gained a reputation for steady and excellent insight into the Forex markets.

The team is led by Robert Petrucci, who has nearly twenty year’s experience in the financial world starting from Chicago in the fast paced commodities markets.

Mr. Petrucci and his team have over the course of the past year pointed out many of the failings regarding the EUR using their insights that they have interpreted with a firsthand perspective gained through years of participating in the international markets. Since the beginning of the financial crisis that started in the fall of 2008 they have been candid about their thoughts in the Forex markets.

Mr. Petrucci has consistently pointed out what was, in his opinion a lack of transparency among some of the European nations and what he felt would lead to a failure in fiscal policy that could not produce a unified scope, in fact one that would lead to the crisis that we are now seeing with the Sovereign Debt crisis in Greece, but also the growing nervousness that is causing countries like Spain and Portugal to now have problems in their collective bond markets.

“The short term outlook and long term prospects are two divergent paths, but the past month and a half has seen investors become increasingly concerned by a lack of clarity from the European Union and the ECB on how the matter of Sovereign Debt would be handled. The EUR in essence has been punished and been sold off as it has been increasing viewed with skepticism by those who see long term structural problems and unresolved questions”, says Robert Petrucci.

Part of the problem that now exists in Mr Petrucci’s opinion is that it is much easier to hide fiscal blemishes when economies are sustaining growth. Certain countries in the European Union were thus ‘permitted’ to be more lenient with their budgets when times were good. Now that the international economies have been faced with a difficult road for the past two years, we are beginning to see questions emerge for the EUR that were simply not asked with great force while the economies enjoyed good growth.

The EUR may well find itself consistently under pressure for some time if investors continue to create an atmosphere in which Spain, Portuguese, and Greek debt becomes increasingly expensive for those nations to finance compared to the likes of Germany.  The implications of austerity, poor growth, and the possibility of restructured Sovereign Debt may be a shadow that continues the remainder of 2010 and into 2011.

The U.S. has in essence, Mr. Petrucci feels, taken a moderately weak USD approach to its own currency which played a part in the EUR becoming so strong. And now it might actually be up to the U.S. to keep the EUR in a place that does not make it too weak.

This as the U.S. Federal Reserve keeps its interest rate policy at a near zero framework even though the U.S. economy is starting to show signs of growth, particularly when compared to that of the European Union, which is facing a potential problem with longer term stagnation if it is to implement austerity measures to keep certain nations spending in line with guidelines in order to maintain its bond yields.

Predicting the future is never an easy task but taking into context the events of the past two years in the financial world it has been proven that investors and traders are faced with a volatile marketplace that has the ability to provide surprises on nearly any given day due to the problems that have arisen for the international economies due to the banking, real estate, and thus questions of credibility that Governments have faced regarding the manner in which they have combated the crisis.

These surprises offer a virile marketplace for the trader who constantly has the opportunity to trade these swift ranges.

For a company like bforex this means making a trader’s entry into the Forex market simple and smooth, constantly adapting to meet the ever-changing needs of the trader to keep the loyalty and satisfaction of the trader in a win/win situation keeping the trader trading for a very long time.

Personalised trading

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The company started its operations in 1997. In 2004 it obtained a Polish Financial Supervision Authority (PFSA) license becoming Poland’s first regulated FX brokerage. Its business activity follows the regulations set forth by the PFSA assuring one of the highest standards of service in Europe. TMS Brokers’ professionalism and compliance with EU standards reassures the safety of funds entrusted with the institution.

TMS Brokers ensures that clients have all the necessary elements to successfully trade in today’s markets: recommendations, live streaming news, state-of-the-art trading tools and capital allocation strategies. Additionally, the company delivers education to investors at all stages of their activity. TMS offers three high quality financial products, all of which utilise the latest technical innovations.

TMS Brokers’ core business is the TMS Direct platform, which allow investors for quick and efficient transactions over the internet in a fully personalised trading environment. 24 hours a day investors have access to 160 currency pairs, 470 futures contracts, Contracts for Difference (CFDs) on 25 of the world’s biggest stock indices and 5000 international stocks – these are the main features of the TMS Direct trading platform, which constantly evolves in an attempt to deliver the best trading solutions. Besides the large product range, clients receive personalised coverage from traders as well as recommendations and forecasts prepared by TMS Brokers’ Advisory Department. The latter obtain the highest marks for accuracy in British Magazine FX Week’s forecast rankings claiming 43 first places and 53 second places in 2009. TMS plays big attention to its forecasts due to their fundamental role in an investor’s success.

The TMS Direct is integrated with two additional access tools providing investors access to their trading account no matter where they are situated. The browser-based TMS WebDirect requires no installation and provides full and secure access to financial markets worldwide. TMS MobiDirect allows users to trade anytime and anywhere by simply using a mobile device with internet connection.

“One login and password suffice to manage all the orders, use the chat module or monitor the account balance, regardless of time or place. Mobile investing is very popular among our customers. With this solution they don’t lose the opportunity to invest”, says Mr Mariusz Potaczala, CEO, TMS Brokers.

