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FINANCIALS

Are Hedge Funds like Man Group

still worth investing in?

Faisal Samih

The recent market volatility has seen a great

rush away from asset managers and hedge

funds toward safer assets such as US

Treasury Bills. Hedge funds like Man Group

are no longer judged to be the market

geniuses as once thought. Investors that

once thought hedge funds would profit from

such volatility via algorithmic trading have

shockingly seen the value of their

investments drop. Given the slow motion

meltdown currently occurring within the EU

we should investigate how Man Group will

perform and do massive quantities of selling

present new opportunities for investors?

The hedge fund industry has been damaged

during this recent bout of volatility. The

world‟s largest listed hedge fund, Man Group

has seen its share price half in just two

months. Man once traded at its intrinsic

value of £2.40 but now trades at a shade

above £1.20. Though there was strong

support at £1.50, the previous all-time low in

2009, it dropped further. This cataclysmic

loss was due mainly to the Eurozone debt

crisis which resulted in a suppressed investor

appetite. The ensuing panic has resulted in

Man‟s „Assets Under Management‟ (AUM)

dropping from $71 billion to $64.5 billion.

Most of the withdrawals were taken out of

the GLG Fund, a recent addition to Man that

has underperformed lately. The purchase of

GLG last year has added a certain degree of

diversification risk and the underperformance

of GLG has increased reliance on the AHL

fund to bring in fees. The AHL fund is a

computer driven fund that now accounts for

$25 billion AUM delivering a staggering 80%

of profits. Such over-reliance in AHL has

damaged Man Group. This was evidenced

when shares rallied in early October and AHL

lost as a result of short positions

subsequently resulting in shares dropping

5.1%.

There also seems to have been a great deal

of short trading on Man that seems to have

exacerbated the fall due to the drop in AUM.

On September 28th alone 2% of Man Group

shares were borrowed by short sellers. This

is highly significant given that the total share

issue for Man Group is 1.85 billion shares

and resultantly a high volume of shorts

pushed the share price down further. This

short trading may in part be due to

speculation that Man Group made a poor

investment in MF Global. This speculation

largely stems form the fact that the fund

used to be a subsidiary of MF before

becoming independent. Such miscalculations

would not be without precedent given that

Man Group invested Madoff‟s Ponzi schemes.

However, the fund has reassured investors

that that it has no counter-party exposure to

MF Global and that the two are separate.

The volatility in the financial sector has

resulted in hedge funds losing on average

4.11% in August. Man however, has managed

to make pre-tax gain of $154 million for the

first 6 months of 2011 and has also delivered

a dividend of 9.5 cents a share. The fund

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remains in a position of strength with a cash

reserve of $1 billion. Recently it was unveiled

that $150 million of this reserve would be

utilised through a share buy back scheme on

November 3. This was later followed by

several director purchases of shares which

hint that perhaps the leaders of Man realise

that it is undervalued and offers strong

potential. The shares seem to be trading at a

massive discount to their value. A small drop

in AUM and a change in market conditions do

not seem to justify such a sharp drop. This is

particularly evident given that Man traded

around 150 at the height of the credit crisis

in 2009 and now at a time when market

conditions are not as bleak, profits are being

delivered and a strong reserve held the

current share price is lower. This seems

indicative of a panic sell off. In fact, the fund

is now trading at an all time low. An increase

in share price seems inevitable because the

AUM have stabilised around $65 billion and

an increase of AUM seems inevitable as Man

continues to produce growth.

To conclude, Man Group should be viewed as

a worthy investment given that it is trading at

half its intrinsic value; despite the fact that

fundamentals have seen little change since it

was trading above £2.50. The share price

could certainly recover to this level if market

conditions improve and AUM recover. Not

only has it outperformed many hedge funds

in a financially turbulent environment, it has

also been taking in hefty profits and

managed to maintain an attractive dividend.

In fact the dividend yield at the current price

(if next years dividends remain the same) will

be a respectable 10%. High dividend yields

like this are rarely found and reason enough

for some growth investors to invest. If, as

predicted, the share price increases there will

be a corresponding increase in dividend yield

enabling yields in excess of that stated.

However, in part due to the GLG fund, there

is a significant diversification risk that has

recently underpinned the fund‟s

underperformance. This subsequently places

a reliance on the AHL fund to raise fees. GLG

principally only takes long positions on

equities and when market conditions

improve, it may be able to project some

profit which would potentially mitigate this

diversification risk.

ENERGY

Changes in the Alternative

Energy Companies

Aulia Beg

Contrary to popular belief that alternative

energy companies are highly beneficial, they

are facing great difficulties during the current

crisis in the western world. This mainly stems

from the change in the political framework

and the market‟s view of this industry.

The change in the political framework shows

how alternative energy companies would be

given little room for growth and

opportunities. One example would include

the Kyoto Protocol, which has been

abandoned by a major key player such as

Canada. This has been highly detrimental as

the Protocol was a key proponent of the

renewable energy sector.

The Eurozone crisis is another threat as it

weakens EU politicians support for renewable

energy. There is a push to curb subsidies for

green growth projects. This is expected to

slow volumes greatly from at least 65%

annual over five years to 2016 (FT, 2011).

Other initiatives to push for green jobs have

been undermined. One recent case would

include the collapse of Solyndra which was

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backed by $535m of federal loan under the

Obama administration.

Secondly, market sentiment has not had a

favorable view on this industry. The S&P

Global Clean Energy Index is four-fifths

below its 2007 high. The alternative energy

industry has received great attention to help

address the major economies dependence on

oil resources and the need to acquire

alternatives. This has lead to great growth

potential and harbored fierce competition,

price warnings and tighter financing.

Solar Flair (Thomson Reuters)

This is one example of fierce competition,

which has fueled a great deal of price drops

for solar panel energy due to massive cost-

competitiveness. This is due to overcapacity

and low-cost Chinese production. This

further accelerates price warnings. For

example U.S. based Evergreen Solar filed for

bankruptcy only less than three months ago.

Clearly, the industry is hardly thriving: the

MAC Solar Energy index has lost over a third

of its value in six months.

So the question is what will be the

implications? Does this mean with great

failures in this industry that time is now ripe

for more consolidation? Does this mean we

should look at General Electric and Vestas to

acquire other smaller firms? Or should we

look at who is profiting from the downfall of

the alternative energy industry in Europe and

the US.

As it appears that there is fierce competition

for this industry this means the ones with the

greatest advantage are the firms that

obviously provide the least amount of costs.

