AndrewChia.com

Source:  Straits Times, Singapore

Highlights

Washington Mutual Tower

1.  Wall Street tumbled 1.19 per cent in opening deals as investor jitters  surfaced over the biggest bank failure in US history.

2.  The US Federal Reserve and other major global banks meanwhile pumped billions of dollars into money markets pending a possible deal in Washington to end the worst financial crisis in decades.

3.  Pressure on markets increased with the overnight collapse of Washington Mutual, the biggest US bank failure, which was taken over by JPMorgan Chase for 1.9 billion dollars.

4.  Global markets have been sent into a tailspin since the collapse last week of Wall Street investment giant Lehman Brothers and the US government’s rescue of insurance giant AIG.

5.  The crisis claimed another victim on Thursday as the US government closed down Washington Mutual.

6.  Meanwhile it emerged on Friday that Nomura Holdings would pay a token two dollars for the Europe and Middle East operations of bankrupt Wall Street giant Lehman Brothers.

Comments

1.  Experts say that a stock market crash due to a collapse in the banking sector may take a longer time to recover compared to a property market crash, currency crisis or a dotcom crash.

2.  Despite various opinions from the experts, we should not try to predict when markets will recover from this current financial crisis.  Instead, we should prepare ourselves in case a recovery is longer than expected.

Learning message:  Investors should be prepared in the event that the recovery from this financial crisis is much slower than what we expect.

Source:  The Star, Malaysia

Highlights

1.  The Securities Commission (SC) has obtained a landmark judgement forcing two men and a company to pay back US$83 million (RM285 million) to victims.

2.  The two men are Albert Lee Kee Sien and Melvin Choo Mun Hoe.  Their company is Dynamic Revolution Sdn Bhd.

3.  The SC will work its counterparts in Switzerland, Isle of Man, Jersey, Australia and Singapore to trace and repatriate Swisscash monies of approximately RM30 million known to be held overseas.

4.  Swisscash operated the scam through telegraphic transfer (TT) and the Internet.

5.  Its no-limit investment plan with convincing profit returns attracted between RM380 million and RM3.8 billion from about 100,000 Malaysian investors.

6.  The SC also obtained a worldwide Mareva Injunction in June 2007 to prevent the defendants from disposing their assets in and outside Malaysia.

7.  The commission also reminded investors that neither Swiss Mutual Fund or Swisscash are licensed by them.

Comments

1.  The authorities can’t even determine how much money was involved in the Swisscash scam.  It was somewhere between RM380 million and RM3.8 billion.

2.  Depending on who you ask, the scammers were either very convincing, or the “investors” were very stupid and greedy.

3.  As mentioned earlier, we can easily identify scams if they offer,
- high returns
- quick returns
- no work needed, and
- low capital

4.  However, investors who fall prey are sometimes desperate investors.  Although not all desperate investors may fall prey to scams, they nonetheless lose all their money even in regular investments like property or shares.  Why?

One of the reasons is this.  They could have lost their job, or taken a pay cut.  Inflation is high, expenses are mounting.  They could see no way out.  Then comes hope in the form of high returns, quick returns…  it is their only hope, you see.

5.  Desperate times may call for desperate measures.  We need painkillers to numb the pain.  But if we do something stupid like playing dice with our hard-earned savings, the payback and the pain would be multiplied.

6.  There is no way out.  We have to get educated financially.  And if we want faster returns, we just have to learn faster.

Learning message:  Get-rich-quick schemes are too risky to try.  Don’t do it.

Source:  Straits Times, Singapore

Highlights

1.  Hundreds of nervous customers today swarmed the Bank of East Asia offices in Singapore and Hong Kong in Asia’s first major bank run since the global financial crisis erupted last year.

2.  Hong Kong’s de facto central bank responded by injecting US$500 million into the market as a way of shoring up the territory’s banking system.

3.  Billionaire tycoon Li Ka-shing started buying the company’s stock after it plunged – a huge vote of confidence from the territory’s richest man.

4.  The moves came after thousands of customers earlier descended on BEA offices across Hong Kong to demand their deposits amid unconfirmed rumors questioning the mid-sized lender’s stability.

5.  ‘I read about the bank’s problems in Hong Kong, so I came down here today to pull out some of my money,’ said Mr Kim Hoon Toh, 70, as he waited in the bank’s lobby for his number to be called.  It is ‘better to be safe than sorry.’

6.  The panic underscored a growing distrust of financial institutions in Asia since the turmoil on Wall Street began more than a year ago.

Confidence has eroded further in recent weeks as thousands in Hong Kong and Singapore cancelled policies with troubled insurer American International Group, and investors in Lehman Brothers products lobbied the government to help prevent losses.

7.  BEA is Hong Kong’s fifth-biggest by assets.

8.  Seeking to calm investors, the bank also disclosed that its combined ‘exposure’ to failed US financial companies Lehman Brothers and American International Group was about HK$473 million.

9.  ‘The rumours emerged after Moody’s Investors Service changed its outlook on BEA’s credit rating from stable to negative.

10.  Last week, the bank revealed a trading loss of HK$93 million it says was incurred by a rogue equity derivatives trader who ‘manipulated’ valuations to hide losses

Comments

1.  The rating agency Moody’s Investors Service helped to spark the run on the bank when they downgraded BEA.

Learning message:  Investors should make sure that their deposits would be safe in the unlikely event that there is a run on the bank where they keep park their cash.