Asian banks surge on Fannie, Freddie bailout (Reuters)
08.09.2008 07:40 Finance
The takeover plan makes it more explicit that debt issued by Fannie and Freddie will be backed by the U.S. government and curbed worries about possible losses among financial institutions and investors that hold such paper, analysts said.
"There is hardly any equity exposure of Asian bank ex-Japan in Freddie and Fannie," said Todd Dunivant, head of regional banks research with HSBC in Hong Kong.
"But investors were concerned about the mark-to-market losses in debt and MBS (mortgage-backed securities). Equity losses are much easier to keep track of and since the shares have fallen 90 percent already even if it goes down to zero value, we don't have a very long way to go."
MSCI's index of financial stocks in the Asia-Pacific region outside of Japan (.MIAPJFN00PUS) jumped 5.3 percent, its biggest one day move since March, while Japan's largest banks rose more than 10 percent.
Industry leader Mitsubishi UFJ Financial Group (8306.T) rose 12 percent while No. 2 lender, Mizuho Financial Group (8411.T), soared 11 percent.
Third-ranked Sumitomo Mitsui Financial Group (8316.T) climbed 11 percent.
The U.S. government's action, prompted by worries over the mortgage firms' shrinking capital, was the latest in a series of emergency steps taken by U.S. officials to prop up the wobbly housing sector and quell what is now a year-long crisis in credit markets that has helped push many economies toward recession.
Shares in Kookmin Bank (060000.KS), South Korea' top commercial lender, jumped 8 percent. Woori Finance Holdings (053000.KS) surged 13.7 percent and Shinhan Financial Group rose 7.9 percent.
"Banks with higher portion of riskier assets are making the most gains. Woori Finance Holdings, which is said to hold more Fannie and Freddie-linked bonds than other banks, is jumping." said Park Jung-hyun, an analyst at Hanwha Securities.
In Australia, Reserve Bank of Australia Governor Glenn Stevens said the U.S. action was necessary to reassure shaky markets.
"On the whole it's a step they had to take. It's good that they've done it," Stevens said in testimony to parliament.
Commonwealth Bank (CBA.AX) shares raced 7 percent, Westpac Banking Corp (WBC.AX) gained 5.4 percent, National Australian Banking (NAB.AX) rose 7.6 percent and Australia and New Zealand Banking Group (ANZ.AX) added 9.7 percent.
In Hong Kong, Bank of China (3988.HK), which has been tipped to have the greatest exposure to Freddie and Fannie debt among the Chinese lenders, rose 4.6 percent. China's third largest lender cut its debt and MBS holdings in the beleaguered U.S. home financers to under $13 billion by end-August from $17.3 billion at the half year mark.
Shares in Europe's largest bank HSBC Holdings (0005.HK) was up 4.5 percent.
But Masanobu Takahashi, chief strategist at Ichiyoshi Securities in Tokyo, cautioned it was too early to predict a full recovery for banking shares, which are still down 20 percent in Japan and 30 percent elsewhere the region so far this year.
"It's just that bleeding from U.S. front has been stemmed, and it does not mean the overall economy will turn upward," he said. "We cannot expect that unless the governments take up measures that have impact on the economy."
(Reporting by Taiga Uranaka, Aiko Hiayshi and Masayuki Kitano in TOKYO, Mette Fraende in SYDNEY, Park Jung-youn in SEOUL, Parvathy Ullatil in HONG KONG; Writing by Lincoln Feast; Editing by Jean Yoon)
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