Friday, May 30, 2008

Vietnam Bear

Speaking of major exchanges, keep an eye on Vietnam. First and foremost, the Ho Chi Minh stock index is neck deep in a nasty bear market:
Investors were gaga for the VNI last year… Vietnam’s genuine growth prospects pushed the index up over 23%. This year, Vietnam has been slammed with double-digit inflation and a hard-core credit crisis… thus, the VNI has plunged 55% year to date.
And today, we learn Vietnamese officials have halted trading for the third straight day. The State Securities Commission says a computer glitch has crippled trading capabilities and hopes to resume trading by the end of the week. We couldn’t help but notice the VNI had been free-falling into the abyss leading up to the convenient stoppage… the index was down over 20% in May alone.
Over-the-counter trading in Hanoi has stayed online, and has been trending down all week. When the Ho Chi Minh exchange officials turn the power back on, we wouldn’t be surprised to see some serious fireworks.
Elsewhere in the world, Brazil is in the final stages of creating a sovereign wealth fund. The bill to enact a Brazilian SWF heads to the nation’s congress today. When approved, the bill’s sponsors estimate the fund will control $10-20 billion, almost all of which will be invested abroad.
Brazil was able to create this new SWF after the Brazilian government produced an annual surplus… 4% of Brazil’s GDP. Must be nice.
Check out this chart from today’s Wall Street Journal:
Pretty interesting depiction of just how quickly Wall Street lost faith in Bear Stearns. Like every other big financial brokerage house, Bear’s day-to-day operations were financed by short-term loans backed by little more than their illustrious reputation. The credit default swap market, as illustrated above, bets on the probability of those loans going bad. You can see the slow but steady realization that Bear was overextended and undercapitalized… lending money to this fiscal nightmare became an undesirable proposition, to say the least.
When we see this chart, we think of the U.S. at large. What an appropriate allegory, no? As the U.S. -- from small-town consumers to Washington bureaucrats -- digs itself deeper in the hole, when will the risk to support our consumerism outweigh the benefits? When it finally does, will it all unravel this quickly? We saw what happened to Bear Stearns when its creditors turned the corner…

1 comment:

Anonymous said...

I consider, what is it ?a false way.