Asia in a faltering world

Aug 21, 2008

Take a look at the interesting table on the right. What you see is the total amount of money written down in 2007 from some of the largest investment banks and commercial banks in the world. Certainly the bottom line is still growing but it tells one story: the financial world is collapsing. Want an example? Bear Stearns, and Lehman Brothers is coming up next. Freddie Mac is following suit.

This is bad news,...ahem, not really. As Western banks are falling, Asian banks are looking to spend its money. Temasek has injected some of its US$131bn (latest market value) into Merrill Lynch and Barclays. The Abu Dhabi Investment Authority's poured around US$7.5b to rescue Citigroup from the ever groomy outlook. The story behind this pretty simple. As the world is faltering, Asia is playing a more active role in the financial market and in fact, it is benefiting from its wise investments.

The Industrial and Commercial Bank of China, already the biggest bank in the world in terms of market capitalization thanks to Citigroup 's voluntary retreat from its previous first spot, is expected to announce "the biggest profit of any bank in the world" [Financial Times] soon. It is yet another simple story: as the world is slowing down, Asia is cathing up FAST!.

Where is Vietnam? Or more specifically, what are our banks and the State Capital Investment Corporation doing? Yet another simple answer: they are struggling with the vibration of the financial crisis and at the same time the recession caused by internal economic issues rather than external ones. Inflation caused by overheating has prompted the central bank to suck money from the market and thus made the VN-INDEX the second most terrible performers in the world behind China's stock market. The SCIC , Vietnam's first sovereign wealth fund, has been working on taking control over state companies. If you look at how slow Vietnam is responding to the global crisis and globalization, SCIC is as slow as that.

It may take many years to come until a major investment from Vietnam to arrive at the US's shore or any Western countries'. Perhaps at another downturn of the world's business cycle :)