The TMS Direct platform embraces the fast pace of the industry. This is essential when one seeks perfectionism and professionalism in their trading – new features, such as a highly sophisticated option board and financial instruments which are constantly added, system updates make it even faster and more reliable. TMS informs their customers about all changes via e-mail.

The training programme offered by TMS is comprehensive and depends on the products and targeted investor groups. Available are online webinars as well as seminars all across the country. The TMS Direct academy is designated towards advanced players. The topic range here is much more complex. Even the platform itself might seem complicated at first glance, therefore a large part of training is devoted to the possibilities of the system. Classes on Technical Analysis and Financial instruments on the other hand attract those who are interested in fine tuning their investment strategies. TMS also organises seminars for financial institutions. The brokerage cooperates with the British-Polish Chamber of Commerce, with whom they organise meetings for importers and exporters who want to protect themselves against exchange rate risk.

Webinars constitute a series of interactive meetings hosted via the internet. This allows TMS Brokers to educate clients without them leaving the house nor office. Lessons are carried out by experienced analysts who discuss current market events, give out recommendations and forecasts. Courses on the functionality of various platforms are carried out as well on the assumption that the better you know the tool, the better you can use it when making investment decisions.

“To build trust in business is not a simple task. It cannot be done overnight. With ongoing persistence, the company seeks new ways of reaching customers and showing them that TMS is a professional partner with strong roots that is calmly looking into the future. The way chosen by us delivers satisfying results. That our customer base increased over four times in the last three years reflects this”, says Mariusz Potaczala.

Investor education is inscribed into the company’s mission. For that reason all courses are held free of charge – it’s a contribution to the development of the Polish forex market. TMS Brokers cooperates with journalists from various media channels and have their own TV studio. Providing journalists with knowledge, comments and analyses, TMS aids them in their work. The company takes part in radio and television programmes, commenting on current market developments and administer their own blogs. One of the most active bloggers is TMS Brokers’ chief analyst while another blog contains the collective work of the Advisory Department.

“People, who watch our analysts on the television, listen to our comments on the radio, read our analyses in the press or take  part in training are more aware and certain of their decision on the selection of a broker as their partner. We try to be a good partner, both for journalists and for our customers. We make it easier to reach information which is nowadays very precious and often determines success”, adds Mariusz Potaczala.

In late 2009, TMS Brokers introduced an additional trading platform under the separate brand GO4X. It is based on the popular Metatrader4 system. This came as the result of extensive research focused on the needs of less sophisticated investors. For them, most important is educational support and intuitiveness of the tools within the GO4X system.

TMS has planned a series of seminars throughout Poland, which are designed to familiarise aspiring investors with general knowledge of the forex market, technical analysis and basic investment strategies. Additionally, the platform is integrated with the GO4X News Reader which allows customers to receive up-to-date market information from TMS Broker analysts. Furthermore, investors have the option of attaching additional RSS feeds such as Bloomberg, CNN or Polish information services. GO4X product is definitely simpler, but still under development. In April 2010 the main instruments in the form of the major currency pairs were joined by new, related to stock indices , such as SP500, Dow Jones, NASDAQ and the Polish WIG20.

Aside from the TMS Direct and GO4X platform, TMS Brokers also provides advisory services to corporations and companies having foreign exchange transactions. Using best practices and innovative financial instruments, TMS effectively protects companies against foreign exchange and interest rate risk. The cooperation model includes either a fixed monthly fee or fee plus share in Client profit. As an advisor, TMS aids in hedging positions via the TMS Direct platform or negotiates transaction terms with other institutions on behalf of the client.

TMS also shares its data with other firms. Applets containing live market quotes help small and medium businesses in their operations – no matter whether it is a small currency exchange or a large exporter. These applets are available on many sites in Poland often accompanied by the company’s comments, analyses and reports, which are published daily in many Polish online media channels. Data sharing relies on barter contracts, which govern the entire legal process for data transmission. In addition to the standard ways of reaching customers via the radio, television, press and well-known Internet portals, TMS uses the latest communication channels such as Facebook (www.facebook.com/tmsbrokers), Twitter (www.twitter.com/go4x) and its Polish counterparty – Blip. The Polish financial market is a novelty, which has been considerably defined by TMS.

Governance aids risk management

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As the largest telecommunications company in Austria, Telekom Austria Group is successfully positioned on international markets with a focus on the CEE region. Besides Austria, the company has international operations in Belarus, Bulgaria, Croatia, Liechtenstein, the Republic of Macedonia, the Republic of Serbia and Slovenia. More than 2.3 million fixed line customers and approximately 19 million mobile customers put their trust in products and services provided by Telekom Austria Group. Telekom Austria Group has over 16,000 employees and achieved revenues of Ä4.8bn in 2009. Telekom Austria Group is an innovation leader when it comes to mobile communications with numerous “first-to-launch” – rollouts such as the world’s first rollout of an UMTS network.

