Archive for category Financial Market
BOJ to Provide 10 Trillion Yen in Emergency Credit
Posted by admin in Financial Market, World News on December 1st, 2009
By Mayumi Otsuma
Dec. 1 (Bloomberg) — The Bank of Japan said it’s ready to pump more money into the financial system after unveiling a 10 trillion yen ($115 billion) program to help an economy battered by falling prices and the yen’s surge to a 14-year high.
“If there is a shortage of liquidity we are prepared to provide more funds,” Governor Masaaki Shirakawa said after an emergency board meeting in Tokyo today that decided to offer three-month loans at 0.1 percent to commercial banks.
Bond yields fell the most in 13 months, lowering borrowing costs for companies whose profits are being threatened by deflation and the yen’s advance. Today’s action constitutes “quantitative easing in the broad sense” said Shirakawa, who earlier today faced demands from government ministers to complement a stimulus package that Prime Minister Yukio Hatoyama will release this week.
“The BOJ was facing a lot of pressure from the markets and the government, so it wanted to show that it was being proactive,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The BOJ’s understanding is that deflation risks have increased.”
The yen pared losses after earlier falling the most in more than a month on speculation the bank would take action that would limit the currency’s appreciation. It traded at 86.83 per dollar at 11:39 a.m. in London from 87.53 before the announcement. Last week the yen reached 84.83, the highest since 1995, threatening earnings at exporters including Toyota Motor Corp.
Bond Yields
The yield on Japan’s five-year bond dropped 7.5 basis points, the most since October 2008, to a four-year low of 0.455 percent. The Nikkei 225 Stock Average closed 2.4 percent higher before the decision was published.
The policy board kept the key overnight lending rate at 0.1 percent, a level that Shirakawa said is already effectively zero, indicating he is unlikely to lower the rate.
The bank also maintained its monthly purchases of Japanese government bonds at 1.8 trillion yen. Analysts expect the central bank to expand the bond transactions eventually.
“Today’s move is only the first tentative step by the Bank of Japan to a much more substantive quantitative easing policy,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “Ultimately, JGB purchases will form the bulk of that policy — and to have any meaningful effect, those purchases will have to be in excess of 2.2 to 2.5 trillion yen per month.”
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FHA considers tighter lending rules
Posted by admin in Financial Market, Housing Market on December 1st, 2009
Dec. 1, 2009
By Market Mix Up
In other news… it has been brought to many people’s attention that FHA is considering tighter lending rules. They say the percentage of delinquencies on new loans this year is on the rise. How much worse is it going to get before we hit the bottom???
This clearly isn’t a good sign!!!!!
Check out the full article from USA Today.
China’s overdue credit-card debt reported rising sharply
Posted by admin in Financial Market, Mixed Economy, World News on November 30th, 2009
By John Letzing – Nov. 30, 2009 07:27 PM est
MarketWatch.com
SAN FRANCISCO (MarketWatch) — While China has the reputation in the West as a nation of frugal savers, a state-media report Tuesday cited another sharp rise in overdue credit-card accounts, highlighting a downside to the country’s rapidly expanding economy.
Credit-card debt at least six months overdue rose 126.5% for the first three quarters of 2009 compared to the same period last year, Xinhua news agency reported, citing People’s Bank of China data.
By the end of September, China’s banks had issued 175 million credit cards, a 33.3% increase from last year, according to the report — which said that the central bank has warned of potential risks of mounting overdue credit-card debt.
Accounts overdue by six months or more made up 3.4% of China’s total credit-card debt outstanding at the end of the third quarter, a 0.3% increase over the prior period, the report said.
Credit-card debt at least six months overdue had risen 131.3% in the second quarter of this year compared to the same period last year, according to the report, following a 133.1% increase in the quarter before that.
U.A.E. Will Support Banks in Dubai Credit Crisis
Posted by admin in Financial Market, World News on November 29th, 2009
by Vikas Bajaj & Graham Bowley – Nov. 29, 2009
The New York Times
MUMBAI — The United Arab Emirates central bank on Sunday said that it stood behind domestic and foreign banks operating in Dubai after last week’s announcement that Dubai World needed more time to pay back some of its $60 billion in debt.
