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Goh Eng Yeow tracks the V-shaped rally made by global lenders
AROUND this time last year, I accompanied my colleague, Gabriel Chen, to see Sir Philip Hampton, the then newly-appointed chairman of Royal Bank of Scotland (RBS).
RBS fascinates me as it is the inheritor of the bank with the oldest presence in Singapore, ABN Amro. I was also curious to find out more about Sir Philip, who had a non-banking background.
His local RBS minders were quite awed by his presence – reminding us to address him as Sir Philip.
Until RBS faced a financial crisis of unprecedented scale in October 2008, due partly to the huge price it paid for the rump of ABN Amro, the global credit crunch had been largely a stock market phenomenon here.
RBS changed all that. With the crisis it faced, the terror facing Wall Street finally struck at the heart of Raffles Place.
But I digressed. We spent over an hour discussing issues of the day. One year later, most of them have been largely resolved – like the huge storm stirred up by the pension given to RBS’s previous CEO Sir Fred Goodwin.
But there is one point made by Sir Philip which remains etched in my mind – and that was his observation that huge lenders like RBS never entirely go away. They will survive in one form or another.
This brings me to the point which I wish to raise in this blog: Commercial lenders have been at the vanguard of the recent global stock market rally which had seen the Dow Jones Industrial Averages cross the 11,000 level and the STI here breaching the 3,000 mark for the first time in nearly two years.
Largely forgotten for now by investors has been the worry that they are too big or too connected to fail.
Only 13 months ago, the global financial system suffered a massive seizure, following the horrendous losses posted by huge US lenders, as they made huge provisions against their bad loans.
In a black fortnight between end-February and early March last year, Citigroup broke the buck, while HSBC Holdings – whose roots in the region stretches back more than a century – tumbled 24 per cent in one day.
What a contrast then to find that Citigroup rose 6.7 per cent to US$4.93 on Wall Street last night, while HSBC rose 1.1 per cent to HK$83.40 in Hong Kong this morning.
The financial panic experienced a year ago is now receding into memory, while traders look forward to stock markets making another sustained push higher – after Singapore – the canary on the health of the global economy – experienced a dramatic jump in quarterly economic growth.
Spring is in the air, and it is likely that the music will continue for a while yet. Even grizzly old bears may find that they "have gotten" to get up to dance while the music is playing – to paraphrase the words used by a former bank chairman.
But going by the experience gathered over the past two years, it may be worthwhile to note that riding the rally is like playing a game of musical chairs. Just make sure that you are not the one who fails to find a chair when the music stops.
Enjoy the rally while it lasts.
AROUND this time last year, I accompanied my colleague, Gabriel Chen, to see Sir Philip Hampton, the then newly-appointed chairman of Royal Bank of Scotland (RBS).
RBS fascinates me as it is the inheritor of the bank with the oldest presence in Singapore, ABN Amro. I was also curious to find out more about Sir Philip, who had a non-banking background.
His local RBS minders were quite awed by his presence – reminding us to address him as Sir Philip.
Until RBS faced a financial crisis of unprecedented scale in October 2008, due partly to the huge price it paid for the rump of ABN Amro, the global credit crunch had been largely a stock market phenomenon here.
RBS changed all that. With the crisis it faced, the terror facing Wall Street finally struck at the heart of Raffles Place.
But I digressed. We spent over an hour discussing issues of the day. One year later, most of them have been largely resolved – like the huge storm stirred up by the pension given to RBS’s previous CEO Sir Fred Goodwin.
But there is one point made by Sir Philip which remains etched in my mind – and that was his observation that huge lenders like RBS never entirely go away. They will survive in one form or another.
This brings me to the point which I wish to raise in this blog: Commercial lenders have been at the vanguard of the recent global stock market rally which had seen the Dow Jones Industrial Averages cross the 11,000 level and the STI here breaching the 3,000 mark for the first time in nearly two years.
Largely forgotten for now by investors has been the worry that they are too big or too connected to fail.
Only 13 months ago, the global financial system suffered a massive seizure, following the horrendous losses posted by huge US lenders, as they made huge provisions against their bad loans.
In a black fortnight between end-February and early March last year, Citigroup broke the buck, while HSBC Holdings – whose roots in the region stretches back more than a century – tumbled 24 per cent in one day.
What a contrast then to find that Citigroup rose 6.7 per cent to US$4.93 on Wall Street last night, while HSBC rose 1.1 per cent to HK$83.40 in Hong Kong this morning.
The financial panic experienced a year ago is now receding into memory, while traders look forward to stock markets making another sustained push higher – after Singapore – the canary on the health of the global economy – experienced a dramatic jump in quarterly economic growth.
Spring is in the air, and it is likely that the music will continue for a while yet. Even grizzly old bears may find that they "have gotten" to get up to dance while the music is playing – to paraphrase the words used by a former bank chairman.
But going by the experience gathered over the past two years, it may be worthwhile to note that riding the rally is like playing a game of musical chairs. Just make sure that you are not the one who fails to find a chair when the music stops.
Enjoy the rally while it lasts.
