I thing the "Asian hype" is probably over so far
Naaahh!! Japan, and Korea to an extent, are just beginning. Trust me, I see and work in it every day.
American year end is approaching. Japanese banks constantly have huge funding requirements in dollars. US banks like to tidy up their balance sheet at year end for regulatory reasons, which means not rolling over their short term loans. 90% of the Japanese banks don't have a US retail business, so have no source of $ funding. So they have to go to US banks. US banks don't want Japanese names on their books. Net result = Japanese banks have to pay a premium to borrow $ over year end. Normally, it's bad. This year is turning out to be a massacre. No-one wants to lend to them at almost any rate. They are having to pay premiums of 0.50% for 3 month money at present. Believe me, it might not sound like much, but it is. In fact, they're so desparate that in some cases they are prepared to lock in funding for 5 years at premiums of 0.10% and above. Struggling under bad debts is bad enough without having to borrow all your money at a premium rate double what you pay your depositors. Very ugly indeed. Moreoever, the spiral is taking effect: the bigger the premium, the more foreign banks worry about their ability to sustain it, and hence charge a bigger premium yet, etc. etc. Moreover, the Nikkei is approaching 15,000 which makes many Japanese banks insolvent on Western accounting standards.
I don't understand it fully, but I think this is the gist of it.
Neil. |
