Wednesday, November 30, 2011

Global Market Weekly Review, 20 - 26 November 2011

A special debt-reduction committee in the US Congress failed to reach agreement, extending partisan gridlock into the 2012 election year and setting the stage for US$1.2 trillion in automatic spending cuts. Standard & Poor’s said it would keep the US government’s credit rating at AA+ after the super-committee’s announcement. S&P, which stripped the US of its top AAA grade on 5 August 2011, said it decided that the failure didn’t merit another downgrade.

The International Monetary Fund (IMF) revamped its credit line program to encourage countries facing outside shocks to turn to the fund with few conditions attached, as European leaders fail to end their debt turmoil. The IMF said the new instrument, the Precautionary and Liquidity Line, can be tapped by countries with strong economies currently facing short-term liquidity needs. Funding available will be capped at a percentage of countries’ contributions to the fund, limiting the role the instrument can play in preventing the debt crisis from spreading in Europe.

China widened efforts to support cash-strapped companies in Zhejiang and rural areas hit by a credit squeeze that’s slowing the second-largest economy just as Europe’s debt crisis saps export demand. The People’s Bank of China cut the reserve ratio for more than 20 rural credit cooperatives nationwide by half a percentage point where small businesses have complained about lack of access to credit. The Chinese central bank’s move reduces the percentage of deposits the cooperatives are required to park with the central bank to 16%, a “normalization” after an increase a year ago.

Source: ING Funds Berhad

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