The International Monetary Fund (IMF) reported that the loss is not limited to US sub-prime market. Of US$945 billion, US$565 billion will be due to residential mortgage debt; US$240 billion will come from commercial real estate debt; US$120 billion from corporate debt; US$20 billion from consumer credit debt.
Banks will bear about half of the sub-prime mortgage-related losses with insurance companies, pension funds, money market funds, hedge funds, institutional investors bearing the other half.
US banks are worst hit with exposure of 53% of the sub-prime exposure; 41% for European banks; 5% for Asian banks (including Japan).
(Source: The Business Times, 10 April 2008)
Asia is less affected in this financial crisis since they have been well capitalised since the painful lessons learned from the Asian financial crisis of 1997-98.
However, this does not mean that Asia will be spared from economic slowdown started with US and Europe. The world economy will slow since US and Europe are major economies that will affect the world including Asia.
Written on 4/10/2008 6:17 PM
Copyright © 2008, the author known as LKT in Singapore.
The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.