While we wait with bated breath on whether the USD700b bailout bill would be signed into a law by the US Congress within the week to steer the US markets from a financial disaster; Japan, China and other larger holders of US government debt are watching each others moves and stances regarding the hugh debt investments they are holding. They may be asking themselves "Should we sell first or wait?", "Are our investments safe?" or "Will US default in the debt?". I believe this is worrisome as any of the big selling of IOU may trigger panic selling among the others as well. Will any form of agreement between the holders as suggested below help to stem the possibility of panic selling?
Bloomberg: Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
* Bloomberg: 3 months interbank offered rates rose in Singapore, HK and Australia today as concerns that the US law makers may delay or dilute the Treasury Department's USD700b plan to bailout the banking system.
UN's World Investment Report: Outflows of FDI from Malaysia rose to USD10.98b last year from USD6.04b in 2006. Inflows increased to USD8.4b last year from USD6.04b in 2006.
* Fuel prices reduced again today for the 2nd time in 2 months. RON 97 RM2.45 per litre(Previous:RM2.55), RON 92 RM2.30(Previous RM2.40) and Diesel RM2.40 (Previous RM2.50) Crude oil is currently trading at USD106 per barrell.
* A quarterly survey by the Chinese Central Bank showed that residents' interest in buying a home had dropped to a 10 year low as China's property market enters a downward correction.
* China Economic Review: Foreign funds will return home as RMB slows against USD. China's currency has lost 0.45% against the USD since June this year.
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