The sub-prime woes, whose loss was initially pegged at $100 billion, are growing by the day as four central banks have already pumped in about $230 billion to calm the markets.
The move to pump in funds can only be a temporary solution.
Meanwhile, speculations are rife that the US Fed, in a surprise move, may reduce interest rates. If such a move materializes, global markets will further plunge into volatility.
The Reserve Bank of India [RBI] has sought data from domestic banks on the exposure to credit-linked derivative instruments by their overseas branches and subsidiaries. Any sub-prime assets in the books of these banks will trigger panic. High-premium private equity [PE] and merger and acquisition [M&A] deals are also set to slow down, at least for the time being.
"If investors want to withdraw money from hedge funds, a 45-day notice period is required, in which the application can be submitted. So for the July quarter, July 1 to August 15 is the application period to withdraw serious money from a hedge fund. Post-August 15 will probably see people queuing up for redemptions in hedge funds. This may lead to a cascading liquidity withdrawal syndrome across emerging markets. This has not happened yet, but if it does, stock prices can be under the selling pressure across markets, where funds have been invested".
There could be a lot of jitters in the hedge funds sector, leading to a contraction and pullout of liquidity from participatory notes. The hedge funds that face redemption pressures will prefer to sell in the emerging markets, where they have made more money in recent weeks. According to a Standard & Poor's global stock market review, in July the emerging equity markets rose 4.53 per cent compared with a 2.02 per cent loss in the developed equity markets during the same period.
The move to pump in funds can only be a temporary solution.
Meanwhile, speculations are rife that the US Fed, in a surprise move, may reduce interest rates. If such a move materializes, global markets will further plunge into volatility.
The Reserve Bank of India [RBI] has sought data from domestic banks on the exposure to credit-linked derivative instruments by their overseas branches and subsidiaries. Any sub-prime assets in the books of these banks will trigger panic. High-premium private equity [PE] and merger and acquisition [M&A] deals are also set to slow down, at least for the time being.
"If investors want to withdraw money from hedge funds, a 45-day notice period is required, in which the application can be submitted. So for the July quarter, July 1 to August 15 is the application period to withdraw serious money from a hedge fund. Post-August 15 will probably see people queuing up for redemptions in hedge funds. This may lead to a cascading liquidity withdrawal syndrome across emerging markets. This has not happened yet, but if it does, stock prices can be under the selling pressure across markets, where funds have been invested".
There could be a lot of jitters in the hedge funds sector, leading to a contraction and pullout of liquidity from participatory notes. The hedge funds that face redemption pressures will prefer to sell in the emerging markets, where they have made more money in recent weeks. According to a Standard & Poor's global stock market review, in July the emerging equity markets rose 4.53 per cent compared with a 2.02 per cent loss in the developed equity markets during the same period.
