World Markets Nosedive, Emergency Meeting Called By Thai Finance Minister

[george]

Market nosedive

BANGKOK: -- Finance Minister Suchart Thadadamrongwej called an emergency meeting of a committee tasked to tackling emergency economic woes to discuss a possible fallout on Thailand in the wake of the financial crisis in the United States.

The outcome of the discussions will be reported to the Cabinet on Tuesday, he said.

The SET index on Tuesday opened at 568.18, down 33.11 points following a huge loss on Wall Street after US lawmakers defeated the US administration's emergency bailout plan.

The benchmark Nikkei stock 225 index fell 544.54 points, or 4.64 per cent, to end morning trade at 11,199.07 on the Tokyo Stock Exchange, hitting its lowest level since June 2005.

The Hong Kong Hang Seng Index also opened down 998.68 points at 16,882.00, after falling 4.3 per cent on Monday.

The Dow Jones industrials index plunged 778 points, the most ever for a single day. However, the percentage fall was not the worst.

The US rescue plan, a result of tense talks over several days between the government and lawmakers, was rejected by 228 to 205 votes in the House of Representatives. About two-thirds of Republican lawmakers refused to back the rescue package, as well as 95 Democrats.

The committee comprises representatives from the Finance Ministry, the Bank of Thailand, the Stock Exchange of Thailand, the Securities and Exchange Commission and the Office of the Insurance Commission (OIC).

Mr Suchart earlier said the ministry had closely monitored the US financial turmoil and had a contingency plan to maintain liquidity in the system.

Speaking at a seminar on "Breakthrough for the BigMac-Crisis," Wisit Ongpipatkul, executive director and research head of Tisco Securities Co, commented that Thailand will be affected by a decline in exports to the US, which is one of the country's four major export destinations.

It is also expected that land prices in Bangkok would drop because real estate projects developed for rental or purchase by foreigners would experience a greater difficulty in sales, he said.

-- TNA, Bangkok Post 2008-09-30

[george]

World markets, companies reel as US rejects rescue

Stock markets reeled and world finance giants stumbled Monday as the lower house of the US Congress rejected a rescue plan intended to prevent a US and global financial meltdown.

Even hours before the tense vote in the House of Representatives in Washington, European government bailouts were announced for key banks in Britain, the Benelux and Germany and a key Icelandic bank was taken over by the government.

In the United States, yet another bank collapsed, Wachovia Corp, with banking giant Citigroup intervening to buy up the bulk of its operations.

The Brazilian stock exchange in Sao Paulo suspended trading for half an hour after its Bovespa index crashed 10.6 per cent after the US vote. A second shut-down could follow if the slide reaches 15 per cent.

The three leading US stock indices shed massively: the Dow Jones Industrial Average lost 6.98 per cent; the S&P 500 shed 8.79 per cent; the Nasdaq high tech index dropped 9.14 per cent, as the final results of trading were being counted.

Stocks around the world plummeted. Amsterdam's AEX was down 8.75 per cent; Hong Kong's Hang Seng, 4.29 per cent; India's Sensex, 3.4 per cent; London's FTSE 100, 5.30 per cent; the French CAC, 5.04 per cent; Frankfurt's DAX, 4.23 per cent.

Japan's Nikkei was down 1.26 per cent.

The international turmoil was on the mind of US Treasury Secretary Henry Paulson in Washington after the stunning defeat of the finance rescue plan. Referring to the failure of two major financial institutions in Europe, Paulson said that the stress on world markets reduced "the availability of credit that businesses across America depend on to meet payroll and to purchase inventories."

The US Federal Reserve said it would pump more liquidity into the global financial system to help alleviate the credit crunch. It increased its existing currency swaps with foreign central banks by 330 billion dollars to 620 billion dollars to make more dollars available worldwide, the Fed said.

As the US financial industry's crisis spread deeper into Europe's finance sectors, French President Nicolas Sarkozy called a meeting of bankinga nd insurance industry chiefs in his country to review the situation.

European governments moved to shore up liquidity-plagued institutions. Among the major developments:

-- In London, the British government intervened to save major mortgage lender Bradford & Bingley (B& by taking it into public ownership and selling off its savings and deposits business.