Dubai surprised the financial world on Wednesday when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, to agree to a six-month standstill on the debt. Global markets sank on the news.
On Sunday, the central bank said it set up a “liquidity facility” for the Dubai banks, and tried to reassure investors that the banking system there was more sound and liquid than a year ago.
Whether these moves will restore investor confidence remains to be seen as soon as Monday, when most U.S. traders return from a long holiday weekend.
In recent days, investors have begun worrying that Dubai’s debt troubles might be the first in a series of panics in developing countries that borrowed too much money in the past few years — much as in 1997, when Bangkok became the first capital to crumple in the Asian financial crisis.
Many analysts said their biggest worries were not about whether Dubai would fully repay its lenders, or how much assistance it would receive from its neighbor Abu Dhabi. Rather, these people said, their main concern was what Dubai’s problems said about the rest of the world.
These analysts fear that while Dubai may have spent its borrowed money more extravagantly than most, it is far from alone in having taken on too much debt for dubious real estate projects. Investors have already raised alarms about debts in Ireland, Greece and East European countries.
During the shortened U.S. trading day Friday, the first since the Wednesday announcement by Dubai that it was seeking more time to repay billions in loans, investors sold bonds of other emerging markets and drove up the price of insuring against a default by those same countries.
If investors’ fears about a crisis in emerging markets were realized, it would be a severe setback to a fragile global economy that has yet to fully recover from the credit crisis last year.
RBS Led Dubai World Lenders; HSBC Most at Risk in UAE
Posted by admin in Financial Market, World News on November 28th, 2009
By Vivian Salama and Gavin Finch
Nov. 27 (Bloomberg) — Royal Bank of Scotland Group Plc was the biggest underwriter of loans to Dubai World, the state company seeking to reschedule debt, while HSBC Holdings Plc has the most at risk in the United Arab Emirates, according to JPMorgan Chase & Co.
RBS, the largest U.K. government-controlled bank, arranged $2.3 billion, or 17 percent, of Dubai World loans since January 2007, JPMorgan said in a report today, citing Dealogic data. HSBC, Europe’s biggest bank, has the “largest absolute exposure” in the U.A.E. with $17 billion of loans in 2008, JPMorgan said, citing the Emirates Banks Association. Abu Dhabi Commercial Bank PJSC may be owed $1.9 billion by Dubai World, making it the largest creditor outside the emirate, said two people familiar with the companies.
“The market is very nervous about exposure to Dubai and RBS’s name has been associated with it as both a lender and a book runner,” said David Williams, a banks analyst at Fox-Pitt Kelton Ltd. in London. “People are concerned it’s going to produce a new wave of losses. Dubai is driving everything in the market at the moment.”
Stocks around the world have slumped for two days on concern a debt restructuring by Dubai World, with $59 billion of liabilities, will add to the $1.72 trillion of losses and writedowns from the global credit freeze. British banks have the most to lose among international lenders from a crisis in the United Arab Emirates, with a combined $49.5 billion of loans outstanding, according to a report from RBS that cites Bank for International Settlements data published in June.
‘Disruption and Uncertainty’
U.K. Prime Minister Gordon Brown’s government is monitoring the situation in Dubai, his spokeswoman said today.
“Clearly the restructuring announcement has caused disruption and uncertainty in world markets,” Brown’s spokeswoman Vickie Sheriff told reporters in London. Brown’s “view is that U.K. banks are well capitalized having undergone rigorous stress testing,” she said.
Dubai World, controlled by the emirate’s ruler, Sheikh Mohammed Bin Rashid Al-Maktoum, borrowed from more than 70 lenders to buy assets ranging from stakes in Las Vegas casino company MGM Mirage to London-based Standard Chartered Plc through Istithmar PJSC. The government said this week it will seek a “standstill” agreement to delay repayment of its debt, including $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC.
In Contact
“We are in touch with Dubai World, and we have been in discussions more than once today and yesterday,” Ala’a Eraiqat, the chief executive officer of Abu Dhabi Commercial, the third- largest lender in the United Arab Emirates, said in a telephone interview yesterday. He declined to comment on specifics. “We have a lot of assurances which is a good thing.”
