It has been 3 weeks since the US markets have suffered at the hands of the ailing US sub prime market and it never look like it is going to recover any time soon. This week is brand by many as the make or break week…. Will the US economy sink into a recession, global markets starting experiencing the terrifying bear kill bull scenario, let us all bow our heads and start praying!
The Signs….
Top French Investment Bank BNP Paribas announced the freezing of a couple of hedge funds causing severe panic in the market. Many financial institutions will follow suit soon.
Ben Bernake and friends have announced that the US interest rates will stay at 5.25% and trying very hard to persuade the investors the fundamentals are strong and the market will self correct.
The US, European and Asians central bank have officially pledged to pump in funds to tackle the credit crunch. The US and European big boys have subsequently pump in money into the economy.
Why should we care?
Singapore is highly dependent on the US economy. A huge part of our exports are consumed by the Americans, a huge of Singapore’s direct investments also comes from them… the US is like our sugar mummy.
The movement of Singapore Interbank Rates… Almost every single bank is being hit by their exposure to the US sub prime market. Under pressure from the market to be more conservative, banks have increased their provisions significantly, become more stringent in offering credits and holding back huge money SS to counter the redemption of loans. Be sure to see a hike in the SIR.
If the US sub prime market can crash, we should be wary of the Global Real Estate market too. In fact a lot of the global real estates are in the over-valued region and it seems that there is only one way which is down. If the real estates prices are going to fall any time soon, there might be a re-enactment of the sub prime market scenario. Watch out for the Spain real estate, best bet to crash next!
Techno Bunny
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