World economy talk

[uls]

RE: Japanese finance minister

malamang press release lang yan

Tokyo hasnt intervened in the currency markets in years

RE: US "strong dollar policy"

hahaha

don't believe what they say

look at what they do

[uls]

check out Dow futures -- negative 210 and falling

[tidus1203]

And as time goes it gets harder and harder to intervene in the markets because just the sheer size of the market makes it hard to manipulate it unlike before...

[tidus1203]

check out Dow futures -- negative 210 and falling

Yeah because of yesterday's holiday they have a lot of catching up to do. Europe already fell 3% yesterday, Asia today Nikkei down 170 pts, most likely because of the JPY's advances and just overall pessimism... Hong Kong down some 690 pts...

[uls]

Japan raises prospect of G7 statement as dollar falls
http://www.reuters.com/article/ousiv...5AQ02I20091127

TOKYO (Reuters) - Japan's finance minister raised the prospect of a Group of Seven joint statement on currencies to cool the yen's rally as the dollar tumbled to a 14-year low against the yen on Friday.

In a sign Tokyo was stepping up its warnings of the chance of currency intervention, market sources said the government and the Bank of Japan had been checking dollar/yen rates with commercial banks in the morning.

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oil and gold fall

oil below $75

[uls]

see gold plummet

[uls]

Flight to safety

reversal of the short USD trade

Gold Spot


NYMEX crude


USD index

[uls]

S&P500 futures

[tidus1203]

YEHEY! YEHEY! YEHEY! Finally the much awaited correction I am looking for in GOLD!

[Monseratto]

Hope the Dubai default problem won't cause another financial meltdown. Are there many large bank institutions with a lot of exposure with Dubai? Are there any institutions that have insured such default and are they financially sound?

LONDON – World stocks tumbled Friday amid fears that the fallout from Dubai's problems repaying $60 billion in debt would derail the global financial and economic recovery.

Sentiment among investors has been hit hard by Wednesday's news that Dubai World, a government investment company, has asked creditors if it can postpone its forthcoming payments until May. That has stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets.

Asian stocks were particularly badly hit as they played catch-up following big losses in Europe in the previous session — the main indexes in Hong Kong and South Korea slumped nearly 5 percent. Hong Kong's Hang Seng ended 1,075.91 points, or 4.8 percent, lower at 21,134.50, while South Korea's benchmark plummeted 4.7 percent to 1,524.50.

[tidus1203]

AFAIK mostly European banks, but even the US banks should have some exposure. Remember there was fervor investing in the Middle East in the past years. Mostly real estate...

[uls]

yes mostly European banks

HSBC and Standard Chartered have biggest exposure in UAE

[uls]

Monseratto:

Hope the Dubai default problem won't cause another financial meltdown. Are there many large bank institutions with a lot of exposure with Dubai? Are there any institutions that have insured such default and are they financially sound?

financial meltdown hindi siguro

but what it can trigger is risk aversion towards emerging market debt

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as for today, it triggered flight to safety

the short USD/long risk assets trade has been overcrowded already for some time

everyone is on one side of the boat

all that was needed was a trigger to cause everyone to rush to the other side of the boat (sell risk assets, buy USD)

Dubai was the trigger

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as for credit default swaps...

don't know who the protection sellers are

siguro naman hindi na nagbebenta ng bond insurance ang AIG hehe

[uls]

USD index back below 75


NYMEX crude makes a comeback

back above $75 per barrel ($76.05, hit a low of $72.39 yesterday)



Gold bounces back too

[tidus1203]

Pero as we learned in history small crisis can become bigger ones. Remember the current financial crisis started from the small "sub-prime" sector of the housing market. Sub-prime being low credit quality. I remember Bernanke and Paulson (Paulson being the Bush administration's Treasury secretary; ang mga experts natin kuno) testifying in Congress (yes, testifying uner oath) that the problems are contained and will not spread! And we know what happened, the rest is history!

The problem that could arise is if other Middle East (the Kuwaits of the world, the Quatars and the Bahrains) also have over extension in debt that they will also request a standstill in debt repayment then we can have a small problem to another big problem that might hit other banks as well who have exporsure to these "credit worthy" soveriegn debt. Reminds me how this crisis all started with a speculative hedge fund from Bear Stearns then spread to big mainstream banks.

[uls]

yep

investors will become very cautious when it comes to emerging market debt

investors do not look at countries individually

they look at entire regions

and right now, all Gulf states are considered high risk

not only that, the Gulf states are part of the emerging markets

and as of last night, the spreads on emerging market debt has widened

Emerging-market debt takes a hit with other risk assets on the Dubai debt crisis. Spread on JPMorgan’s Emerging Markets Bond Index Global 14bps wider to 338bps over Treasurys; index pulls back 0.9%. It’s the widest spread seen on the index since the beginning of November. Argentina sees biggest hit, with its spread wider by 34bps to 735bps; index down 5.4%. Brazil’s benchmark Global 2040 bond down 1 to 135 7/8 bid

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Dubai Crisis May End in ‘Major’ Default, BofA Says
http://www.bloomberg.com/apps/news?p...8uqjoLCQ&pos=2

Nov. 27 (Bloomberg) -- Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.

