The recent series of bailout plans brokered by governments have somewhat sooth and relaxed the nerves of many wary investors. Citigroup's financial woes were taken calmly by investors as they correctly predicted that the Government will step in. Is the worse over and have the bailouts bring bottom in sight as hailed by many analysts recently? In the short term, yes but for the longer term, I really doubt so. The financial rut is far from over and many economies have just begun feeling the pinch of global slowdown. The drop in property prices in China and unemployment woes will probably be the next big issues to unfold. Others even boldly predicted the collapse of USD and long dated US bonds etc.Interestingly, we are beginning to witness the calling off of large Merger and Acquisition activities which were proposed earlier before the financial crisis went global. Yesterday, we were made known the calling off of the proposed USD66b takeover bid by BHP for its rival miner Rio Tinto. BHP's shares rose 10% in the early trading in London yesterday while Rio's shares dropped 40%. Also, as announced after trading hours yesterday, MISC's RM3.2b reverse takeover of Ramunia also fall apart. Similarly MISC's shares price went up 6% today's afternoon while Ramunia's went limit down twice with a 53% drop. Although the buyers above(BHP and MISC) cited other reasons for the failed plan, it is a known fact that the both the M&As failed due to the continued declining of commodities prices and turmoil in the financial markets. Take oil for an example. The price is now 40% below its opening price for the year while it has dropped 60% of its July peak.
So if the above two examples are of any indication M&As activities were to slow down or coming to a stand still, how can the financial markets have reached its bottom yet and our worse woes are over?
* TheMalaysianInsider: Tourism Malaysia will advertise "Malaysia-Truly Asia" through Australian Football club Carlton Blues's jersey for AUD1m? Currently, the Blues are ranked 11 of the AFL's standing.
* US Q3's GDP growth falls 0.5% amidst sharpest contraction in consumption since 1980.
* Bloomberg: Fed risks "spitting in the wind" with the new USD800b pledge.
* Indonesia considering a USD3b crisis loan to help the county whether the global financial crisis.
2 comments:
Things sometimes go down before they go up, it happens alot in stocks. The bailout's are leading to easier ways for you and I to get out of debt. The debt situation is getting better. With the recent bailout, it has opened more doors for the consumer. Most people don't take the time to check all options before claiming bankruptcy.
Debted.blogspot.com
Hi Mberenis,
Thanks for your comments and giving me a link to your blog. Hope to visit it more often in the near future.
Although bailout, temporary funds and overnight lending backed by the US government seems to be on the rise, credit conditions still show a lack of liquidity in loans between banks and to consumers. However,I do agree with you that some progress is seen lately and hopefully improving further.
In order for bankers to overcome fear of default and consumers confident to spend, counterparty risk (risk of default) must be reduced – a rather difficult proposition in a recession.
Post a Comment