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Times of Malta – The situation in the international financial markets, although still displaying signs of uncertainty, seems to be settling down. Governments in the major economies, US, UK, Germany, France and Italy, no longer seem to be chasing fairies (or bad witches!), but appear to have got ahead of the situation.
The money markets (which were a major issue) are getting unblocked and as such even interbank lending rates are going down. However, this does not mean that the world has solved all its economic problems. We have simply gone back to the situation of a few months ago, when there was already fear of an international economic slowdown resulting from the increases in the price of oil and the consequent rise in inflation.
The recapitalisation of financial institutions by different governments, the partial or full re-nationalisation of such institutions and the continued provision of liquidity by governments to the financial system have restored a level of confidence that at last allows the system to function, even if not at an optimum, at least to an acceptable level.
KEZI – Most Asian stock markets recovered Monday after last week’s historic sell-off as governments around the world intensified efforts to boost the ailing financial system.
Hong Kong’s Hang Seng Index, which tumbled more than 7 percent Friday, opened over 2 percent but shed its gains to trade about 360.50 points higher, or 2.44 percent, at 15,157.37.
In Australia, the S&P/ASX200 index was up 4 percent in response to a government plan to guarantee bank and other lender deposits for three years. The benchmark plunged over 8 percent on Friday, its biggest single-day fall ever.
South Korea’s benchmark gained more than 2 percent and Singapore’s key stock measure was up about 1 percent. But China’s key Shanghai index traded 2 percent lower, while Taiwan’s benchmark lost more than 3 percent.
Washington Post – It’s easy to explain the continuing financial chaos — and the failure of governments to control it — as the triumph of psychology. Fear reigns, and panic follows. Everyone dumps stocks because everyone believes that everyone else will sell. Only rapidly falling prices attract sufficient buyers. All this is true. But it ignores the real engine of mayhem: "deleveraging." That’s economic shorthand for purging the financial system of too much debt.
Just how this deleveraging proceeds will largely determine the fate, for good or ill, of the crisis. The turmoil has already moved beyond "subprime mortgages," which (it now seems) merely exposed widespread financial failings. These were global, not just American, and their pervasiveness explains why leaders of the major economies have struggled, so far unsuccessfully, to fashion a common response.
Alone, American subprime mortgages should not have triggered a global crisis. Losses are smaller than they seem. Mark Zandi of Moody’s Economy.com estimates that all U.S. mortgage losses will ultimately reach $650 billion. But that hefty amount pales against the value of all financial assets — stocks, bonds, bank loans. For the United States, these totaled almost $60 trillion at the end of 2007; for the world, the comparable figure exceeded $250 trillion.
Bloomberg.com: UK & Ireland – “I’ve never lived through something like that,” Stephen Jarislowsky, the 83-year-old chairman and founder of Montreal-based money manager Jarislowsky Fraser Ltd., said yesterday about the past month on Wall Street.
“I don’t even think the ’30s were like that,” he said in a telephone interview. “At least they had a bank holiday and they closed all the banks. These idiots in Washington didn’t do that.”
On the worst day in global financial markets in 21 years, investors who have seen it all were left shaken. After the U.S. House of Representatives voted down a $700 billion rescue package supported by President George W. Bush and leaders of both parties, $1.2 trillion of market value was erased from U.S. stocks.
“I’m more than worried,” said Jarislowsky, who co-founded his firm in 1955 and oversees C$51 billion ($49 billion). “In a market like this, I’m not looking at opportunity. I am looking at preservation of capital. If governments aren’t careful and this mess isn’t solved fast, capitalism as we know will be wiped out.”
Business Day – Private equity firm Actis says equity funds have embraced investing in Africa because many governments have instituted market reforms which are creating opportunities for brave investors willing to take a long-term view on Africa.
“There is increased private equity interest in the continent, illustrated by numerous new (private equity) funds being raised for Africa," Peter Schmid, head of Actis Africa, said yesterday.
His firm recently led a consortium to acquire Alstom South Africa, a big electrical engineering, manufacturing, distribution and contracting business, for R5,16 bn.
Analysts say the lure of emerging markets in countries such as Russia, China and India, and now Africa, has grown stronger after the bruising credit crunch in the US and Europe.
