Outlook: Like him or loathe him, Soros is in the right
Tuesday 23 September 1997
There's nothing particularly new in the Malaysian premier's complaint. From George Brown's famous fingering of the "G-nomes of Zurich", politicians the world over have tended to blame their economic ills, given the chance, on the antics of international speculators.
In recent years, however, the speculator has come to be seen in a rather more favourable light, even a force for good if the end result of his activities is what turns out to be a necessary economic adjustment.
That is what has occurred in the Far East. The IMF has been warning for several years that the Pacific Rim economies were floating on a dangerous mixture of unchecked credit expansion and speculative froth.
The only real puzzle is that it has taken the likes of George Soros so long to move in on the region and exploit it. What he and other speculators have done is certainly accelerate the pace of crisis, and possibly by over correcting in the way markets always do, deepened it a bit. But there is little doubt that the punishment capital markets are inflicting on the region is thoroughly deserved.
By attempting to fight it, Mahathir and others are just exacerbating the situation. The region's growth has been fed by foreign capital. Now to turn round and try and impose capital controls in an attempt to stop what the speculators are doing is merely going to make a bad position worse. If a country is in need of foreign capital, about the worst thing it can possibly do is attempt to prevent it getting out. Mahathir and others in the regional are living in the financial equivalent of psychological denial. It's always so much easier to blame the nasty foreign speculator than acknowledge your own failings.
Mr Mahathir's strictures are naturally very much directed at his own domestic audience, but when phrased in such intemperate and backward looking language, he shouldn't be surprised if he is taken seriously by the financial markets as well. Mr Soros is right. Mahathir is a menace to his own country. He is making a bad situation worse and by doing so he is performing a grave disservice to his own people. If the international capital markets help hasten his demise, that would be an added bonus.
If it is true that National Westminster Bank has put Gleacher, its US corporate finance business, up for sale, then plainly things are in a rather more serious state round there than anyone imagined. Or are they?
NatWest was downplaying the reports yesterday, but that Gleacher is up for sale is certainly what many of its rivals think. It is little more than eighteen months ago that NatWest bought Gleacher. More dramatic U turns in corporate strategy than this have certainly been known, but they generally don't take place under the same management.
Investment banking was to have been a cornerstone of the NatWest Group. To further these ambitions, the company bought in short order Gleacher, Gartmore, Greenwhich Capital Markets and Hambro Magan.
Even before NatWest discovered a blackhole in its options book, none of these acquisitions looked particularly inspired. The partners of Hambro Magan, once a booming corporate finance boutique, seem to have been out to pasture, or possibly lunch, ever since NatWest picked them up. NatWest might be well advised to get them off the pay role too.
Martin Owen, chief executive of NatWest Markets, has done the honourable thing and hymn book in hand, fallen on his sword.
But he was hardly the only or even the chief architect of all this. That the chairman and chief executive of NatWest can so brazenly reverse a strategy they embarked on such a short time ago almost begars belief.
Unless, of course, you believe what the share price is saying - that the bank is being groomed for takeover.
Three possible suitors are known to have given NatWest the once over already - Abbey National, the Prudential, and Barclays.
To that list can now be added the Halifax, which is said to have a not insubstantial team evaluating the possibility of a merger. Plainly, investment banking of is no interest at all to Halifax.
It may involve some swallowing of pride, but if what Lord Alexander and Derek Wanless are doing is attempting to make themselves more appetising to others, then shareholders might have something to thank them for after all. In attempting to improve its return from investment banking, NatWest is probably on a hiding to nothing. The more direct route to shareholder value may be for NatWest to get out of this business entirely.
Karel Van Miert is not exactly flavour of the month at British Airways. Nor has he endeared himself to Lord Sterling's ferry company P&O. In fact, given the frequency with which he journeys from Brussels to London these days, his travel options are beginning to look decidedly narrow.
The European Competition Commissioner is in town today to talk to Margaret Beckett about the P&O-Stena ferry merger.
Yesterday he was giving the BA-American Airlines alliance more stick. In case the accountancy profession thought it had got away with it, he is about to get his teeth stuck into the Coopers & Lybrand-Price Waterhouse merger.
What, you may ask, is going on? How, you may wonder, can one man wield such unfettered power? Why, you may conclude, can't Brussels keep its big nose out of matters that don't concern it and leave the markets to make sure the consumer is properly served?
Well, in these days of international capital, multi-national corporations and global alliances, Mr Van Miert is the regulatory equivalent.
A one-man competition authority who can side-step the physical boundaries of nation states and take on the cartels wherever they seek to set up.
Sometimes he oversteps the mark. It remains a mystery why Brussels ever thought it had the right to vet a merger between two American planemakers. As it transpired, the concessions it wrung out of Boeing were largely academic.
Sometimes Brussels needs to pay more attention to the principle of subsidiarity - the idea that competition law is best made and implemented at local level.
Both the BA-AA and the P&O-Stena mergers raise issues concerning distinct markets but in the case of aviation at least, the ramifications of the merger proposed by BA and AA go far beyond these shores.
But Mr Van Miert and the Commission's competition directorate DG4 are not going to go away, nor can they be ignored. Indeed, if anything, their writ will run wider as more mergers fall into Brussels' lap for approval.
Little Englanders may abhor it. Big business may fight it. But global corporations have to learn that global regulation comes with the territory.
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