Banks gear up for emerging markets push

Goldman Sachs' decision to have one of its prized proprietary traders, Driss Ben-Brahim, lead the emerging markets FX sales and trading effort speaks volumes. Certainly, Goldman Sachs has made no secret of the potential it sees in emerging markets. In fact, it claims to have coined the term Bric (Brazil, Russia, India and China) economies.

Ben-Brahim had been running Goldman's global FX proprietary business since 2005, following the retirement of co-heads Christian Siva-Jothy and Geoff Grant at the end of 2004. Remaining in London, he is being mandated to grow the bank's business, with institutional investors and hedge funds looking to gain exposure to the emerging markets.

The outlook is promising. Over the past year, the emerging markets have been increasingly credited for rising revenues for a number of banks. Morgan Stanley said in its 2006 fourth-quarter results statement that it experienced record results in interest rate and currency products "benefiting from favourable positioning and activity in emerging markets" (see page 5).

Similarly, last week JP Morgan also partially attributed the 77% rise in fixed-income markets revenue to currencies and emerging markets. The bank is understood to be building up its emerging markets capabilities, as is US peer Bear Stearns.

And it looks like banks whose names are synonymous with a strong emerging markets franchise are not resting on their laurels. A market source says Standard Chartered is looking to expand in emerging markets this year, with new hires in Malaysia, Indonesia and Korea. The bank said it is always looking to hire good people across the business.

On the brokerage side, we've already seen interdealer broker Tradition hire staff from Tullett Prebon and Icap to build its emerging markets coverage in London and Johannesburg. On the options side, Reuters attributes the busiest month on its FX options dealing platform in November last year to the addition of emerging market currencies. Reuters has now added a further eight currencies to its options service including the Turkish lira, Russian ruble non-deliverable forward, Icelandic krona, Romanian leu and Israeli shekel.

Here in London, the Bank of England figures are due out shortly, which should give us a better indication of exactly how much more we're trading beyond the five major currency pairs.

Saima Farooqi, Editor