Wednesday, November 23, 2011

Liquidity Creeping Into The Markets

One sure fire way to anticipate a bull run is access to liquidity. I have been hearing this more than a couple of times over the past two weeks, bankers are flying in from Singapore and HK to offer decent loans to listed corporations at highly undemanding rates.

The last 6-7 years saw much of the liquidity in Asia gravitating towards supporting property loans. Hence equity markets did not get much of a boost from the excess liquidity in the system. There has been a dramatic shift in property outlook in HK, Singapore and Malaysia. Most have gone neutral or hold from buys. What that means is that banks are too flushed with liquidity and have to keep them working.

Local banks are doing the same but apparently the foreign banks are a bit more aggressive. Ringgit loans of RM50m to RM300m can be had at 2% or 3% below BLR. The juiciest one is USD loans can be had at just 0.1%. Many of the top tier companies do not really need the funds, so the bankers are going second tier and soon I think not so blue companies as well.

The natural chain of events would be that once they take the loans, they have to put it to work, usually expansion or asset acquisition, hence more corporate developments. I see this as the beginning of a bull run cycle and it would probably take another 2-4 months to ripen.

Liquidity is a massive force in charging a bull run. You have been warned.


easystar said...

Hi SD,

Where can you get USD loan for 0.1%?
Is this with huge fees? What is the duration? (Is this a overnight financing rate? )

Bonescythe said...

This Jesicca also not bad..

trusbx said...

Chia cha better

Unknown said...

I would like to have whatever you are smoking there. Banks are facing liquidity crunch and pricing is on the uptrend.

David Koay said...

Depending on banks of which country. From what I got, banks such as those in australia are flushed with liquidity. It's not a liquidity issue, it's a confidence issue. Investors and corporations are scared like hell over the past few months that everyone puts money into the bank, dun dare to invest, dunno where to invest.


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