Firms' takeover augurs market volatility

PUBLISHED : Monday, 08 September, 2008, 12:00am
UPDATED : Monday, 08 September, 2008, 12:00am

Markets in Hong Kong and on the mainland are bracing for more volatility this week following the United States government's takeover of mortgage giants Fannie Mae and Freddie Mac.

'The news from the US is not good,' said He Fuqiang, a director at Beijing ZHY Money & Bond Market Investment Consulting Centre. 'Now the question of whether the fundamental problem is deteriorating will haunt the investment community.'

'Investors will be watching out for whether the US economy continues to deteriorate or stabilise,' said Ben Kwong Man-bun, chief operating officer at KGI Securities. 'They will watch out for coming economic data and whether the mainland government will adopt measures to stimulate the economy.'

But Xu Mingqi, economic researcher at the Shanghai Academy of Social Sciences, said Washington's action 'might be a positive sign that the mortgage giants won't go bust and hopes for recouping losses remain'.

Mainland holdings of bonds issued by the two US companies were estimated to exceed US$340 billion, rating agency Standard & Poor's said.