“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.

A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.

--

as investors become more risk averse towards emerging markets, it will become more difficult and more expensive for companies and governments of developing countries to borrow money

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what happens when you can't refinance?

you default

[tidus1203]

This is just a by-product of the still since 2007 financial crisis. It all stems to countries, banks etc. that are using too much debt and can't pay them without access to even more debt!

[uls]

yep

this is still a carry over of the financial crisis that began in 2007

Dubai behaved exactly like the US consumers

during the boom years pre-2007, Dubai borrowed and spent like crazy

Now Dubai can't pay back its debt coz it isnt making enough money on the real estate developments it spent the borrowed money on

they have to refinance

who the hell will lend Dubai money?

[uls]

RE Dubai debt

Central Bank prepares to limit Dubai fallout
http://www.thenational.ae/apps/pbcs....711289817/1133

Last Updated: November 29. 2009 2:30PM UAE / November 29. 2009 10:30AM GMT

The Central Bank is preparing to limit the fallout to the banking system from the recent decision by Dubai World to ask its creditors for a freeze on debt repayments.

Lenders in Abu Dhabi and Dubai hold billions of dollars of Dubai World debt and the company’s decision to ask for a payment holiday could hurt bank share prices when trading resumes tomorrow.

“The Central Bank is considering measures to limit the risk of systemic damage to the banking system,” said an adviser to the Government, adding that an announcement was expected tomorrow.

Members of the Dubai Government met Central Bank officials in Abu Dhabi yesterday to discuss the measures.

The Central Bank is keen to avoid banks taking provisions for bad loans to Dubai World, which would negatively affect profitability at a time when results are already suffering from the global economic slowdown.

The Central Bank is also keen to avoid further downgrades of credit ratings of the banks.

A spokesman for the Central Bank said it was “monitoring developments to ensure there is no negative impact on the UAE economy”, according to a report by Reuters.

Meanwhile, advisers to Dubai World are working on a plan to enable the troubled conglomerate to meet a crucial deadline for repayment of one of its most important debts – the US$4 billion (Dh14.6bn) that its subsidiary Nakheel is due to pay back in just over two weeks.

This is one of four options being considered.

If Dubai World were able to make that payment, it would create breathing space to deal with the rest of its liabilities – which currently add up to $59bn – and reassure world markets about Dubai’s financial condition.

Nakheel

wiki:

Nakheel is a real estate developer in Dubai and creator of several land reclamation projects, including the Palm Islands, the Dubai Waterfront, The World and The Universe Islands.

Nakheel's flagship properties are the three man-made palm tree shaped islands on the coast of Dubai. Nakheel operates under the umbrella of Dubai World, which manages various businesses on behalf of the Dubai government.

on Dec. 14, 2006, Nakheel issued a 3.52 billion USD sukuk (Islamic bond)

on Dec. 14, 2009, Nakheel has to come up with 4 billion USD

for finance geeks, here's the term sheet



Dubai World May Pay Nakheel Sukuk by Deadline, National Says
http://www.bloomberg.com/apps/news?p...d=afy4pjy_tmiE

Nov. 28 (Bloomberg) -- Nakheel PJSC, the Dubai-owned developer whose parent is seeking to delay debt payments, may still meet the Dec. 14 deadline to pay a 14.7 billion United Arab Emirates dirham ($4 billion) Islamic bond, The National said, without citing anyone.

Options also being considered by Aidan Birkett, managing partner for corporate finance for Deloitte LLP, include offering holders of the sukuk an 80 percent redemption, and a similar offer to bankers, the newspaper said.

Dubai World might also proceed with a debt holiday under its standstill proposal made on Nov. 25 as it seeks to negotiate the extension of maturities including the Islamic bonds due Dec. 14 from its Nakheel property unit, the National said.

The state-controlled company might choose to liquidate assets as a last resort in response to any legal action by creditors, the National said.

that's just $4B

Dubai has $60B-$80B total debt

[uls]

Risk appetite is back

USD weaker against all major currencies

USD/JPY 86.23

EUR/USD 1.05065

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Nakheel Seeks Sukuk Suspension Until Further Information
http://www.bloomberg.com/apps/news?p...02zYTXyA&pos=2

Nov. 30 (Bloomberg) -- Nakheel PJSC asked Nasdaq Dubai to suspend the trading on all its islamic sukuk bonds until it is in a position to provide further information, according to a statement to the Dubai bourse.