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Going in for the kill

Asian banks find rich pickings in the West after Wall Street's meltdown

The story

As the bloodbath on Wall Street intensified last week, Asian financial institutions were circling for the kill. The scale of the carnage left even seasoned analysts slack-jawed. Goldman Sachs and Morgan Stanley's  transformation from investment banks to government-regulated bank holding companies marked the end of an era, and the aggressive moves of newly assertive Japanese banks may have slammed the door on the old ways of the wild West. Japan's Mitsubishi UFJ Group agreed to buy a 10 to 20 percent stake in Morgan Stanley for as much as $8.5 billion, following reports that the Wall Street icon was talking about selling a stake of up to 49 percent to state fund China Investment Corp or Chinese lender Citic. Japanese brokerage Nomura Holdings, meanwhile, picked up the Asian unit of collapsed US investment bank Lehman Brothers for as much as $225 million. Singapore state investor Temasek Holdings and Korea Investment Corp, meanwhile, stood to gain handsomely from their stakes in Merrill Lynch, following the US securities firm's sale to Bank of America.

What's being said

The latest "epic and historic" chapter in the credit crisis has opened the door for both opportunity and criticism in Asia, says Bunn Nagara in The Star Online (Malaysia). China sees a golden chance to snap up casualties of the credit crisis and other Asian institutions may also "have reason to celebrate." But this is not a "foreign plot" to uproot the US economy, "since US capitalism is ably undermining itself." Temasek, for example, "is getting more than it asked for" now that its stake in Merrill could turn into shares of a "new financial mammoth" involving Bank of America, says Lynette Khoo in The Business Times. What this has shown, argues Bill Powell in Time, is that Japanese banks have cleaned up their act over the past decade and are no longer "shy about taking advantage of the current weakness of their American competitors."

This crisis offers "much-needed food for thought as China's financial development enters a new era," says China Daily's Zhu Qiwen. "Asia has undoubtedly sharpened up its act since the last crisis," observes the Financial Times' Lex column. But the region shouldn't be rubbing its hands with glee over recent events, because the argument that Asia has decoupled from the US economy is pure "bunkum." The nightmare on Wall Street should serve "as a cautionary tale for Asia," agrees the South China Morning Post. But it also "marks the end of an era of excessive leverage."

What's next

Markets are buzzing with speculation that Japan's Sumitomo Mitsui Financial Group may invest in Goldman Sachs, while it remains to be seen whether Nomura and MUFG will be able to mesh their acquisitions with their operations in Japan. The Government of Singapore Investment Corp has been cagey about its intentions, saying only that the US financial meltdown presents "opportunities." Regional investor sentiment is low, and stock and currency markets will remain volatile at least until the details of Washington's proposed $700 billion bailout plan are revealed.

 

 

 

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