Moody’s Signals Possible Cut for Europe Banks

Banks in 15 European nations, including the largest lenders in France,Italy and Spain, may have their subordinated debt ratings cut by Moody’s Investors Service Inc. to reflect the potential removal of government support.

All subordinated, junior-subordinated and Tier 3 debt ratings of 87 banks in countries where the subordinated debt incorporates an assumption of government support were placed on review for downgrade, the ratings company said in a statement today. The subordinated debt may be cut on average by two levels, with the rest lowered by one grade, Moody’s said.

Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and consider reducing support to creditors, the rating company said. Moody’s has said that a “rapid escalation” of Europe’s sovereign debt crisis threatens the entire region. U.S. President Barack Obamarenewed pressure on European leaders to prevent a dismantling of the euro. More

American Airlines Parent AMR Files for Bankruptcy

AMR, the parent company of American Airlines, filed for voluntary Chapter 11 bankruptcy protection in a New York court on Tuesday.

AP

The company [AMR 1.62 0.01 (+0.62%) ]listed assets of about $24.72 billion, while it has liabilities of $29.55 billion. more

Further consolidation for KL stocks in near term

Mah Sing, MRCB, UEM Land and Dialog should see stronger buying interest on dips for medium-term gains, says a head of research.

Blue chips extended their slump for a fourth week in volatile trade as investors shunned the local stock market due to worries over further downside volatility in global markets. The lower-than-expected US third quarter GDP growth of two per cent, contraction in China factory output, disappointing German bond auction and resistance from Germany on the issuance of euro-bonds to contain the debt crisis all combined to dampen sentiment last week.

As a consequence, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) slumped 22.85 points, or 1.57 per cent last week to 1,431.55, with about 70 per cent of the losses coming from Maybank (-30 sen), Genting Bhd (-58 sen), MISC (-65 sen) and Petronas Chemicals (-26 sen). Average daily traded volume and value declined to 1.45 billion shares and RM1.1 billion from 2.18 billion shares and RM1.45 billion in the previous week. Trading momentum on the ACE Market and in penny stocks dwindled further as they fell into correction mode.

External concerns dictated the FBM KLCI's direction last week and this trend will last. Issues stemming from Europe continue to evolve and do not show any signs of dissipating anytime soon. There are no easy solutions either with even the bigger and stronger European countries trying to walk a tight rope, worried that any wrong moves will affect them as well. Germany's failure to secure takers for all its bonds in an auction last week underscored reducing risk appetite among investors if the return from the corresponding investment does not match its risk profile. So, it is not surprising to see Germans being adamant in not wanting a joint eurobond as it is tantamount to the largest economy in Europe carrying the burden of guarantee on its shoulders.

Read more: Further consolidation for KL stocks in near term http://www.btimes.com.my/Current_News/BTIMES/articles/marketoutlooknov28/Article/index_html#ixzz1ez04Vgo2

KL stocks expected to head south

Share prices on Bursa Malaysia are expected to be lower next week with the market barometer, FTSE Bursa Malaysia KLCI (FBM KLCI), likely to hover around the 1,400-level due to deteriorating outlook in global markets.

Affin Investment Bank head of retail research, Dr Nazri Khan, said more downside risk remained in view of the lack of confidence in the market on fears of the impact from the escalating debt crisis in Europe.

"More investors are unlocking European assets because they expect tough capital requirement for European business with rising funding cost," he said.

He said the local bourse now was oversold and counters looked cheap.

"However, there is no short-term profit. People are looking for markets to calm down and for the debt crisis in Europe to end. However, this will take time," he said.

Nazri said currently, there were no new leads to boost the local market and external factors would still dominate sentiment.

During the week just-ended, the local bourse was mostly lower reflecting weaknesses in regional markets dominated by fears of escalating debt crisis in Europe and the still fragile US economy.


Read more: KL stocks expected to head south http://www.btimes.com.my/Current_News/BTIMES/articles/20111126112036/Article/index_html#ixzz1emwlWioZ

Moody's Warns On French Rating Outlook

A rise in interest rates on French government debt and weaker growth prospects could be negative for the outlook on France's credit rating, Moody's warned in a report on Monday, adding to pressure on European debt markets.

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Worries that France has the weakest economic fundamentals among the euro's six AAA-rated countries have drawn the euro zone's second largest economy into the firing line in the debt crisis this month.

The rating agency said the deteriorating market climate was a threat to the country's credit outlook, though not at this stage to its actual rating.

"Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," Senior Credit Officer Alexander Kockerbeck said in Moody's Weekly Credit Outlook dated Nov.21.

"As we noted in recent publications, the deterioration in debt metrics and the potential for further liabilities to emerge are exerting pressure on France's creditworthiness and the stable outlook (though not at this stage the level) of the government's Aaa debt rating," the Moody's note read.

The yield differential between French and German 10-year government bonds rose above 200 basis points last week, a new euro-era high. Read more