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The Economist – 14/07/07
July 24, 2007, 1:26 pm
Filed under: current affairs

The Economist – 14/07/07

  • Japanese firms are typically adverse to mergers and acquisitions; firms are considered social institutions. However M&A activities have been increasing over the past decade with deals reaching 15 trillion yen last year. A big trend has been the growing number of M&A deals between subsidiaries within big corporate groups. Conglomerates may have hundreds of subsidiaries in diverse industries and many intra-group M&A activity consists of companies bundling together disparate subsidiaries from similar industries in order to manage them better or sell them off.
  • Topic-specific search engines seek to challenge Google’s dominance of generalist search. Health seems to be a promising field where consumers seek specialist sites.
  • The Children’s Investment Fund channels part of its fees and profits into charity; it has $5b under management and $1.4b in allocations to the Children’s Investment Fund Foundation, making it one of Britain’s biggest charities.
  • Germany performs strongly but structural problems persist. Germany continue to manufacture much exports; domestic demand in the form of investment is rising and construction is picking up. Consumer confidence is rising. However there are problems still. Cost of capital has gone up with state guarantees for public-sector banks gone, and more is being demanded of equity capital with financial institutions paring down their old stake in industrial companies and complicated network of cross-shareholdings being dismantled.
  • Collateralised debt obligations, which are divvied up residential mortgage-backed securities that in turn are essentially cut up subprime mortgages, are illiquid and they cut up risk so nobody knows where the risk now lies. Defaults have shot up and the subprime market is melting down. Rates are increasing and the excess liquidity that fueled the growth of global markets is drying up.
  • South Korea has moved to legislate the removal of bureaucratic barriers in its securities industry and help bokers, banks and possibly insureres to consolidate. The population is well-education and it lies close to China and Japan. Attitudes to foreign investment and personnel has improved; restrictions on foreign lawyers and accountants are being relaxed while a free-trade agreement has been struck with America.
  • China’s forex reserves stand at $1.33 trillion at the end of June, according to its central bank. It accumulated $266.3b in the first half of 2007, more than in the whole of 2006.
  • The Bank of America is the biggest bank in the world, in terms of holdings of tier-one capital. Banks from emerging markets, including Brazil, India and Russia, prospered while two Chinese banks (ICBC and Bank of China) made the top ten list for the frist time. China also produced the highest number of new arrivals in the top 1,000. UBS is the largest if total assets was taken as a measure.
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