This is why we look towards the East that

provide cheap labour, but particularly to

China that has the capacity to set up a

renewable energy industry. It is widely known

that China is the world‟s biggest investor in

clean energy with $54.4 billion spent in

2010. Also its manufacturing capacity has

been growing rapidly thereby the world‟s

two-largest wind turbine manufacturers lie in

China. The main growth in China is driven by

its cheap labour, large home market and

support from local governments and state

banks.

Interestingly, although some companies in

the US find China‟s rise in renewables a

threat, they have managed to bring costs

down for renewable power generators. This

is highly beneficial as it makes then in line to

compete against coal or gas-fired plants

around the world. Clearly, the failure of some

alternative energy companies gives rise to

growth and new opportunities for other firms

such as in China. This is beneficial to the

wider-society as we now can have access to

cheaper sources of alternative energy and

relieve ourselves from our dependence on

oil.

RETAIL & CONSUMER

Retail Industry in India

Upasana Bhaumik

It is hard to find equilibrium in India, so

perhaps it is not surprising that finding

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consensus quickly seems to be nearly

impossible when it comes to policy which

affects the entire country. Economic

liberalisation from the 1990‟s helped

transform India into a force to be reckoned

with. Deregulation and privatization,

amongst other policies, have made India into

what it is today, so in first glance it seems

surprising that it was only in December 2011

that the government decided that in cities

with a population of more than one million,

foreign firms could own 51% of „multibrand‟

retailers. Primarily this meant that

supermarkets, controlled by the likes of

Walmart and Tesco, were now a possibility. A

few days later, the policy was stalled pending

further debate.

Supermarkets run by Indian firms exist with

full gusto in many cities. Many choose to

shop there for the convenience, cleanliness

and choice offered, in comparison to the

more common and traditional corner shops

which are found across India. These small

corner shops are the reason that there has

been so much opposition to the new policy –

fears that it would create mass

unemployment instead of curbing food

inflation. In India‟s $450 billion retail sector,

less than 10% of sales take place in a shop

resembling the stereotypical ones found in

developed countries. Allowing foreign firms

could change the scene in the retail industry

in India.

FDI in the retail sector in India might not

happen now, but it is bound to happen

sooner rather than later. It is common for a

developing country to slowly move away from

unorganised retail, and away from being as

dependent on agriculture as India is at the

moment. The changing demography of India,

the rapid progress made in the IT sector and

the ever growing influence of globalisation

were always bound to result in the

introduction of such seemingly dramatic

policies. India is now a global player and has

to keep up with other countries in order to

continue growing. The challenge is to ensure

that as much as possible is done to promote

growth, whilst making sure this is done

keeping in mind that the entire population

should prosper from the policies.

Problems in investment and growing inflation

(especially in food prices) have prompted the

speed in proposing this new policy. Previous

case studies show that organised retail,

coupled with effective supply chains, profit

farmers and reduce waste from harvests in

the long run. The technology and investment

required to do this can be provided by

foreign firms, and this way India does not

miss out on an opportunity. The policy could

also result in a more equitable distribution of

wealth across India, with more rural areas of

the country benefitting from growth than

they do at present.

Allowing foreign firms to help with a more

productive agricultural sector will not solve

all of India‟s problems, but it may well help –

if it works. It could create an atmosphere of

increased competition, hopefully resulting in

the utmost efficiency possible, and increased

prosperity in rural areas could result in

increased literacy rates. On the other hand,

the policy implementation may be ill

considered and rash, creating long term

unemployment for many with no special

skills and a livelihood entirely invested in

their small corner shop.

India is a land of opportunity and needs to

seize every opportunity which comes whilst

keeping the wellbeing of every citizen in

mind – it just needs to be done in a very

unique Indian way.

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HEALTHCARE

Pharmaceutical Companies in

Africa

Peter Smith

If there is one thing there is no shortage of in

Africa, it is disease, and as much as people

don't like to admit it, disease is big business!

HIV infection rates in countries such as

Swaziland exceed 25%, and a large

percentage of the population are hit my

malaria, various forms of hepatitis and of

course malnutrition.

It was promised at the G8 Summit in 2005

that access to antiretroviral treatments

(drugs to prevent HIV progressing to AIDS)

would be universal by 2010. The production

of such drugs is primarily controlled by the

FTSE 100 listed company, GlaxoSmithKline.

Due to the smaller size of the pharmaceutical

market in Africa, GSK and several other

pharmaceutical companies have been

skeptical to make an entrance. However

given the pledges of the G8, and pledges

from global financiers including Warren

Buffet and Bill Gates, such companies ought

to be increasing profits in the African

regions. I reasonable question might be why

other companies do not attempt to approach

the African pharmaceutical market. The

answer is the nature of global patent laws

which means that a few companies including

GlaxoSmithKline possess a monopoly of

several key drugs for Africa, in particular

antiretroviral treatments.

Recent research published by RNCOS predicts

a 22% increase in profits for the South

African pharmaceuticals industry. This must

have been partly inspired by the stepping

down of Thabo Mbeki as president of South

Africa, who actively denied the HIV/AIDS

concept and feared western pharmaceuticals

attempting to exploit his country for profit.

Pharmaceutical companies are clearly gaining

the message, with GlaxoSmithKline and

Pfizer forging a historic merger in 2009 to

combat AIDS, and GSK announcing its desire

to inject £60 million into HIV treatments for

Africa. The companies claim this to be part of

a 'not for profit scheme', but given their

reputation, this assumption may be naïve at

best. With any given larger market, the

companies have the ability to issue price cuts

(which may be as large as 33% for some

drugs), since they both access larger markets

and obtain humanitarian reputation for their

work. Such reputation is going to make

western governments much more likely to

engage further with the likes of

GlaxoSmithKline and Pfizer in the near

future.

Several pharmaceutical companies are lifting

patent rights whilst giving smaller firms

mandates to produce generic copies of

several drugs. This year GlaxoSmithKline has

experienced a 13% increase in profits from

the emerging markets, and a 7% fall across

Europe. Much of this is theoretical - GSK

made net earnings of 1.85 billion in 2010, of

which only 17.5 million came from LDC's (the

least developed countries). However, given

governmental and private pledges and the

abundance of disease with the continent, the

performance of pharmaceuticals in Africa

may be one to watch.

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TECHNOLOGY

The Blackberry Crumble

Daniel Gardiner

Research in Motion (RIM), the owner of the

Blackberry brand, was reeling from the

repercussions of a processor malfunction at

its UK base of operations in Slough on 10th

October which meant that the 70 million

Blackberry users across Europe and Africa,

and later certain parts of America, were

unable to send and receive emails.

