Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (2131)	2/13/1998 3:16:00 PM
From: Bucky Katt	Read Replies (2) \| Respond to of 9980

Japanese bank alarm bells fail to unnerve markets By Brian Spoors LONDON, Feb 13 (Reuters) - Long-standing concerns over Japan's banking system came back into focus on Friday as a top rating agency sounded alarm bells, but financial markets were already ahead of the game. Analysts said Japanese asset markets may be in for more suffering, but news that Moody's Investor Services was considering downgrading three Japanese banks only confirmed what everybody in the market knew. ''The signs were there for a long time,'' said Chris Furness, senior market strategist at 4CAST. He said concerns were being aired as early as last June that some banks could be in trouble with the Nikkei index at its then-current levels. At the same time, the ramifications of the wider Asian crisis were becoming common knowledge. ''Everybody in the market understood that a lot of the loans outstanding to the Asian region came from Japan and the BIS (Bank for International Settlements) came out with figures to prove it,'' he said. Moody's on Friday said it was considering downgrading some ratings for Bank of Tokyo-Mitsubishi Ltd (BTM), Dai-Ichi Kangyo Bank Ltd (DKB) and Nippon Trust Bank Ltd(8405.T). The move was criticised as being defensive and overdue coming so long after contagion had swept through Asia leaving the lending of some of Japan's major banks exposed. ''The rating agencies have lost a lot of credibility and now they have to run very hard to stand still,'' Furness said. Other observers noted the announcement sounded a warning just when investors' views of Asia in general seemed to be turning more positive. In mitigation the agencies were faced with low quality disclosure and lack of transparency in the Asian financial sector compared with other regions, they said. ''In the last week or two, equity markets have jumped to the conclusion that the Asia shock has happened and done and things are going to rebound and get back to normal,'' said Robin Marshall, chief economist at Chase. ''All that looks wildly optimistic and this downgrading is part of a reality check on this,'' he added. The rerating of Japan's largest bank caught the eye of some analysts. ''Bank of Tokyo-Mitsubishi is the No.1 bank so that is slightly a surprise,'' said Furness. ''It is unusual for a big bank to be downgraded. (In this instance) it doesn't really matter unless they have found something which we don't know about that is extra,'' he added. Chase's Marshall said the agencies had been inflexible. ''They are either going to be accused of being too aggressive or being too slow to move the ratings downwards,'' he said. ''(The agencies) generally have been a bit too rigid and loath to move more flexibly in the past. There were complacent to start with and probably a bit shell shocked now.'' He said the huge capital flows and consequent international bank exposures of the modern market meant they could no longer measure risk as they had done in the past. Analysts were wary of a recent rally in the yen and Asian equities, noting it was based partly on information seeping out of Tokyo about the Japanese government's reflation package due on February 20. ''All they are telling us is that they are going to do the minimum necessary,'' said Marshall, adding that any further ambitions were stunted by the government's ''eccentric attachment'' to a stronger yen. ''The rebound was driven to some extent by the fact that the markets have fallen almost to almost extreme, undervalued levels,'' Marshall said. ''But the growth outlook remains appallingly weak. There is going to be no growth in Asia this year,'' he added. For many foreign investors, Asia remains a no-go area although that is down more to potential industrial bankruptcies and restructuring than to worries about the financial system. ''The time to buy might be a few more months down the road,'' Paul Burik, chief investment officer at Commerz International in Frankfurt recently told RFTV.