-- In Brussels, a deal was announced by the Netherlands, Belgium and Luxembourg to take over substantial parts of Belgian-Dutch banking and insurance company Fortis.

-- In Berlin, the German Finance Ministry announced that the government and top banks were moving to inject billions of euros into troubled mortgage lender Hypo Real Estate (HRE) but that there would be no nationalization of the company.

-- In Reykjavik, the Iceland government and Glitnir bank announced thatthe state was taking a 75-per-cent stake in the bank for 600 million euros. The move was aimed to boost Glitnir's capital ratio and liquidity.

Britain's intervention in Bradford & Bingley had been expected for several days.

"We will do whatever it takes to ensure the stability of the financial system in the wake of the nationalization of Bradford & Bingley bank," Prime Minister Gordon Brown said in a statement.

During a busy weekend in Brussels, the governments of the Netherlands, Belgium and Luxembourg hammered out a deal for each to purchase 49 per cent of Fortis's businesses in their respective countries, supplying the bank a total of 11.2 billion euros.

The plan entails the sale of Dutch banking division ABN Amro by Fortis, while Fortis chairman Maurice Lippens is to step down.

The government intervention provides Fortis with the funding it has desperately needed since its joint takeover along with the Royal Bank of Scotland and Spain's Banco Santander of ABN Amro in October 2007. Fortis' share of the takeover was 24 billion euros.

In Berlin, the German Finance Ministry said the government and top banks would inject billions of euros into troubled mortgage lender Hypo Real Estate (HRE) as it teetered on the brink of collapse.

The ministry said HRE would need a guarantee totalling 35 billion euros (50 billion dollars). The ministry stressed that no nationalization was intended at HRE.

HRE is the first major German casualty of the crisis.

In Reykjavik, Iceland's majority takeover of Glitnir bank was a comparatively small matter costing only 600 million euros.

Bank chief executive Larus Welding said the move "strengthens the capital base of the bank and removes all doubt about Glitnir's financial strength."

-- DPA 2008-09-30

[kedawi]

One of my staff commented that if anything happens in the States, it'll be 10 years before it is felt in Thailand........oh dear! and this is Thai management in a company that EXPORTS to the States and relies on them for customers over here.

[astral]

Now where is that thread about the governor of BOT saying that all was well.

It was less than a week ago, but I cannot find it.

[RolloTomasi]

Who cares. I moved here to avoid all that nonsense.

[Seneque]

Who cares. I moved here to avoid all that nonsense.

This financial earthquake will shake everyone, where ever you are ... including Thailand (hence this emergency meeting )

[Martin]

"Nosedive" is a ridiculously exaggerated way of describing drops that are all less than 10%.

"Lurch down" could be justified, that's all.

And why the note of surprise and panic that is contained in the use of "Emergency"? Hundreds of finanial commentators have been predicting the US financial system getting itself into trouble for months now---or even years, in many cases---since spending US$800,000,000,000 more than its income each year was bound to get the US Government into financial difficulties. "As expected" would be nearer the mark.

[cclub75]

"Nosedive" is a ridiculously exaggerated way of describing drops that are all less than 10%.

"Lurch down" could be justified, that's all.

Indeed. The market is perfectly healthy.

And, no, the DJ didn't have its largest drop in points EVER.

It didn't.

"Lurch down"... "ever"... don't you see like a small inference bug there ?

[lifeisrandom]

what was the big mac problem about?

[jeebusjones]

And why the note of surprise and panic that is contained in the use of "Emergency"? Hundreds of finanial commentators have been predicting the US financial system getting itself into trouble for months now---or even years, in many cases---since spending US$800,000,000,000 more than its income each year was bound to get the US Government into financial difficulties. "As expected" would be nearer the mark.

Exactly. Anyone who has been paying attention has seen this coming for a long time. I would expect things to get much worse in the US actually, this is only the beginning. The US dollar is being held afloat by the Chinese and Japanese - once they finally realize the US is incapable of paying back its loans, the dollar will experience a total collapse.

European and Asian markets will struggle in the short term, but in the long term will benefit since they will no longer be wasting their own productivity to support the dying US economy. See "Crash Proof" by Peter Schiff.