RIM‟s email technology relies upon a

centralized private network to push emails to

individual Blackberries; when the Slough hub

malfunctioned, this caused a build-up of

unsent messages which compounded the

problem and caused “The Blackberry

Crumble” as it quickly became known, to

spread to America. Despite a lot of popular

unrest, the problem was fully resolved in the

following couple of days, and on 17th

October, Mike Lazaridis, co-CEO of RIM

promised Blackberry users affected by the

problem would receive $100 (approximately

£62) in free Blackberry apps.

RIM Share Price, 26th Sep – 24th Oct (ft.com)

Markets were not too quick to judge this as a

fatal malfunction that would seriously

damage the long-term prospects of RIM and

the Blackberry brand, despite the share price

of RIM losing 1.40 points or 5.76% of its

value during the week which began on the

10th October. This depreciation could be seen

more of a quick speculative slide more than

anything, but The Blackberry Crumble has

opened up questions about the long term

profitability of RIM and the competitive

structure of its markets.

RIM Share Price, Oct 2010 – Oct 2011(ft.com)

The above graph illustrates the one-year

share price performance of RIM which shows

that the events of 10th October may have just

been a short acceleration in what is looking

to be a long-term downward trend of RIM‟s

share price. Over the past year the price of

RIM shares has fallen by 54.24%. This

movement is possibly a reflection of RIM‟s

falling competitiveness and investors losing

the confidence to take long positions in the

firm. It is certainly a reflection of falling

profitability; between April and June 2010,

Blackberrys alone accounted for about 20% of

all smartphone sales but only 12% in the

same period this year, as pointed out by the

research firm Gartner. It seems that the

events of 10th October are not the only

worries for RIM with regards to Blackberry:

competition is a key long-term struggle.

This was highlighted by the fact that The

Blackberry Crumble coincided with the launch

of the new iPhone 4S. Sales were predicted to

be between 2-4 million units on the first

weekend and actually exceeded the upper

limit. Despite the shortfalls with the 4S such

as few technological improvements and

difficulty in upgrading software and

recognising voice commands, there is an

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increasing sympathy in the business

community to the iPhone over the Blackberry

because the latter may have lost one of the

main selling points from which it derives its

popularity in businesses – reliability.

Apple Share Price, 26th Sep - 24th Oct (ft.com)

Not only that but Apple‟s iPhones – and for

that matter, Google‟s/HTC‟s Android

smartphones - are more appealing to the

mass market which does not rely on sending

extensive streams of emails every day from

their handset. iPhones and Androids are

much better suited to media content than the

Blackberry, and despite the Blackberry having

around 40,000 apps, this is only a fraction of

those available for iPhones and Androids.

This aspect is crucial given that the

smartphone market is particularly relatable

to the Schumpeterian model of creative

destruction whereby older products are

constantly being replaced by newer, more

innovative ones, and failure to innovate

rapidly drives a firm out of the market. This

is possibly what we see with RIM‟s yearly

share-price performance above – it may be

stagnating whilst Apple and Google/HTC are

innovating.

Having said that, the future prospects for

RIM, as far as innovation is concerned, may

actually be looking up. At the end of October,

RIM reached a contract with MasterCard to

allow it to use PayPass, which employs Near

Field Communication (NFC) technology, in

the Bold 9900 and Curve 9360. NFC

technology allows these phone users to have

access to PayPass which is a mechanism

whereby the user can make contactless

payments in stores which use PayPass

technology – the number of which is

growing. Using NFC technology is something

which HTC has tapped into experimentally

but not so much Apple, so maybe rather than

being pushed out by creative destruction,

RIM is in fact about to help fuel the spiral.

France Telecom-Orange has said that RIM

beginning to use PayPass – not yet used by

either of RIM‟s main competitors - in some of

its handsets has the potential to revolutionise

the smartphone market, and therefore should

be something for Apple and Google/HTC to

be wary of, especially since many analysts

have proclaimed non-contact payments to be

the future of mobile commerce. Even if the

technology will be in your debit card, too, a

debit card is one thing less to always

remember for wherever you go.

If, however, we take a look at RIM‟s

macroeconomic figures in isolation, things

do not currently look good. This year

Samsung sold the most smartphones in the

third quarter, and Canalys analyst Tim

Shepherd noted that: “RIM's market share has

fallen below 10% for the first time and the

current outlook for it in the U.S. is certainly

bleak [so] RIM must deliver a competitive,

high-end 4G smartphone in early 2012 [to

remain competitive]”. In terms of US market

share, RIM fell from 24% to 9% between

third-quarter 2010 and 2011, although this

might be offset by growing demand in other

parts of the world, particularly within EMEA,

from a young generation attracted by its free

instant messaging service.

For RIM, then, it seems there is a mixed

business outlook for the future. Certainly, at

the current time, the sales figures and

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market position are not enviable.

Contrariwise, RIM has some innovative

products in its pipeline for the coming year,

and this, combined with growing market

demand from alternative social groups, may

help to reverse the contraction which it has

been suffering for well over a year; though

Apple and Google/HTC are not going to stay

still so RIM has heavy competition ahead.

The future is bright, the future is

ARM!

Ben Black

Whilst it is fair to say that macro conditions

are less than favourable for the demand of

high value consumables, there is one

Cambridge based company that is

increasingly getting its fingers into all pies

within the technological sector. That

company is ARM Holdings.

In 2010, ARM partners shipped over six

billion ARM Powered chips. Its designs are

used in more than 95% of the world's mobile

phones and are increasingly designed into a

wide range of other digital electronic

products. A glance over the recent Q3

figures just shows the increase in the

demand for ARM architecture with 14

existing semiconductor companies buying

their first processor licenses out of a total of

28 licenses signed in the quarter. Indicators

such as this are showing a huge

technological shift that the industry is

undergoing.

Recently, Hewlett Packard(HP) showcased

servers for the first time using ARM chips.

They are just one of many companies‟

trialling micro servers, which focus on

extremely low power consumption rather

than high processing speeds (After all,

power, heat dissipation and the resulting

huge air conditioning costs is exactly why

Facebook is building a data centre on the

Arctic circle.). HP showcase is particularly

significant given they currently have 30%

market share in servers, and is Intel's number

one customer. This alone could be the start

of a massive multi-year shift for the

computing industry to move from

performance led (Intel's leadership) to power

led (ARM's DNA) architectures. Adding

further weight to the case is Microsoft, some

42% share of the server market, who is a

primary license of the new ARM 64-bit

ARMv8 architecture. To put this into a

valuation perspective, the server market is a

c5.6bn a year market, nearly 14 times larger

than ARM's total annual sales.

