Asia markets unfazed by Washington Mutual sale

26 September 2008 10:52  [Source: ICIS news]

SINGAPORE (ICIS news)--Asian financial markets stayed comparatively resilient following news of the seizure and fire sale of US banking group Washington Mutual (WaMu) on Friday, market sources said.

At 16.20 local time (08:20 GMT), the Hang Seng Index was down 252.34 points, or 1.33%, to 18,682.09 while the Nikkei 225 only lost 113.37 points, a fall of 0.94% to 11,893.16.

At the same time, the benchmark Shanghai Stock Exchange 180 was trading up 0.45% to 5,071.19 while the Straits Times Index fell 36.95 points to 2,407.29.

“In terms of overall macro sentiment, it hasn’t changed much as the market has come to expect some of the events now,” said James McCormack, head of sovereign ratings for Asia at Fitch Ratings.

“It is not as damaging as the first ones and its not surprising,” McCormack said, comparing the WaMu sale to the recent collapse of Lehman Brothers and the unprecedented American International Group (AIG) rescue by the US Federal Reserve.

“The US economy is about to see the end of one of the longest upturns in an economic cycle,” said Song Seng Woon, regional economist at CIMB-GK.

Song added that the possibility of any recovery in the US economy remains shaky but contented that the $700bn (€476bn) bailout proposal by the US Federal Reserve, if finalised and approved by Congress, would prop by the financial markets for a while.

WaMu was seized by the US government earlier in the day and had been sold to JP Morgan Chase for a $1.9bn (€1.29bn) fire sale as it had insufficient liquidity to meet its obligations, according to federal bank regulator Office of Thrift Supervision (OTS).

The acquisition of WaMu by JP Morgan Chase would result in the largest US depository institution with over $900bn of customer deposits and $2,036bn in assets and is expected to be immediately accretive to the bank’s earnings.

“JP Morgan Chase expects to incur pre-tax merger costs of approximately $1.5bn while achieving annual pre-tax cost savings of approximately $1.5bn by 2010,” said Jamie Dimon, chairman and CEO of the US banking giant.

The move came just as the White House, Federal Reserve and Congress continued to grapple with the controversial $700bn bailout proposal that still remained unfinalised after officials met at an emergency meeting on Thursday.

Talks to hammer out final details of the plan are expected to continue on Friday.

($1 = €0.68)

Pearl Bantillo contributed to this story
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