Globals Banks Decline on AIG Worries

123jump.com Staff
16 Sep, 2008
New York City

Banks around the world fell as investors sell stocks in Asia and Europe. The prospect of AIG bankruptcy filing swirled the borderless global markets and banks in Japan, China, Hong Kong, Korea, India and in UK dropped. Japanese and Korean banks plunged as several banks in the region have nearly $1.5 billion in loan exposure to Lehman Brothers. Metals and crude oil futures fell to six-month lows in New York trading.

[R]9:00AM New York – Banks around the world drop as fearful investors sell stocks.[/R]

Global markets continue to gyrate and seek lower levels as fearful investors sell stocks. The U.S. financial crisis deepened the focus shifted to the health of the largest insurance company AIG. The insurer sought and received a permission to access $20 billion of capital from its subsidiaries and may need to raise as much as $70 billion total in the short term. AIG stock fell 61% and drove benchmark indexes lower around the world.

World Markets Decline on AIG Worries

The benchmark index at close in Japan fell 5%, in Hong Kong declined 5.5%, in South Korea dropped 6.1%. European markets were trading between 2% and 4% lower at mid-day before the New York opening.

Global Banking Sector Sell-off

Banks in Japan dropped the most as investors worried their exposure to Lehman and AIG. Mitsubishi UFJ dropped 8% to 792 yen, Sumitomo Mitsui Financial Group declined 9.8% to 619,000 yen. Aozora dropped 16% after it was noted in the bankruptcy filing that the bank was the single largest unsecured creditor to Lehman. The bank issued a statement that cited the error in the filing and said its exposure to Lehman is not more than $25 million. Shinsei Bank Ltd plunged 16% to 314 yen.

In South Korea banks fell sharply after the Financial Services Commission noted that local banks have a total of $720 million loan exposure to Lehman Brothers. Kookimn Bank dropped 8% to 55,300 won and Woori Finance Holdings dropped 14% to 13,050 won.

Babcock & Brown Ltd in Sydney trading fell 34% to A$1.05 on the worries that recent Lehman bankruptcy filing will cut off access to funds to the infrastructure funds manager.

Banks in China and in Hong Kong trading fell as well. Industrial & Commercial Bank of China Ltd dropped 7% and Bank of China Limited declined 6.6%.

Banks in India plunged in the global sell-off. ICICI Bank dropped5.7% to 591.65 rupees, However, State Bank of India closed 6.1% higher after it dropped as much as 5%.

Metals and Commodities Fall

Metals and commodities markets declined as copper, zinc and lead declined to lows of the last three months in Asia and in London trading. Crude oil futures in New York trading dropped to $91.94.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 605.04 or 4.95% to 11,609.72, Hang Seng index in Hong Kong decreased 1052.29 or 5.44% closed to 18,300.61. ASX 200 index in Australia decreased 66.90 or 1.39% to close 4,750.80. The KL Composite index in Malaysia decreased 19.26 or 1.87% closed to 1,012.37.

The Kospi Index in South Korea decreased 90.17 or 6.10% to close at 1,387.75, SET index in Thailand closed lower 17.83 or 2.78% to 624.56 and JSE Index in Indonesia increased 16.38 or 0.95% to 1,735.64. The Sensex index in India decreased 12.47 or 0.09% closed to 13,518.80.

Europe Markets Review

In London FTSE 100 Index traded lower 158.50 or 3.05% to 5,045.70, in Paris CAC 40 Index decreased 83.21 or 2.00% to 4,085.76 and in Frankfurt DAX index traded lower 114.32 or 1.89% to 5,949.84. In Zurich trading SMI decreased 170.93 or 2.46% to 6,768.18.