It should not be forgotten who the real gem

in ARM‟s customer crown is, which is of

course Apple has indicated for some time

now that it doesn‟t want to support 2

operating systems (OSX and iOS) long term,

and wants everything to morph into the iOS

system. This has never been possible before

given the system requirements for Macs

which need 64bit architecture. This doesn't

happen overnight but checks suggest Apple

has signed a core ARM license for this 64-bit

ARMv8, which means in the future every

Macbook, Mac, iPad, iTV, iPhone, AppleTV

and whatever else is in the pipe for them will

seamlessly integrate with the cloud and all be

based around ARM architecture. At this point

it is worth noting ARM‟s history; it was

founded back in 1990 as a spin off from

Acorn and Apple.

More news relating to ARM came in the form

of an announcement recently made by the

new CEO of Advanced Micro Devices

Inc.(AMD) who stated plans to cut 10% of its

workforce across all divisions. Of more

significance is the decision to reinvest the

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cost savings on new growth initiatives of low

power processors and cloud computing. It

shouldn‟t take too much thought to think of

who the beneficiaries of this could be. The

company recently hired a new Chief

Technology Officer, Mark Papermaster, who

used to work at Apple and IBM. So in other

words, he has extensive knowledge of the

ARM and MIPS based technologies rather

than x86(the primary processor offered by

AMD). It is, in my view, highly likely that AMD

will move to a multi architecture approach

perhaps in the form of combining its GPU

with ARM‟s CPU cores, the way Nvidia

successfully has. Also, with AMD's mix

geared towards desktop PCs and servers, it

makes sense to embrace the ARM

architecture as Microsoft, 42% share in server

market, is a primary licensee of the server

focused ARMv8architecture. In addition its

worth recalling HP's decision to use low

power servers using ARM chips as HP

happens to be AMD's largest customer too.

All things considered, I feel the prospects,

both long and short term, all stack up to give

a very compelling story here. With the

evidence above there are clearly signs of a

huge shift in technology for the industry and

ARM is, in the majority of cases, behind

much of implementation of this shift,

benefiting across the board and I feel in an

excellent position for the future growth.

ARM Holdings, Dec 2008-Dec 2011 (ft.com)

EMERGING MARKETS

Mongolia‟s Economic Growth

Prospects

Rupreet Sandhu

When someone mentions Mongolia, a thriving

economy is not always what first comes to

mind. Nevertheless, over the past decade,

Mongolian Equities have seen an astounding

10,000% return. Additionally, Mongolian

equity markets in 2010 dwarfed the returns

of the MSCI EM (index tracking emerging

markets performance) and the S&P 500, and

therefore investors are starting to pay more

attention to Mongolia. However, to what

extent is Mongolia to develop, and what

factors may prevent Mongolia from reaching

its full potential.

Mongolia‟s main advantage is it has 82

elements from the periodic table in

abundance. Cash and Commodities are the

main ingredients for economic progress, for

which Mongolia has no shortage. It is one of

the most mineral rich countries in the world

which is currently driving growth. Because of

the copious reserves, Foreign Direct

Investment (FDI) has increased by 176% in

2010 and now stands at USD1.57 billion. FDI

correlates with the influx of foreign technical

expertise which is providing Mongolia with a

world class workforce.

There is also a continuous investment in

Human Capital, with the Cambridge

Assessment being in talks to restructure the

Mongol Education system to raise education

standards. Saying such, Mongolia currently

has a literacy rate of 97.3% ranking above the

likes of Greece. This coupled with a young,

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thirsty for success population, makes

Mongolia‟s future prospects even more

promising.

Moreover, Mongolia could be the next

Switzerland. People tend to be sceptical

about Russian and Chinese goods. Being a

haven for cashmere and a country where all

clothes made are organic and cruelty free,

Mongolia could tap into the upper end of the

market and be the Switzerland of Asia. This

could further European demand, and again

result in more FDI.

On the contrary, there could be a Dutch

Disease resource boom which may prevent

Mongolia from developing. The Dutch

Disease explains the apparent relationship

between an increase in exploitation of

natural resources and a decline in

the manufacturing sector. This means

Mongolia‟s increase in revenues from natural

resources, will make Mongolia‟s currency

stronger compared to that of other nations.

Therefore, Mongolian exports will become

more expensive, making the manufacturing

sector less competitive.

The resource curse also implies that

countries with copious natural resources tend

to have less economic growth and worse

development outcomes compared to nations

with less. This may be because of volatility of

revenues from the natural resource sector

due to exposure to global commodity market

swings.

A major concern is whether Human capital

can actually keep up with economic growth.

There is arguably not only a shortage of

Human Capital to keep up with growth, but

also a shortage of people in general.

Mongolia‟s population is only 2.7 million,

spread around a country 1,566,500 sq. Km.

It must also be noted the severe winter

conditions have a significant impact on the

Mongolian infrastructure. Harsh winters

result in pavements cracking, pipes freezing

and a pollution trap! This means that there is

a continuous need to reinvest in the

destroyed infrastructure which takes up

resources and money.

Overall, Mongolia still has some of the most

promising growth prospects in the world. In

a world of finite resources, a country so rich

in non-renewable resources will inevitably

develop. Although there may be a human

capital inadequacy in the short run, in the

medium term, multinationals, such as Rio

Tinto will bring in their own employees if

there ever was a human capital inadequacy.

The “natural resource curse” seems to be

nonsensical recently, with gold and copper

hitting record highs. In the long run, the FDI

and infrastructure developments

multinationals bring into the country will

allow sustained prosperity, and continuous

development.

FIXED INCOME

European Debt Crisis

Ivan Rangelov

In the period 2000-2008 it was perfectly

acceptable for European countries to run

significant budget deficits, which surprisingly

did not pose a major concern to investors.

The turmoil in the European debt markets in

the past two years however signalises the

investors have woken up. Greece triggered

market uncertainty in the bond market,

which followed by higher bond rates for

Ireland and Portugal. But considering the

deep economic integration within the EU, it is

to no one‟s surprise that the crisis which

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started in the periphery is now approaching

the heart of the EU.

Spain was the first larger economy to endure

issues with its bonds even though its debt

level is significantly lower than the likes of

Greece and Italy- only 60.1% of GDP.

Nevertheless the high unemployment and

sluggish economic growth raised concerns

among investors and the yields for Spanish

10-year-bonds have been above the 6% line.

