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Tuesday, October 07, 2008

As The Bell Tolls

Middle East equities are mostly getting whacked. Foreigners are pulling money out to go elsewhere:
Saudi Basic Industries Corp., the Gulf's biggest company, tumbled for a second day. Oman Telecommunications Co., the sultanate's largest phone company, fell for a fourth day. Emaar Properties PJSC slumped to the lowest since February 2005. Aldar Properties PJSC retreated after it joined Mubadala Development Co. in a $20 billion real-estate project in Malaysia.

Saudi Arabia's Tadawul All Share Index lost 8.5 percent to 6,157.02 at 2:14 p.m. local time, bringing the two-day slump to 17 percent. Oman's Muscat Securities Market 30 Index declined 7.3 percent. The Dubai Financial Market General Index lost 5.1 percent and the Abu Dhabi Securities Exchange General Index retreated 4.6 percent.

``Foreigners, who have invested a lot in real-estate companies, are taking their cash back to support their positions in global markets,'' Motaz Herzallah, senior broker at Emirates Securities LLC in Abu Dhabi, said in a phone interview. ``Local investors have no more cash because they kept buying as shares fell. They didn't expect companies like Emaar or Aldar to reach such low levels.''
It's not that locals have no more cash. It's that the cash is distributed relatively thinly, and those who have extra are sending it overseas. The smaller investors are going to get hit hard here, which is an absolute pity. If there is one region which needs to build a middle class, this is it. Kuwaiti investors are trying to get a court to close their exchange to stop the bleeding, which is very similar to an earlier such incident in Pakistan.

Brazil (Bovespa) takes action:
Brazilian President Luiz Inacio Lula da Silva authorized the central bank to buy loans from cash- strapped lenders and will use the nation's international reserves to ease a credit crunch that sent the local currency to the lowest in two years and roiled stock markets.

The central bank may also lend dollars to Brazilian institutions abroad and will accept foreign assets in currency swap contract auctions to stem the decline of the real, central bank President Henrique Meirelles told reporters late yesterday in Brasilia. The government will also provide the state development bank with an additional 5 billion reais ($2.29 billion) to finance exports.
That bit about the foreign assets is interesting.

In other news - the Dexia bailout is still simmering, Iceland first announced it got a loan from Russia, then said negotiations hadn't been finalized. Iceland is in pitiable shape, and is going to nationalize a bank or two. Light truck sales in Italy are down 17%. Unicredit is still under pressure.

Major action in India. Background. Note the bit about the realty index being down 70% this year. In the wake, the central bank cut the cash reserve ratio from 9% to 8.5%. Everyone believes they will cut again. Foreign institutional investors have been pulling money out of India for months. Now comes another restriction relaxation to try to stem that tide; participatory note rules are being relaxed for FIs. The rupee has been falling and has gone below 48 to USD, which is hurting some companies badly and should help some exporters. But it also means that buying oil continues to be a huge drag on the economy, since the fall in oil prices is being largely offset by the decline in the currency.

Taiwan's exports dropped
, startling most:
Sales to China and Hong Kong combined fell 16.3 percent, the first drop since February 2007, mainly because of weaker demand for electronic components used in products assembled for export, Lin Lee-Jen, director of the statistics department at the Ministry of Finance, said at a briefing in Taipei.
In China, Shanxi Coking had to cut its stock offering price by 70% or so. Coke prices are way down, so investors aren't going for it. Australia cut its overnight cash rate by 1% to 6%. Consumer spending is down, mortgages are sliding, and residential permits are sliding.

UK manufacturing contracts again. The UK is still pondering a bigger bailout. A&L is being acquired by Santander. The discussion is about the government buying into some of the larger banks, with a figure of 79 billion USD in this article. The EU is talking about a coordinated rise in bank deposit insurance. They say by five times, which I believe would take the minimum from 20,000 euros to 100,000 euros.

European exchanges are doing decently today.

Update: Of the following comments, a number were generated by the same IP. These include:
Fake MaxedOutMama,
Fake Rob Dawg,
Bond Girl,
Fake Sam Wilson.
Under another IP, the following sets of comments matched:
Newt For President,

In short, there's a few frantic teenagers with emotional ages of two running through a redirect and they will replace it and be back again. As I noted, unfortunately there are a FEW Obama supporters who make their own candidate look bad.
Since I am sure that any reader of this blog habituated to its staggering boredom is capable of enjoying this spectacle, I thought you would want to know. Bond Girl is safe, Rob Dawg is getting a good laugh out of this, and I guffawed.

The only reason I ban IPs is for pure abuse of another commenter or such shenanigans. Anyone is welcome to cuss me out. I will probably enjoy it, and probably a few other readers will too!

If by chance you are incorrectly banned, post to the old moderated comments. I will review and release those at least daily.

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