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HSBC is hit by turmoil in emerging markets
Bill Condie, Evening Standard24 Oct 2008
Fears over the future of developing economies smashed shares of emerging market banking giants HSBC and Standard Chartered today.
The two lenders have so far been relatively unscathed by the turmoil due to their focus on developing economies.
However, the sudden eruption of the economic crisis this week in countries ranging from South Korea and Belarus to Argentina and Pakistan has triggered fears over their future profits.
Asian stock markets plummeted this morning amid fears about the region, with deeply troubled South Korea's main index down 11%, Japan's off 10% and Singapore 8% down.
London shares followed suit, with the FTSE 100 index off 200.9 to 3886.89.
HSBC was one of the biggest fallers, with its shares down 76p at 729p.
"Amid signs of trouble in emerging economies like Argentina and South Korea, there is growing concern that HSBC will take a hit," said Patrick Shum, strategist with Karl Thomson Securities in Hong Kong.
Standard Chartered was down 64½p to 835½p. Merrill Lynch said this week it is likely the lender will need to raise cash to boost its capital ratio.
Ex-Soviet republic Belarus has joined Iceland, Pakistan, Hungary and Ukraine in asking the International Monetary Fund (IMF) for emergency loans.
Even minerals-rich Kazakhstan is now struggling under a mountain of debt racked up during the months before the current slump in the price of oil and other commodities.
Turkey is coming under increasing pressure to act against the plummeting value of the country's currency.
All of these countries have seen their economies suddenly suffering as investors from the developed world have pulled out, leaving them short of hard currency.
Earlier this week Argentina sparked concerns that it could be heading for a default after unveiling a plan to nationalise nearly $30 billion (£18.16 billion) in private pension funds, including those of HSBC.
Meanwhile, the IMF has flagged a multi-billion-dollar bailout plan for Pakistan where foreign currency reserves have slumped to just $4.5 billion. This represents only six weeks of interest payments on the country's debts.
The IMF is considering establishing a pool of money that nations at risk could quickly access.
The fund's board is expected to vote on the proposal next week, but it is sill unclear yesterday how much money could be made available.
Reader views (2)
“The Brown Witch Project” After sixteen years of record growth, which would have left most cupboards bursting at the seams, our incompetent hero having frittered our money away with nothing to show for it is unable to aggressively cut taxes and will soon embark upon a record borrowing spree adding to the £30'000'000'000 (yes thirty billion pounds) our taxes pay each year in INTEREST alone. After selling our gold at the lows he encouraged all to borrow, borrow and borrow some more (as he did) so we now have little to back up our free falling inflation causing currency and with taxation currently the highest in British history and pensions ruined I fear the ending will indeed be truly horrific!
- Richard, colchester, 27/10/2008 11:09
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It’s really difficult to comment the situation – but it’s like a horror movie except you cannot just turn the TV off
- Andrey, Guernsey, 24/10/2008 13:35
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