Germany‟s 10-year-bonds for example have

yields slightly above 2%.

Italy happened to be the next major

European country to endure the pressure of

the markets. Its significantly large deficit

(120% of GDP) and yet slower than the

average for Europe economic growth over the

past decade did not seem to be very

reassuring for investors. This led to the

higher yields demanded for Italian bonds and

on November 8 they crossed the 7%

psychological barrier for the 10-year-

government bonds. Greece, Ireland and

Portugal had to seek bailouts after crossing

this line but this option would be too

expensive for Italy. The government, under

the threat of being unable to meet its

payments at the current yield, pushed for

austerity measures. This seemed to have

somewhat eased the markets and on

November 11 the yields fell sharply to 6.7%.

They continued to hover around the 7% line

for the rest of the month.

Belgium came next on the list with a

significantly large debt (100% of GDP) and a

budget deficit of 5% in 2010. Standard and

Poor‟s degraded its rating from AA+ to AA

and this caused 10-year-bond yields to

surge to 5.66%. This forced the government

to tighten fiscal policy in order to restore

investors‟ confidence, which sharply

decreased bond yields to 4.66%.

Thus country by country sovereign debt

issues have reached the centre of the

Eurozone. And if two years ago some

expressed extreme views of Greece leaving

the Eurozone, today this solution would not

be viable as most European countries seem

to struggle with their debts. Thus it is not a

single country is threatened, but the stability

of the whole monetary union and possibly

the future of the EU.

European leaders have understood the

significance of the situation and are in the

process of preparing adequate measures to

tackle the unrest in the markets. They appear

to have agreed on a deal, the details of which

are still under further discussion. Even

though it would be officially disclosed at the

European Summit on December 9, the

outlines are somewhat clear and include

three major solutions. Among these would be

a stricter and unified fiscal discipline within

each Eurozone member, with a number of

sanctions for not abiding to it. Another

measure would be to increase the funding of

the European Financial Stability Facility in

order to build a firewall against spreading

contagion among other countries.

Furthermore, the troubled economies would

be required to enhance their austerity

measures, decrease their budget deficits with

the goal of eventually restoring investor

confidence. These long term solutions do not

seem to be acceptable for all parties. French

PM Nicolas Sarkozy expressed his desire for

immediate intervention by the ECB to ease

the bond in the short term. Mario Draghi

(head of ECB) however argues the bond

markets tend to react on the long term

expectations and therefore immediate

actions by the ECB might not be required.

13

Even though the markets have reacted

positively on the news of the three pillar

package, the situation is still far from settled.

Many remain sceptical of the usefulness of

the current solutions provided by the

European leaders. Nevertheless, all parties

have recognised a fundamental- the coming

months could potentially be detrimental for

the future of the Eurozone.

FOREX

Rupee, Rupee, Rupee

Jordan Rankin

With all the attention that has been given to

the Euro-zone crisis over the past few weeks,

especially with the EU summit in Brussels in

October, it has been easy to overlook what

has been going on in other parts of the

world. One country which may be able to

sympathise with the situation of some EU

countries is India, which has been suffering

from slowing growth, a currency which is

setting record lows against the dollar and

also struggling to halt high levels of inflation.

In the last month the rupee has depreciated

by over 6% compared with the US dollar, and

it has fallen by 18% against the dollar since

the start of August. These high levels of

depreciation have resulted in the rupee

hitting a new record low of R52.73 to the

dollar. This is leaving one of Asia‟s biggest

economies with one of its weakest

currencies.

Problems for the rupee have been coming

from many sources; with both slowing

growth and high inflation, India‟s central

bank has a difficult balancing act to manage

in terms of monetary policy and at what level

the interest rate is set. GDP growth has fallen

below 7% in India and has helped contribute

to the economy growing at its slowest rate

for over two years. Although 7% may seem

like a high level of growth when compared to

the0.5% growth achieved by the UK in the last

quarter, for an emerging economy which had

previously been aiming at GDP growth levels

of over 9% it is a significant and worrying fall.

India also has the highest levels of inflation

of any big emerging economy - edging

towards 10% - and has been relying on

monetary policy to try and tackle the issue,

increasing lending rates more than a dozen

times since March 2010.

With the economy clearly struggling to get a

grip on inflation, investors have been fleeing

the rupee in favour of the safety provided by

currencies like the US dollar. This quick sale

of rupees has obviously also contributed to

the depreciation experienced over the past

months, and has given the Indian central

bank a further headache; in order to protect

the exchange rate (so as not to suffer when it

comes to importing oil or food priced in $US)

a higher interest rate would be required, but

this would then cause issues as it is likely to

further hinder the already struggling GDP

growth of the economy. China is seen by

some as the model to be followed for the big

emerging markets, its success in controlling

inflation gives investors the confidence to

put money in to the economy, something

which India and the rupee would benefit from

now.

The Indian government and the Reserve Bank

of India face a period of difficult decisions in

order to try and get the economy back under

control and pointing in the right direction

again. It is expected that there will be some

intervention by the RBI soon to try and stop

the free fall which the rupee appears to be

suffering from. As with any intervention

though, there are already worries that the

14

action taken won‟t be of the level required,

and also that because of the economic

situation in the wider world, the rupee will

continue to fall until at least the end of the

year even with intervention.

How did currencies move along

with the tumultuous economy over

the second half of 2011?

Xiaotong Hong

With the overwhelming European debt crisis,

the euro is experiencing the largest ups and

downs over the last decade. Heated debates

among economists and politicians made

newspaper headlines almost daily.

Continuous fears and doubts of the solutions

to the European debt crisis and the unstable

financial systems dampened investor

confidence. When posting an eye on the

world‟s largest economy – the United States

has also experienced a difficult period when

President Obama arduously attempted to

restore citizen confidence for the country‟s

prospects after debts were downgraded.

Therefore it is necessary to examine how

fundamental economic related events affect

the relative strength of currencies, which

reflects the power of economy. In this essay,

three months-August, September and

October, over the second half of the year are

examined, when tremendous economic

fluctuations were seen.

The Eurozone debt crisis is the major

downward pressure on the value of the Euro,

while the value of pound sterling is also

relatively affected. The debts situation in

Greece, Italy, Ireland and the peripheries are

still a great concern by European policy

makers and investors. Bailout funds for

Greece were urgently needed for the survival

of euro. The value of Euro/USD has

continuously declined over the months,

which placed European countries in a

detrimental position. Unemployment and

economic growth related figures did not give

positive prospects on the economic

development of Europe. Investors and

consumers lacked confidence in the

European economy. However, a striking

turning point happened at the beginning of

October when European Summit

compromised to recapitalize European banks

and restructure their banking systems.

