Citigroup: Asian Markets Not Less Vulnerable To Global Credit Crunch Than In 1998

A Citigroup report makes an interesting point. It says while corporate leverage is perhaps at at an all-time low, that does not mean that Asian markets are less vulnerable to global credit crisis, now compared to say 1998.

click to enlarge

A key reason it says, is that investor profile is now quite different. Leverage has shifted from corporate to the investor. Hedge funds have proliferated, and since most of them are leveraged, they have limited capacity to take loss. Markets can thus still be extremely volatile, if rising credit costs force hedge funds to unwind positions.

Comments

[LJ:]

Question: Hedge funds may blow up in the course of time, but we have plenty of non-leveraged mutual funds around. Can the asian economies survive without these hedge funds?

2007 Aug 21 02:23 AM