Telekom Austria Group has a strong commitment to excellence in corporate governance. The positive effect of good corporate governance ultimately results in a strengthened economy. Hence, good corporate governance is an important tool for socio-economic development. It is of critical importance how directors and management develop a model of governance that aligns the values of all corporate stakeholders, which then is evaluated periodically for its effectiveness. In particular, senior executives should operate in an honest and ethically manner, especially with regards to actual or potential conflicts of interest and disclosure of financial reports.

To ensure sustainable and value-enhancing corporate development Telekom Austria Group adheres to strict principles and is committed to transparency and a willingness to engage in open dialogue. Areas of competency and responsibility are clearly regulated by law, the Articles of Association of Telekom Austria AG and the Rules of Internal Procedure for the Management Board and the Supervisory Board.

With regards to the structural setup at Telekom Austria Group the Management Board defines the strategic thrust of the group in consultation with the Supervisory Board and provides the latter with regular reports on the company’s current situation, including risks. Furthermore, the Supervisory Board is authorised to ask the Management Board at any time for reports on matters concerning Telekom Austria Group. The Rules of Internal Procedure for the Supervisory Board, the Audit Committee and the Management Board provide the legal framework for the duties and scope of action of both the Supervisory and Management Boards.

The group achieved compliance with the extended reporting obligations of the Austrian Corporate Governance Code at an early date. The Austrian Corporate Governance Code enjoys widespread acceptance. In January 2010, an amended and expanded version of the Code was published and shall apply to all financial years starting after December 31, 2009. The most important changes concern aspects of the variable and share-based remuneration of the Management Board and other executives. Several provisions of the Code were also adjusted to comply with amendments to the Austrian Stock Corporation Act 2009. The Telekom Austria Group fulfilled almost all of the extended reporting obligations at an early date and will continue to consistently work on further developing its corporate governance in future. The group committed itself to voluntary compliance with the Code as of 2003 and has also implemented further corporate governance instruments such as an effective risk management system or the Code of Conduct.

The group’s risk management system enables a Group-wide structured identification, evaluation and management of risks on the basis of a defined risk policy as well as strategic and operational objectives. Its effectiveness is subject to external evaluation by auditors pursuant to Rule 83 of the corporate governance Code and, along with the effectiveness of the internal control system, it is monitored by the Audit Committee.

The internal control system of Telekom Austria Group is aimed at safeguarding the effectiveness and profitability of business activities, the integrity and reliability of financial reporting as well as compliance with the relevant laws and regulations.

The Code of Conduct, which is binding throughout the Group, is designed to raise awareness among employees with regard to corruption prevention and lawful ethical conduct.

Commonly accepted principles of corporate governance include, among others: Rights and equitable treatment of shareholders, role and responsibilities of the board, integrity and ethical behaviour, disclosure and transparency. A reporting system has been put in place that enables employees to confidentially report legally dubious procedures or violations of this code. The Code of Conduct has been published at www.telekomaustria.com. To prevent the misuse or passing on of confidential information, Group-wide compliance guidelines have been implemented and classified units defined within the company.

We have all followed some of the very prominent cases of corporate corruption in the media. Such events cause significant damage and could seriously impact our reputation, but could also result in a significant financial impact.

Analysts and shareholders have zero tolerance for corruption and are very unforgiving if such cases surface. At Telekom Austria Group, we do not want to create a bureaucratic compliance environment as this would harm our unique culture of speed and innovation.

In addition, equal opportunity is considered as a central component of Telekom Austria Group’s Corporate Governance and corporate social responsibility understanding. Having a closer look at the promotion of female executives, the percentage of women on the Supervisory Board of Telekom Austria AG has risen steadily in recent years to a current quota of 25 percent, which is considerably higher than the average female quota of six percent within the ATX Prime Market. Since 2001 the important function of Vice Chair of the Supervisory Board of the Telekom Austria Group has been held by a woman, Edith Hlawati. Further seven Supervisory Board positions within the Telekom Austria Group were held by women in 2009 as were two Management Board and Managing Director positions. The proportion of women in management positions at the Telekom Austria Group in 2009 amounted to roughly 20 percent.

In this context, let us also take a look at our understanding of sustainable management at Telekom Austria Group: The prime strategic objective of Telekom Austria Group is the sustainable enhancement of shareholder value by ensuring the Group’s healthy development in the long term. The challenge of responsible company management is to combine economic success with environmental and social aspects.

To underline its commitment to this principle, the Telekom Austria Group endeavours to further develop its sustainability profile. The increased involvement of the international subsidiaries and their integration into the corporate strategy are central to these efforts.

Our excellence in Corporate Governance has been recognized on numerous Occasions. Most recently Telekom Austria Group has been awarded the World Finance Corporate Governance Awards as “Best Corporate Governance in Austria” and in 2009 Telekom Austria Group received the Vienna Stock Exchange Prize for “Best Corporate Governance”. Furthermore Telekom Austria Group has a proven track record of award-winning IR work: In 2009, we were recognised as the “Best IR team in Austria” and 2nd best Investor Relations Website in Austria. In addition, Telekom Austria achieved numerous awards for its annual reports (Arc Awards, Trend AAA).

Matthias Stieber is Division Manager of Investor Relations at Telekom Austria Group