RBS spokesman Piers Townsend in London declined to comment. The bank had 4.98 billion pounds ($8.15 billion) of loans and advances outstanding to the UAE at the end of the first half, according to company filings. That included 2.7 billion pounds of corporate loans, 1.65 billion pounds to banks and financial institutions and 596 million pounds to consumers.
U.S. banks less exposed to Dubai than European rivals
Posted by admin in Financial Market on November 28th, 2009
by Alistair Barr – Nov. 27, 2009 04:15 PM est
MarketWatch.com
SAN FRANCISCO (MarketWatch) — U.S. banks are probably less exposed than European rivals to a potential debt default by Dubai World, but a lack of transparency and the interconnectedness of the modern financial system make it difficult to know which institutions are ultimately exposed, analysts said this week.
Dubai said late Wednesday that it would restructure Dubai World, a sprawling conglomerate behind many of the largest construction projects in the Persian Gulf emirate.
Dubai World owes roughly $60 billion and has payments of billions of dollars due in coming weeks. Instead, Dubai announced a six-month “standstill” on repayments. Extending payment deadlines like this is considered a default by many fixed-income investors. Read about Dubai World’s potential default.
Shares of banks and other financial-services stocks fell Friday as investors worried about which institutions have lent Dubai World money and now face the prospect of not being paid back on time. See Financial Stocks.
However, U.S. bank shares declined less than European-based institutions because lenders in Europe are generally more exposed to the Middle East.
Cross-border banking exposure for the United Arab Emirates as a whole totaled $123 billion at the end of June, according to Brown Brothers Harriman, which cited data from the Bank for International Settlements. Yet this excludes the bond debt that Dubai World is trying to reschedule, the firm said.
Of that total, European banks hold 72%, with the United States and Japan only holding 9% and 7% of the exposure, respectively. France and Germany each account for around 9%. The United Kingdom is by far the biggest creditor with a share of 41%, Brown Brothers Harriman said.
Foreign banks accounted for $90 billion, or 22%, of the $413 billion in banking assets in the United Arab Emirates at the end of 2008, according to Jason Goldberg, a U.S. banking analyst at Barclays Capital, who cited official UAE data. “The majority appears held at European banks,” he wrote in a note.
U.S. banks also have to disclose which cross-border outstandings account for more than 0.75% of assets. Dubai, UAE and other Mideast nations aren’t listed in any banks’ annual regulatory filings, Goldberg added. “Given U.S. banks have minimal direct exposure, investors looking for exposure to the space could view any stock-price weakness as a potential opportunity.”
Why Investors Should Be Excited for a Bank Breakup
Posted by admin in Financial Market on November 23rd, 2009
by Sean Ryan – Nov. 23, 2009
The Motley Fool
With people from former Federal Reserve Chairmen Paul Volcker and Alan Greenspan to former Citigroup (NYSE: C) Chairman and CEO John Reed suggesting that banks viewed as “too big to fail” should be broken up, it is worth looking at the history of government-mandated corporate breakups and the results.
In doing so, two common themes emerge. First, break-ups of corporate monoliths seem to be a boon to shareholders; the sum of the parts tends to be greater than the whole. Second, break-ups tend to be undone over time, as constituent parts reunite.
John D. Rockefeller’s Standard Oil (1911)
Probably the most well-known such break-up was that of the Standard Oil Company, which in 1900 controlled 90% of the refined oil in the U.S. On May 15, 1911, a unanimous Supreme Court decision mandated the breakup of John D. Rockefeller’s company within six months. It was duly divided into 34 separate companies, including what would ultimately become ExxonMobil (NYSE: XOM) and Chevron.
In a recent speech to the Council on Foreign Relations, former Fed Chairman Alan Greenspan said, “In 1911 we broke up Standard Oil — so what happened? The individual parts became more valuable than the whole.”
Evidently, that came as no surprise to Rockefeller. According to biographer Ron Chernow, upon being informed of the Supreme Court decision, Rockefeller “turned to his golfing partner and said, ‘Father Lennon, have you some money?’ And the priest was very startled by the question and said, ‘No.’ And then he said, ‘Why?’ And Rockefeller replied, ‘Buy Standard Oil.’”
While pre-World War I stock data isn’t easy to come by, some have asserted that the break-up doubled the value of Standard Oil stock.