Crucially, European countries took

corporative action to solve the euro- zone

debts problems. The relative value of Euro

over US Dollar seemed to retrieve to 1.40

levels.

EUR/USD Jun 2011-Dec 2011 (ft.com)

When looking at the US economy, the whole

period of July was overwhelmed by

uncertainty about US debt ceiling.

Democratic and Republican party had long

debates on whether to raise the debt ceiling.

Just 10 hours before the deadline on 2nd of

August, President Obama signed the bill

which raised the debt ceiling from $14.3tn to

$16.7tn. This caused a sharp fall in the

relative value of the US dollar relative to

other currencies. Another contributing factor

to US uncertainty was the rating agency,

Moody‟s, downgrading US credit to Aa and

scored a negative outlook in American‟s

economic growth. In terms of the

employment situation in the US, stagnated

unemployment made restoring confidence in

economic recovery more difficult, with

unemployment at over 9% over the second

15

and third quarter of 2011. From the graph of

Swiss Franc /US Dollar, we can clearly see

that the value of US Dollar fell continuously

over August, when a pessimistic atmosphere

hung over the stock markets all over the US

and the rest of the world. When examining

the nonfarm payroll data, one of the most

influential economic indicators in reflecting

the prospect of business expansion in the

US, the figures did not meet previous

predictions. This placed further pressure on

the value of US Dollar over other relatively

strong currencies, such as the Swiss Franc,

Japanese Yen and New Zealand Dollar.

Consequently, the data since the second half

of the year has not produced positive figures.

Nevertheless, when President Obama urged

Congress to pass the employment plan and

increase taxes, investor confidence in the US

increased. In the given graph, it shows the

value of a sharp rise the relative value of US

Dollar over Swiss Franc and other major

currencies.

CHF/USD Dec 2010- Dec 2011 (ft.com)

The world economy shows dynamic

developing trends over 2011, with the rise of

the East and the relative decline of the West,

places significant pressures on Western

politicians and economists. There are a

number of important questions to ask: There

remain a number of important questions to

ask. Namely, how to sustain economic

growth and increase employment? How to

maintain investors‟ confidence in the

financial markets? And crucially, how are

debt levels going to be reduced? These

questions remain of critical concern to

European and US policymakers.

Currency devaluation and does it

work

Joey Cuthbertson

In the aftermath of the Japanese earthquake,

G7 countries came together in an act of

“currency diplomacy” to devaluate the Yen,

which before the earth quake was worth

82.93 yen to the dollar. Three days after the

earthquake the yen had soared in value,

closing on the 16th of March at 79.151 to the

dollar.

For a country devastated by an earthquake

and a tsunami, the appreciating yen would

fatally stifle any attempt to rebuild its export

driven economy, with big brand names like

Toyota, Sony and Panasonic reliant on cheap

yen to drive foreign sales. This caused the

Bank of Japan to deprecate the Yen and

provide Japanese exporters with some respite

and a much needed price competitive edge.

However the effect of this initial action was

short lived, with the Central Bank being

forced to intervene 3 times since then, the

latest of which was on 31st of October.

Japan however had very little traditional

monetary policy tools available. Interest rates

were already at a historical low of 0.25% in

order to prevent deflation and stimulate

economic growth in the light of the global

credit crunch; further reduction of interest

rates would have had a minimal effect on the

Yen‟s value if the interest rate was cut to 0%.

The Bank of Japan, with the help of the G7,

would need to intervene directly in the

foreign exchange market, selling billions of

Yen in a coordinated act.

16

USD/JPY Jan 2011-Dec2011 (ft.com)

Nevertheless, there has been historical

precedent for successful acts of multi-lateral

intervention into the FOREX market. In 1985

at the Plaza hotel in New York it was agreed

to depreciate the dollar against the yen in

order to reduce the growing USA trade deficit

(the opposite from the current scenario). At

the cost of USD 10 billion the dollar value

declined 51% over two years against the Yen

and then the Deutsche mark. The success of

this was largely credit to the organized and

pre-planned nature of the action. However

the act had an unintended consequence of

creating an incentive for Japan to have an

expansionary fiscal policy, leading to the

80‟s asset bubble, which resulted in the so

called lost decade for Japan. Arguably this

act can be credited for the structural

weakness in the Japanese economy and the

historically low interest rates even before the

global credit crunch.

The effect of the 2011 intervention can be

seen in the chart. Whilst in the short term the

yen did depreciate as planed back to pre-

earthquake highs of 85 yen to the dollar,

unlike previous intervention in the market

this effect was short lived. The rapid increase

of yen in the market would of course have

this effect, however without prolonged

selling the sheer volume of demand would

make the market‟s return back to 80 yen to

the dollar within 3 months inevitable. Whilst

the 3 month respite would have helped

Japanese exports, it was not the Plaza Accord

of 1985 effect that they were looking for.

However there is one variable which differs

from the Plaza accord that no amount of BOJ

intervention can alter. The success of the

Plaza Accord can be accredited to the buying

of structurally sound funding currency at the

time (Pound Sterling, Swiss Franc, Deutsche

Mark, Yen and US Dollar) and the selling of

the US dollar to cause it to depreciate.

However with questions currently being

raised about the future of the Euro, inherent

budget deficits of the USA, the UK and Euro

nations, the market is unwilling to move

away from the relative safe haven of the Yen

and Swiss Franc (which is expected to be

devaluated as well), hence the 2011

interventions have had their long time effect

stifled by current macro economic

conditions. Thus any amount of BOJ

intervention will have very little effect on the

long term trend of Yen appreciation. In

today‟s FOREX market intervention to

depreciate a major currency will not produce

the desired effect in the long run.

COMMODITIES

An overview of the newly volatile

gold market Q3

Tomas Kiskis

Gold prices have witnessed a steady climb for

over the past decade. The only precedent to

current levels is that of January 1980, when

the precious metal peaked at $850 per

ounce. Given the purchasing power of the

dollar, inflation-adjusted gold prices in 1980

surpassed well over the $2000 mark; heights

that we have almost breached over the past

months. However, in 1980, the price of gold

feel as fast as it rose and levelled out to start

a sideways trend up until 2006 when it broke

17

the $600 mark at the peak of the US housing

bubble. Prices have subsequently risen

dramatically till the end of May 2011, closing

at $1535 per troy ounce and fluctuating

around the $1500 mark till the end of June.

