Smart Borrower Blog

Asian Markets Troubled By Sub-Prime Fiasco


Aug 24th, 2007 @ 8:45 AM by Alden Smith


Asia’s three central banks are showing signs of trouble from the sub-prime debacle here in the US. Shares in Singapore’s DBS Group Holdings (DBSM.SI), (author’s note: no quote available) state-controlled Bank of China (3988.HK) and its Hong Kong subsidiary, BOC Hong Kong (2388.HK), all took a beating after they revealed a combined exposure to the U.S. sub-prime mortgage market of almost $13 billion. It indicates that the Asian banks, thought to be more suspect in financial woes, have been more vulnerable than most investors think. Stock markets from Sydney to Seoul fell in response to this news, causing Asia to have its first major losing session since last Friday.

The American and European Markets

Confidence in the market took a death toll on Wall Street and the European arena after  Countrywide Financial (CFC.N) chief Angelo Mozilo  stated that the United States could be dragged into recession.   “I’ve seen this movie before and the ending of the movie always ends up in some form of recession,” he said.  CFC has just received $2 billion in bailout money from Bank of America, to bolster its liquidity.  The Fed also injected $17.25 billion into the banking system on Thursday

The European View

The FTSEurofirst 300 index (.FTEU3) of top European shares was down 0.3 percent. Britain’s FTSE 100 (.FTSE) was flat, Germany’s DAX (.GDAXI) (author’s note: no quote available) lost 0.4 percent and France’s CAC 40 (.FCHI) was down 0.1 percent.  The figures show that the European market is weak, and could bust a five day winning streak.

The Japanese Market

Japan’s Nikkei (.N225) share average slipped 0.4 or 67.35 points at 16,248.97. It Managed to finish the week up 6.4%,  its biggest weekly percentage gain since October 2002. The broader TOPIX index (.TOPX)  edged down 0.37 percent to 1,585.85.

What’s Happening Here 

Regardless of the volatility in the marketplace world wide and here at home, on the personal level, many are suffering.  Thousands in the mortgage market are losing their livelihood, and this only adds to a furture downturn in spending.  NBC nightly news ran a story last night on a Chicago doctor with a high credit score who had closed a deal, was halfway moved into his new home, and received news after he thought the loan was secured that financing was no longer available.  A woman in Denver who has a home with an ARM mortgage feared losing her house because the ARM was adjusted to a point where her payments on this modest place was $3,200.00.   She was unable to meet these obligations and almost faced foreclosure until help arrived for her in the form of an institution that worked with people facing foreclosure.  This scenario plays out over and over due to market volatility.

Where Will It Lead?

No one can predict where this debacle will take us.  Every expert in the country has a different viewpoint on how to cure these ills.  It is obvious that markets are in a bind world wide, and only a large infusion of cash from outside sources seems to be providing stability. The reality remains that many people are suffering, no matter what happens in the world of high finance.  And that is the thing that is most troubling…

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