[Garret]

I am currenty in california, for the first time in 8 years...really sucks by the way, but this is all everyone is talking about...and seneque is correct we will feel it in Thailand......I remember reading back a few years ago that if the economy of Brazil nosedived it would rat f--- the whole world....I am a retired MD with my eggs strewn all over the place.I am losing alot of money day to day...Thank god the home and wife are paid for

[davejonesbkk]

One of my staff commented that if anything happens in the States, it'll be 10 years before it is felt in Thailand........oh dear! and this is Thai management in a company that EXPORTS to the States and relies on them for customers over here.

When I hear comments like that over here it gives me hope that the west will always and forever be world leaders in finance and business

[Boater]

only 1 comment

[Tonyzill]

Why if all countries are affected is it that the pound keeps falling against the Baht?

[animatic]

As expected

but made worse because of Bush's incompetence leading up to it.

He values people LOYAL to him in ALL jobs around him,

more than he values COMPETENT people in positions around him.

He's really screwed the pooch this time. World wide cluster <deleted>.

And this from a registered republican,

unsuccessfully voting for common sense in the GOP during primaries.

I have been living this Bush nightmare for 9 years now,

wondering when the other 3 shoes would drop.

I no longer wonder. Just hope he gets jail time as a legacy.

[Scubadude770]

It is time for the US economy to balance itself into the Global economy. The movement has started.

[njpski]

The desire of the "free marketeers" to be bailed out by the taxpayers has been rejected, as it should be! The "masters of the universe" wanted and got minimal government intervention and they stuffed it up. Now their precious lifestyles need to be maintained - well, Congress rightly rejected the squillion dollar package. Well done, US Congress.

[bonobo]

And why the note of surprise and panic that is contained in the use of "Emergency"? Hundreds of finanial commentators have been predicting the US financial system getting itself into trouble for months now---or even years, in many cases---since spending US$800,000,000,000 more than its income each year was bound to get the US Government into financial difficulties. "As expected" would be nearer the mark.

Exactly. Anyone who has been paying attention has seen this coming for a long time. I would expect things to get much worse in the US actually, this is only the beginning. The US dollar is being held afloat by the Chinese and Japanese - once they finally realize the US is incapable of paying back its loans, the dollar will experience a total collapse.

European and Asian markets will struggle in the short term, but in the long term will benefit since they will no longer be wasting their own productivity to support the dying US economy. See "Crash Proof" by Peter Schiff.

THat is a way too simplistic view on the situation, even if there is some truth on what you write.

THere are many reasons for the strength of the US economy, and consumption is only one aspect. US workers are the most productive in the world, for example, and their agriculture is among the world's most productive.

If there would be a total collapse of the dollar, you would see more than a "short term" struggling in Asia, where entire economies are propped up by sales to the US market. And if the dollar collapsed, you would see a huge rise in US exports, which would, in turn, bring up the value of the dollar. THe one fly in this ointment would be the price of oil. If, and this is a big if, most of the energy costs can be shifted to other sources, any drastic drop in the value of the dollar will result in an eventual resurgence of the US market.

How this will affect THailand depends on how the baht moves against all other currencies. THere is nothing to indicate that the euro will be getting stronger--the signs point to a weaker euro. So if the dollar and the euro get weaker, that will have huge impacts on Thai exports. However, there is a silver lining. The baht does not look particularly strong, and if it can weaken against the yuan, then Thailand can still remain competitive even if the baht strengthens against the dollar and euro.

[dr_Pat_Pong]

As expected

but made worse because of Bush's incompetence leading up to it.

He values people LOYAL to him in ALL jobs around him,

more than he values COMPETENT people in positions around him.

He's really screwed the pooch this time. World wide cluster <deleted>.

And this from a registered republican,

unsuccessfully voting for common sense in the GOP during primaries.

I have been living this Bush nightmare for 9 years now,

wondering when the other 3 shoes would drop.

I no longer wonder. Just hope he gets jail time as a legacy.

I am no Bushie ... but what about the leftie Muslim aspirant ?

[inquisitive]

Why if all countries are affected is it that the pound keeps falling against the Baht?