Gold Price USD (goldprice.org)

July – let us get this rally started

Fuelled by ever-growing concerns about the

piling debt crisis of the US and Europe, prices

have since started hitting new records in July

2011 with the S&P 500 index and gold

starting to diverge. 2011 has seen credit

rating downgrades by Moody‟s and rising

concerns in the Eurozone, especially PIIGS

(Portugal, Ireland, Italy, Greece and Spain)

with a “likely” Greek default according to

former Federal Reserve chairman Alan

Greenspan. Coupled with an increase in

demand from the world‟s largest gold

consumer, India, it is no surprise that we

experienced a gold buying spree. It was only

at the start of July that there was some relief

with the Greek parliament passing budget

cuts that granted access to bail-out funds.

The result was a rise in Euro-dollar prices,

pushing down gold prices. But the release of

the disastrous US labour report with

employment growing by a mere 18,000

payrolls in June – prices began revving up

again. This was despite the ECB raising

interest rates up to 1.5%. Later that month,

Federal Reserve chairman Ben Bernanke told

Congress that the unemployment rate (then

around 9.2% in the US) would diminish only

at a slow rate. Adding Moody‟s downgrading

of the US to Aa rating, this has created

further pressure on raising the debt ceiling,

fuelling gold price growth. Taking into

account these events, it became unlikely gold

prices would decline apart from witnessing

corrections and profit-taking spurts with the

precious commodity finishing the month at a

price over $1600. This was despite a last

second life-raft by Harry Reid (US Senate

Majority Leader) approving the raising of the

US debt ceiling, forcing gold to drop

marginally in the face of an overall slowing

US economy with GDP reports not up to

expectations.

Gold Price USD 6 month view (goldprice.org)

August: „$ 1900? No problem.‟

During August the increases in gold price

continued despite conflicting news with the

House of Representatives finally officially

raising the US debt limit. With S&P

downgrading the credit rating of the US to

AA+, China becoming a gold net buyer

upping their reserves by as much as 800,000

ounces of gold, levelling out the playing field

with panic coming out on top and increasing

gold prices further. Further into the month

gold prices kept climbing despite CME

Group‟s (an exchange operator) increased

margins on gold trading by 22%. The

increased margins slowed down gold‟s heavy

trading, but cut only some of its gains with

weekly volatility numbers exceeding $ 70 and

landing a weekly average price of $ 1750. In

the long run, with the help of stock markets

18

crashing, the bullion indeed became the

„BULL‟-ion with the overall picture not

changing in Europe and the US providing

another disappointing labour employment

report and a possible third Quantitative

Easing programme, according to economists

from leading American investment banks.

Throughout week 3, the gold markets

experienced price swings going towards the

3-figure zone, breaking the $ 1800 mark and

finishing the week with gold prices

marginally over $ 1850. On 23 August the

spot gold price reached its record of over $

1910 on the very same speculation that QE3

will be launched by the Fed, accompanied by

the uncertainty regarding deficit reduction,

dollar weakness and worsening of the

Eurozone crisis. The result was one of the

steepest increases in gold history surpassing

the $ 1900 mark just a week after trading

above $ 1800. On the very same day gold

prices plunged to $ 1830, which many saw as

another buying opportunity seeing it as a

simple correction due to investors wanting to

bank profits from the price increase, which

was the single largest one-day decline in

year 2011 (-3.7%). On August 25, after CME

increased margins on gold trading for the

second time in two weeks, the price of gold

fell down to meet the $ 1700 mark because

of heavy liquidation of COMEX gold futures

and profit-taking. This meant that the price

of gold sank over 10% in 3 days just to later

bounce back to $ 1770. Thiswas said to have

been the consequence of a weak weekly

employment report with prices finishing the

week over $ 1825 due to ever-reviving

rumours of an upcoming QE3. The fourth

week of August let fluctuations of gold price

escalate even further with weekly volatility

exceeding $ 130. With volatility levels hardly

imaginable for a precious metal commodity

market, gold has been on its way to climb the

ladder in the long-run and seems to be

willing to stay high until positive signals are

seen in cutting some of the sovereign debt

problems.

September: „Up and down‟

Coming in to September gold prices have

escalated with enormous speeds as the US

labour employment report showed

disappointing results once again, driving the

stock and gold markets in opposing

directions. It is said the slowed down growth

of PMI (Purchasing Managers Index) could

have revived the possibility a new round of

QE. September from the start did not let

volatility levels drop much, keeping the

weekly price swings at about $ 85. On 5

September the price of gold rallied to peak at

$1902 just fractions away from the nominal

record of $ 1911 set just a fortnight ago with

chaos in the currency market, setting records

across all major currencies. On 6 September

another all-time high was reached with gold

priced over $ 1920 and then plunging to $

1860 the next trading session. This proved

to be a phenomena as the Swiss National

Bank‟s (SNB) currency intervention caused

mass selling in the gold market when it

should have done the opposite. The selling

spurt was probably due to traders that lost

from the 9% negative franc move against the

euro wanting to cover the losses by selling

gold. In the very same trading session gold

went up back to $1900 and then down to low

$1860s. The explanation – fluctuations were

probably caused by bargain hunters, who

started a buying whenever the price dropped

to 1860s. Mixed signals with the liquidity

programme which the ECB, Fed and other

central banks will provide loans to banks in

Europe contrasted with an increase in the

inflation rate, news that there will be no Q3

caused the gold market to change directions

several times during the sessions. September

saw an overall negative trend, resulting in

19

finishing the penultimate week at $1640 and

the month at $1622 with a high weekly

decline of -7.8%.

Beyond Quarter 2 (Q2)

During October the very same story repeated

itself. Prices fluctuated until mid-October

and then shot up from $ 1636 all the way to

$ 1747 when the leaders of the EU agreed on

making 50% cuts on Greek debt and to

increase the European rescue fund by 56%

and US GDP growing by 2.5% in Q3, 2011.

Prices went from then on to fluctuate in huge

volatility levels with support at about $ 1720

and resistance at $ 1800.

Gold price USD 60 day view (goldprice.org)

The aftermath of the 2008 financial

meltdown

It is thought by many that gold prices will

surely surpass the $2000 mark in the

upcoming year; some mention figures much

higher than $ 3000. Many state gold to be in

a bubble, but I personally believe otherwise

as gold is regarded as the safe haven – in

other words – as the ultimate currency to

which everyone turns when there is a

systematic failure in the financial world. I see

gold as the measure of the strength of

currencies, similar to the example of gold

prices in 1980, when at that time a bullion of

gold could have bought you the same

product it could buy today, implying that the

USD had more power at the time, but not

gold having less value at present. I am

inclined to believe that the current scenario

in the gold market shows not how deep in

„bubble territory‟ the commodity is, but how

much the fiat currencies have weakened in

comparison to gold value that has remained.

