- Announced today in asian trade -one of Japan's listed non bank lender FCSG filed for bankruptcy under the weight of USD 3 bn debt on bad loans to small and medium companies. This is the tenth listed co bankruptcy filing so far this year.
As we witness Japan's economy slamming into a wall, USDJPY shook up and rocketed to as high as 94.93 from 93 in asian trade as investors dumped the JPY for safe haven USD.
- today we also learnt of how terrified the stock market is of nationalisation - more specifically, the US government buying up all of and owning Citigroup and Bank of America. as news of state ownership surfaced on last Friday's NY trading, stocks were dumped like hot potatoes.
the Dow closed just 100 pts lower las Friday, after it had been trading more than 200 pts lower on the day - soothed by statements from the white house saying they think 'banks in private hands are the correct way to go'
- nationalisation is scary because it wipes out shareholder value and effectively only promises creditors residual ownership of the firm or any returns when and if it does happens. fortunately for the market, obama's officials later came out to say they do not believe in a permanent nationalisation - that breathed some hope into the market
nonetheless, senator Dodd announced; even if there were state ownership of banks, it would be temporary - hence he hinted that at this stage, it cannot be ruled out.
- then in asian trading today, wsj reported that the US government might convert the preferred shares of BoA and Citi into common equity, this piece of news lent the markets a boost.
why?
even though this dilutes common stock, it allows the common shareholders to continue to have ownership of the banks (resulting in better shareholder value, or whatever is left of it) as compared to total nationalisation.
to do this also will improve the banks' TCE - a more conservative measure of a bank's health compared with Tier 1 ratios - and that will put the banks in a better position for the stress tests for Geithner's bank aid plan in the days later.
- the forex market reacted strongly.
stocks traded a tad higher in asian-london trade.
EURUSD surged to a high of 1.299 in london trading (but was sold off to 1.2720 at the time of writing).
GBPUSD traded up to 1.466 (1.4532 at writing).
- however, the Dow is trading 90 pts lower right now as i write - i think there is still plenty of uncertainty in the market at the moment. and until we hear of more concrete steps by the US government to steady the financial ark in a big way, investors are sick of holding on to risky assets and hoping for the rain to stop.
Dow looks to drop through last Nov lows.
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