My Diary 529 --- The Bank Stories

Trading Diary (March 10, 2009) --- The Bank Stories

Overnight, US equities ended near their lows spooked by Shelby & McCain's comments on big banks to be allowed to fail and WB's comments on the "fallen off a cliff" economy. Financials saw some life signals as BOA surged (+19.4%) on expectation on $8.5bn debt sales backed by FDIC and Wells Fargo rallied (+15.8%) on Buffet's comments on its "better than ever" outlook in 3 years. Also GE Capital hired 5 banks to manage a bond sale under the US govt’s guarantee. Ytd, the 84% plunge in S&P Financials from its Feb07 high has surpassed the crash in Techs after Mar 2000... One street joke is that financial analysts are now being reframed as mid-cap analysts… Hopefully they don't all become small-cap analysts...

HSBC closed auction -12% on 3:59 vs. 11mn shares. Talk on street is that DB and some tycoons are the ones selling it down, as they are the underwriter of the rights and there is a big chance that they will be stuck with the rights. Thus, they are selling their existing exposure and then buy back at $28..I doubt there are much short sellers over last few days as borrow is impossible lately…Other headlines are 1) Moody cut HSBC credit rating (Aa3 to Aa2) with outlook stable to –VE; 2) HSBC closed +13% at 37.3 in UK. I think HSBC is a good buy at $28 as one of the largest deposit-franchise banks in the world with note-issuing right in HK.

Economy wise, Taiwan Feb exports printed -28.6% yoy (vs -44.1% in Jan), improving somewhat due to China demand. Local market wise, today’s focus is China Feb PPI&CPI will be out at 10am and market cons sees the CPI falling -1.5% and PPI -4%. Vanke reported earnings and mgmt said that it's too early to conclude a sustainable recovery in residential property market. Thus I think COLI (688 HK) looks like a SELL…I guess market can see a 100-200 ppt dead-cat bounce today….

Overseas Market Reviews

Global equities moved down another 0.7% ytd, the 17^th-day loss in the last 20 days. Regionally, equities declined 1.2% in Japan, -0.6% in EU and -1.1% in US, as well as -0.7% in EMs. MXWO is now down 18% mom and 21% ytd. Elsewhere, UST yields were flat with 2yr up 1bp to 0.96% and 10yr down 1bp to 2.86%. 1MWTI oil rose $1.5 to a 2-month high near $47/bbl. USD has risen substantially over the past month -- +5.6% on TW basis, +3% against EUR, and +8% vs. YEN.