For Deals, Wall Street Goes East

Andrew Ross Sorkin Dealbook September 29, 2011

In 1902, the International Banking Corporation, a predecessor of Citigroup, went in search of the next big gold rush. But it did not go west. It opened up small outposts in Shanghai, Calcutta and Manila. In 1914, another Citigroup ancestor opened a branch in Buenos Aires, becoming the first big American player in the city.

The story of Wall Street in the emerging markets has been a long one, filled with twists and turns. Most recently, deal makers and big banks have been contending with the global market volatility, which is rocking such risky locales.

But in the age of globalization, with developed economies beginning to slow, emerging markets "” once considered the final frontier "” are beginning to bear fruit for patient investors and firms that have waited decades, and in some cases more than a century.

Three of the largest markets for initial public offerings last year were Hong Kong, Shanghai and Shenzhen, China. Private equity firms focused on emerging markets raised $22.6 billion in the first half of 2011, compared with $23.5 billion for all of last year. And Chile, Ukraine and Thailand are among the fastest-growing markets for deals.

Wall Street titans can truly claim the title of Masters of the Universe "” or at least the World.

"Today, Horace Greeley would say, "Go east, young man,' " said Richard Peterson, an analyst at Standard & Poor's Capital IQ.

Antonio Quintella, chief executive of Credit Suisse's Americas business, has had a front-row seat to the evolution of Wall Street. A native of Brazil, he was a summer associate at Credit Suisse in 1991 and rejoined the firm in 1997.

Since then, he has watched Brazil get its inflation problems and debt under control. Now, the big question is whether Brazil is too hot.

Despite a spate of near collapses in the region, Credit Suisse has remained committed. In 1998, the firm bought Banco de Investimentos Garantia and later acquired the asset manager and private bank Hedging-Griffo.

Through such acquisitions, Credit Suisse has built one of most powerful investment banks in Latin America. "There used to be no capital markets business there," Mr. Quintella said. "Now it's a very significant part of our business."

Here's a good measure of the significance. In 2010, Mr. Quintella was the firm's highest paid banker, taking home $17.4 million. He bested his own boss, Brady W. Dougan, the Credit Suisse chief executive, who made $14.4 million.

Big private equity firms are also investing heavily, often at considerable cost, to build a presence in countries that were once considered unthinkable. Last year, the Blackstone Group acquired Pátria, Brazil's top alternative asset manager.

The Carlyle Group, the Washington firm that made its name investing in military and aerospace, has set up more than a dozen new offices in the last five years. It has the globe covered with bases in China, Beirut, Dubai, Hong Kong and Istanbul, as well as Lagos, Nigeria; Mumbai, India; São Paulo, Brazil; and Seoul, South Korea.

"The interest among Western institutional investors to getting exposure to China, Brazil and India is clear. It's a big mind shift," said Sarah Alexander, president of the Emerging Markets Private Equity Association. And she added, they've been looking farther afield. "You've got Indonesia on the map, Colombia, Peru."

David M. Rubenstein, the co-founder of Carlyle, spent two decades on an airplane, fund-raising for his firm, often meeting with investors in remote parts of the world to put money in the United States. Now, Americans are asking him about opportunities abroad, and sovereign wealth funds want investment in their own backyards.

In 2007, I traveled to Dubai, where Mr. Rubenstein was speaking at a conference and raising money for a new Middle East fund that, at the time, was considered a speculative bet. He intended to invest in places like Libya.

Over lunch, he recalled a phone conversation the previous night with his mother about his trip. "Of course, she asks, "?Is it safe? There's always bombs going off and wars.' " He rolled his eyes: "I told her Dubai is probably a lot safer than Florida."

Finland's Parliament agreed to contribute its share despite reservations among legislators and a dispute over demands for collateral from Greece.

Some investors hope to make a fat profit on the expectation that Greece will once again be bailed out.

Asian shares were mostly lower Thursday as investors again began to doubt Europe's ability to cauterize its worsening debt crisis.

Hearings over a $7 billion Canadian oil pipeline have pitched supporters who crave jobs against critics who fear a spill would be an environmental disaster.

A massive power blackout paralyzed crucial copper mines in Chile on Saturday and darkened vast swaths of the country including the capital Santiago before energy was largely restored, officials said.

From pocketbook economics to global warming, advocates for and against the project say they are making their last stand.

The Federal Trade Commission said the sportswear maker agreed to pay $25 million to settle allegations of unfounded claims about the health benefits of two lines of shoes.

An accounting intern for "Black Swan."Two men who worked without pay on "Black Swan" claim that the studio violated labor laws.

Toyota has released music sporadically, but now it will sponsor a full campaign of record releases, videos and tour support for about 20 acts.

At $199, the color Kindle Fire is less than half the price of the Apple iPad.

Messagenet wants Microsoft to remove the Internet phone service from its ubiquitous Windows Office platform before European approval of the deal.

Kodak officials and some analysts played down the significance of the decision, pointing out the seasonal nature of the company's cash flows.

The unexpectedly quick development makes it all but certain that the court will soon agree to hear one or more cases involving the Obama administration's health care overhaul.

The cost of health insurance this year rose more steeply than in previous years, outstripping wages and adding uncertainty about the pace of growing costs.

Gov. Rick Perry of Texas has a close confidante with expertise in women's health: his wife, Anita Thigpen Perry, a nurse and career-long advocate for victims of sexual assault.

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For Deals, Wall Street Goes East

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