Following the same reasoning I am forced to

believe that gold prices shall increase with no

„roof‟ to come until sovereign debt problems

on both shores of the Atlantic are at least

partially resolved with these problems being

kick-started by the originate-to-distribute of

sub-prime loans „culture‟ within the

investment banking industry that lead to

CDOs (collateralized debt obligations) being

traded as AAA rating government bonds, by

some cleverly insured using credit default

swaps to protect the pockets of banks.

Did Speculation cause the surge

in oil prices?

Rav Sandhu

Oil is a necessity for all nations and

consumers. Economic theory suggests either

an increase in demand, or a reduction in

supply result in the increase in price.

However this may not be the case, due to the

way in which the price of oil has almost

tripled in the 3 years from 2005 to $147 in

July of 2008. The increased sophistication

and deregulation of the futures market

seems to have considerable bearing upon

such a steep rise in the price of oil.

From 2005 onwards, oil supplies stopped

growing and began to fluctuate between 73

million and 74 million barrels per day

through 2010. Following the stagnation in

growth of oil supplies, the world economy

continued to grow until the end of 2007

when it fell into recession. Due to such a

steep recession, production and demand of

20

oil collapsed. The price then increased even

as overall global economic recovery remained

sluggish. A swift recovery in the Far East,

resulted in a robust demand for oil even as

the West remained weak.

From 2006 to the first quarter of 2008 there

was an increase in global demand for oil and

it grew by 2.2 million barrels per day and

even exceeded the supply. The effect on the

oil market was that the price supposedly

doubled. From Q1 2008, global demand for

oil fell by 2.1 million barrels per day till Q4 of

2008, whilst oil prices continued to rocket,

suggesting that it was neither a factor of

supply or demand, which helped the price of

oil to keep surging but speculation. OPEC

believes that record fuel prices are not due to

supply and demand, but are due to „rampant

speculation‟, and has used this belief as an

excuse not to raise production by the

amounts demanded by the West.

Some analysts consider that oil prices

reached such monumental highs because of

speculation about oil futures. The belief that

oil supply is lower than it actually is and the

belief that future oil supply will be just as

low, has resulted in traders inflating the

prices of oil futures. When oil futures are

traded, the institutions that buy the oil, for

instance refiners, aim to buy oil at the lowest

price possible, as that will result in increased

profitability in both the long and short run.

If it is perceived that oil prices will rise in the

future (due to the prices of oil futures being

higher than current prices of oil), oil buyers

have an incentive to create additional

reserves and inventories of oil at lower prices

today; which then drives up demand for

crude in the present, and consequently

forces up the price of oil in the present.

Therefore this results in high prices for oil

futures and consequently leads to high prices

for oil in the present.

When prices of oil closed at record highs for

five consecutive days from May 5th 2008, a

House of Representatives committee

announced an investigation regarding the

role of hedge funds and investment banks in

pushing up prices. In June 2008, the U.S.

commodities futures regulator announced

new regulation requiring daily large trader

reports, and „position and accountability

limits for foreign crude contracts traded in

the U.S.‟

Price increases and fluctuations in oil have an

impact on the global economy and can be

potentially detrimental. The volatility in price

over the past decade, to record highs in July

2008 of $147, have benefitted many in the

financial sector, but has been detrimental to

consumers and firms. Increased regulation of

the futures market should be instigated in

order to prevent this happening again, as it

drives up global inflation significantly,

increasing costs for firms and consumers.

21

M&A Deals Overview:

Milen Kisov

Undoubtedly, the most interesting deal of this month is Virgin

Money‟s tаking over nationalised Bank Northern Rock. The deal

marks the end for one of the most notorious names in British high

street banking. Sir Richard Branson agreed on a price of £900m. It

includes £747m in cash, £150m in debt and further £130m

depending of the future development of the business. The deal has

caused a lot of arguments in the financial world. Some argue the

timing of the deal is not right given the markets are „in turmoil‟.

Furthermore, the government has made a loss of up to £500m as it

supported the bank with £1.4m worth of equity in 2010. Chancellor

George Osborne said the deal in his opinion was „value for money‟,

claiming it was the best of what they were offered.

Asian M&A market is growing significantly more than its European

and US counterparts. The overall value of the deals until mid

November was $567 bn. According to Citigroup some markets are

going to be almost as strong as they were in 2007. Analysts say that

the Asia‟s faster recovery is due to the better performance of local

economies and more stability across them. Financing is easier

because of the low interest rates and deals between different

countries are fostered by the local currencies which show admirable

stability. Some of the deals this year have been the $2.4bn

acquisition of Digital Telecommunications by Philippine Long

Distance Telephone, the $3.6bn purchase of controlling interest in

Frac Tech Holdings of the US by Temasek, the Singapore state

investment agency and the sale of 25% of RHB Capital to Aabar

Investments of Abu Dhabi for $1.9bn.

The saga with AT&T‟s deal for buying Deutsche Telekom‟s T-Mobile

USA is about to continue for unclear period of time. The most

profitable telecom in the USA was convinced there would not be a

regulatory problem with the deal. It even agreed to pay a break up

fee of $3bn in cash with another $3bn-$4bn in other assets.

However, on the 31 of August the US justice department filed an

antitrust suit to block the deal on the basis that it would make AT&T

the market leader in the USA. Today the chances of the deal still

being made are very little. Some analysts say they are as little as

20%. In spite of the difficulties, the two telecoms still expect the deal

to happen and do not have „Plan B‟. T-Mobile USA have made losses

in spite of the growing telecommunications industry. Deutsche

telecom announced it does not plan to invest any more in the US

market.

Executive

Committee

2010/2011:

President:

Frank Williams

Vice President:

Matt Ovenden

Treasurer:

Lawrence Binitie

Secretary:

Sian Whitehead

Chief Market Report Editor:

Ivan Rangelov

Market Report Editors:

Aulia Beg

Upasana Bhaumik

Jordan Rankin

External Relations Officer:

Viraj Chotai

Gabriel Adebiyi

Publicity Officers:

Florian Jaksch

Hector Sanchez

Social Officers:

Angela Musoke

Jasmine Bhasin

Events Officers:

Aman Brar

Sergei Petunov

Operational Officers:

Milen Kisov

Lee Flood

22