Asian banks reported higher-than-expected exposure to the U.S. subprime mortgage market. Singapore’s DBS Group Holdings, Bank of China, and BOC Hong Kong (subsidiary of Bank of China) announced that they a combined almost $13 billion exposure to U.S. subprime loans. Markets edged lower across Asia after a strong week, as shocked investors absorbed the news. Many assumed Asian banks were conservative in their investments, after the Asian financial crisis 10 years ago. Referring to Bank of China’s $9.7 billion holding of U.S. subprime loans, Warren Blight, a Hong Kong-based analyst at Fox-Pitt Kelton Ltd. noted “Bank of China disclosed numbers that no stockholders wanted to hear. The market is likely to be very surprised by the scale of the exposure.” Despite the unexpected news, Citigroup analyst Tracy Yu advised clients not to panic, because 97% of Bank of China’s exposure is AA rated or higher. Fitch reaffirmed its A- rating on Bank of China’s long term debt, because it expects the Chinese government to support banks “in the event of stress.” European outlook is also more positive after dealing with subprime issues over the last several weeks. French Economy Minster Christine Lagarde reported her country’s “situation in the banking sector is absolutely healthy.” Germany, the hardest-hit European economy during the recent crisis, is also recovering. German Finance Minister Peer Steinbrueck told the Rheinische Post “from today's perspective we have in Germany no indication that we're going to see further shocks in the banking sector.”
Sources: Reuters, Bloomberg
Commentary: The Long Case for Hong Kong • China Bashing and Overheating Talk: Dangerous and Ignorant
ETFs: FXI, GXC, PGJ
Related: Wikipedia -- Asian Financial Crisis
Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.
