Central banks infuse big money to boost confidence in financial market

www.chinaview.cn 2008-09-19 00:45:32  

    BEIJING, Sept. 18 (Xinhua) --

Major central banks across the world on Thursday acted promptly to infuse thousands of millions of U.S. dollars into the financial market to rescue the battered sector and restore confidence among investors.

    According to a statement by the U.S. Federal Reserve, the institution has allocated 180 billion dollars in swap lines, or reciprocal currency arrangements, with central banks in Europe, Japan, Britain, Switzerland and Canada to increase liquidity in the financial market.

    Fed also urged major central banks to continue their cooperation and take appropriate steps to address the ongoing pressures.

    Global financial markets tumbled after the historical "Black Monday," when one of the biggest U.S. investment bank Lehman Brothers filed for bankruptcy protection, only a day after another financial giant Merrill Lynch agreed to sell itself to Bank of America for roughly 50 billion dollars to avert a deepening financial crisis.

    The Fed move on Tuesday to save American International Group Inc., an insurance giant, from bankruptcy by granting an emergency loan of 85 billion dollars. The move, however, did not seem to convince investors that the worst would soon pass.

    Major stock indexes across the world continue to plummet Wednesday, with many registering the largest single-day drop in recent years.

    It's definite that more drastic measures are needed, analysts said, but none could tell for sure what way may prove efficient and effective.

    According to official figures, the Bank of England has provided a total of 25 billion pounds (44.8 billion U.S. dollars) to markets since Monday, and the Bank of Japan also pumped a total of 8,000 billion yen (about 76 billion U.S. dollars) into the markets in recent three days.

    Nevertheless, the continuous infusion of money into the markets seemed to work. Stocks jumped Thursday after the previous session's drastic decline, but safe assets such as gold and Treasury bills still saw heavy demand as investors are expecting more instability in the financial system.

Editor: Mu Xuequan

Russian Government unveils steps to counter financial meltdown

Russia Today, September 18, 2008, 20:39

The Kremlin has been working overtime to restore investor confidence: President Medvedev on Thursday asked for an injection of $20 Billion to prop up the financial system.
Finance Minister Aleksey Kudrin promised to cut export duty on crude starting Oct. 1, saving Russian oil companies around $5.5 billion. He also pledged additional emergency loans.

“We've made the decision to ask the three banks -- Sberbank, VTB and Gazprombank -- to support small and medium-size banks… using budget money. They will also loan about $2.5 billion to the stock market...using equity as collateral. This will boost liquidity and stabilize the stock markets.”

For its part, on Wednesday the Central Bank slashed its reserve requirements for all commercial banks, leaving them with more cash to lend.
But will all these measures be enough to reassure the stock market, when it resumes trading on Friday? Yaroslav Lissovolik, Chief Economist at Deutsche Bank Russia say they should be.

“This is potentially one of the triggers for a turnaround in the financial markets, and, more specifically, in the stock market.  The amounts allocated by the government will be sufficient to stabilize the situation at least in the short term.”

The markets have already responded as Russian ADRs traded abroad have moved into positive territory. Now all eyes are on the the US markets to see if the positive momentum is here to stay.
Russians take it easy

The current market tumble has left most Russians unfazed. There are hardly any queues at banks and exchange bureaus in Moscow. People aren’t in a hurry to take their money home or swap their rubles. And while the crisis is making the headlines, the Russians don’t seem to be panicking.

It seems Russia’s worst financial crisis for a decade hasn’t turned into a crisis of confidence among Russian market players.

Evgeny Tupikin is a financial adviser for a Moscow investment company, Broker Credit Service. He says:

”We have seen a significant increase in private clients. I think they assessed the situation: the market dropped more than 50% and this is a kind of a signal that slowly it will recover.”

And while the government says it has the resources to keep things stable, is there a sure fire way to avoid losing? Dmitry Babich from Russia Profile Magazine suggests that people diversify their investments.

”Invest not only in mutual funds, not just in one bank. Invest in as many ways as possible,” he says.

Babich says the current market tumble is nothing like the 1998 crash, when the ruble was devalued and many Russians saw their savings wiped out overnight.

Today people in the streets remain unfazed.

“I’m not worried. I’m hoping for the best,” a Muscovite says.

“It’s all artificial. It’s all exaggerated,” another one adds.

Andrey Stvolinsky, who became a market player a year ago, always checks the latest at the stock exchange, but now there isn’t much to check. The financial crisis has already cost him about $US 4,000.

“When I started playing on the market, I though that everything was going up. That’s what’s been happening for the past couple of years. But now everything’s dropped,” he says.

However, Andrey says his losses won’t stop him from investing and is still positive about his chances of making big gains.

Wall Street collapses as fears of more turmoil mount

www.chinaview.cn 2008-09-18 05:59:35  

    NEW YORK, Sept. 17 (Xinhua) --

Wall Street plummeted again Wednesday with Dow Jones losing 450 points, as investors became more worried that the financial crisis would continue to deteriorate.

    U.S. stocks Wednesday's plunge was like a rerun of Monday's nose-dive as investors flighted to commodities like crude and gold to seek safety.

    American International Group Inc. lost nearly 50 percent in early trading, The world's largest insurer acquired an 85 billion U.S. dollars loan from the U.S. government late Tuesday. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.

    Merrill Lynch & Co. indexes showed that corporate borrowing costs soared to a record in the United States. Financials were among the worst performers. Goldman Sachs and Morgan Stanley, the two largest U.S. securities firms, tumbled after Oppenheimer cut profit estimates. Merrill Lynch also reduced fourth-quarter profit estimate for Morgan Stanley.

    In addition, homebuilders suffered after the U.S. Commerce Department said housing starts slumped 6.2 percent last month to the fewest since January 1991. The reading spurred concern that the housing slump will continue to weigh on the nation's economic growth.

    The Dow Jones slid 449.36 to 10,609.66. Broader indexes also end sharply lower. The Standard & Poor's 500 index shed 57.20 to 1,156.39 and the Nasdaq plunged 109.05 to 2,098.85.