Two things to keep in mind:

1) while all countires will be affected, not all of them will be affected equally; and

2) in a situation such as this, perception can be even more important than reality.

[OlRedEyes]

No doubt the message to the public coming out of the meeting will be comforting.

Someone was arguing that what we have seen on the markets is a 'lurch', not a 'nosedive'. I agree totally. If it was the nosedive, the US admin wouldn't still be scrambling around to save the market, trying to put together an acceptable rescue package. it would be over. They'd be looking at a recovery stimulus package. It ain't over by a mile. The nosedive is yet to come.

And if Thailand thinks it can escape the crunch to come, they're dreaming. They'd be hit harder than a lot of much bigger economies, that are able to absorb much greater blows.

[bonobo]

The desire of the "free marketeers" to be bailed out by the taxpayers has been rejected, as it should be! The "masters of the universe" wanted and got minimal government intervention and they stuffed it up. Now their precious lifestyles need to be maintained - well, Congress rightly rejected the squillion dollar package. Well done, US Congress.

Very, very shortsighted.

Is the bailout good? No. But the alternative is worse. As a taxpayer, I am p'd off that I have to step in to fix this problem of greed and poor management. But like most medicines, it tastes bad going down, but the eventual cure is worth it.

Just what do you expect the US to do? Sit by and let the whole system collapse. Keep people who ahve been making their payments from being able to sell their home or buy a new home if they have to move? Have students quit school because they can't get student loans? Have workers laid off because their companies cannot get credit to buy raw materials to make their products?

The European central banks are stepping in right and left. They understand the consequences of not stepping in.

I hate this situation, and I hate that we have to do something. But taking action is better than sitting by and letting everything go to hel_l in a hand basket.

Edited September 30, 2008 by bonobo

[wileycoyote]

Keep faith & don't panic

[bangkapiboy]

I really don't see any reason to panic. The market goes down today, then it rebounds and stabilizes. This is what happens. Just watch it go back up again tomorrow.

[Don Aleman]

One can only, fervently, hope that the Thai politicals and business power brokers don't make a run on the banks, scurrying to get their money, as that would leave the rest of Thailand with a total bank account of 324 B and, unpaid bills of some 456 Billion !

[bkk_mike]

The Republicans have shot themselves in the foot for the election.

All it takes is another bank run in the US and they'll get the blame now.

On the other hand, with the takeovers of WaMu and Wachovia, weren't they the last two large bank dominoes that people were talking about as having serious problems knocked off the table. The stock market probably still has a distance to drop as Goldman and Morgan Stanley deleverage now that they're commercial banks, but isn't the next big failure more likely to be someone like GM, or GE, with large finance arms that are now struggling.

[LucMee]

Anybody wanna bet a drink at the Soi Cowboy bar of your choice that OPEC starts mumbling about pricing oil in Euros within the next 60 days?

[jeebusjones]

If there would be a total collapse of the dollar, you would see more than a "short term" struggling in Asia, where entire economies are propped up by sales to the US market. And if the dollar collapsed, you would see a huge rise in US exports, which would, in turn, bring up the value of the dollar. THe one fly in this ointment would be the price of oil. If, and this is a big if, most of the energy costs can be shifted to other sources, any drastic drop in the value of the dollar will result in an eventual resurgence of the US market.

The US can't export what it doesn't manufacture. The leading industries in the US are high tech, agricultural and pharmaceutical. All of these are held afloat and made competitive through massive government subsidies. Everyday household items and clothing, and virtually everything sold at box stores like Wal-Mart comes from China. A collapsed US dollar will see normal items exploding in price.

Also, countries like China will soon learn that domestic demand is (or soon will be) large enough that exporting on such massive scales simply isn't necessary anymore. Watch as the world's economy shifts towards China - it is inevitable.

[thecottonmill]

oh dear...so as a farang in thailand...what's the best thing to do with your money in a time like this?? save? spend or invest? and if invest...in what????

[LtCol]

To all the 'Golden Parachute' CEOs that get these ludicrous amounts even after they have lost their investors funds , it eventually had to have a flow on.

Australia has supposedly got the strictest Banking Regs , yet the ozzie Dollar has gone from 98c down to 80c in a few weeks , what gives??