Is The Financial Services Sector "Decoupling"?
Around two years ago, the word "decoupling" was on just about everyone's lips -- until China's stock market cratered, and the subprime crisis helped dispel any hope of economic growth anywhere in the world.
Now, however, signs are appearing that the decoupling theory -- which posits the rise and de-correlation of mostly eastern emerging markets over more developed western ones -- may be coming back. While Chinese officials are calling for a replacement of the dollar as the world's reserve currency, and Shanghai is planning its own 6-ton bull to rival Wall Street's 3.2-ton symbol of capitalism, four other pieces of news emerged during the Holiday weekend which indicate a decoupling shift in the financial services sector:
- U.S. regulators have closed seven banks in Illinois, bringing the total number of bank bankruptcies in the U.S. this year to 52. The FDIC, which insures the nation's bank deposits, is expected to be out of pocket to the tune of $188.5 million as a result of the bankruptcies. If there was ever a sign that "green shoots" are having a harder time springing up in the desert than we first thought back in May, this may be it. Until the economy heals at a regional level, it's hard to argue that it's healthy at a national one.
- Citigroup's at it again, moving around top personnel in order to become more competitive vs. recently de-TARP funded rivals Goldman Sachs, Morgan Stanley, and JPMorgan. This time, the changeovers concern the emerging markets divisions, where Stephen Bird and Shirish Apte were appointed as Asia-Pacific chief executives, and World Bank Managing Director Shengman Zhang was made Asia-Pacific chairman. Then again, while the personnel movements might look strategic, they're probably also to do with the departure of former Asia Pacific chief exec Ajay Banga, and a flood of other departures of Citi's top bankers in the region to smaller asset management firms earlier in the year.
- "We expect 2010 will mark the beginning of the recovery as the major central banks and their respective governments maintain the current unprecedented level of economic stimulus," Morgan Stanley said in a report Monday morning. The bank cites an increase in Chinese imports of copper, iron-ore and aluminum this year, on the back of a huge 4 trillion yuan ($585 billion) stimulus package. Perhaps the only red flag in this report is the possibility that Morgan Stanley is talking its own "book," seeking to drive up commodity prices in order to profit from existing holdings.
- After three years, Bank of Japan is finally positive about growth in the region, and has raised its assessment for Japan's economy for the second straight month. Indeed, I have pointed out before here at BNET Finance how Japanese banks are increasing their Asian profiles in order to become more competitive globally: that process now looks as if it's getting underway.