AU
False sense of security?
18 March 2008
The US financial services industry is burning, but who’s to say Sydney’s so safe?
Bear Stearns doesn’t have an Australian office and Macquarie and Babcock made healthy profits in 2007, but that doesn’t make Australia immune to what’s happening on Wall Street.
Australia’s market has dropped 20% since November, with finance stocks down 30%. Notions of support from Asian commodities demand are misguided. Commodity prices shrink with debt markets and already in the 2008 first quarter, Australian debt issues have fallen by 62.8%, according to Thomson Financial figures.
According to Citigroup, Australia’s particularly susceptible to the crunch which is playing out in the US – when real estate investment trusts are included, 40% of our stock market is accounted for by financials, and Australia’s consumers are some of the most indebted in the world.
Thomson says Q1 equity capital markets are off 59.2% with IPOs cut by 75.2%, and M&A activity down 10.3%. That is a lot of banking business lost.
David Miles, COO of JP Morgan, says now is definitely not the time to be thinking about building your career outside Aus. Is he wrong? Should you be getting out to Asia or Dubai before it’s too late?
It’s always a good time to leave Australia. Even in a credit crunch, the country can’t generate a decent crisis. It’s too small, too protected, too rule-bound for its markets to do anything as interesting as collapse, wobble, fall over. No, it’s steady as she goes, the little boat of the Australian market, paddling nowhere very much in its own wee pond. If you want excitement and some real experience, now is exactly the time to go to London or New York where serious banks are head to head with the core of the world’s economy, madly remodeling, unwinding fabulously complex instruments, and living a really exciting life.
The anti-Oz 18 Mar 2008
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