Government feels good will not save the market, SocGen problem just start

Whether market good or bad, due to various loophole in trading system, any banks that involve in stock trade or funds management, are susceptible to problem similar to Société Générale or Barings bank.

The problem is common sense : conflict of interest. In fact, banks are suppose to be financial body, but in order to expand the profit margin, involve in every financial relate business except the kitchen sinks, has expose many insecurities towards Bank.

Another thesis for conflict of interest that lead to its own collapse are none other than the collapsingArthur Andersen.

When George Soros appear on Malaysia newspaper and talk about Malaysia economy outlook, I almost ROFL(Rolling On the Floor Laughing loud). It seems Malaysia government are so lame and desperate to ask for international speculator cum hedge funds manager that burned his funds in most direct encounter (except encounter with Malaysia, which George Soros has the upper hand, most of the time).

When market are good, we can bet it can absorb multi billions fraud loses. For example, the Enron accounting Scandal, Worldcom accounting scandal. Where those company business and assets still intact.

However, in case of Société Générale fraud , it is worst. Because unlike bricks and mortar company, Banks depends on heavily on the liquidity and trust. Similar to the Barings Banks incident, when the liquidity dried out, it will spell the doom of the banks.

As describe in Rogue trader by nick Leeson, you never know how many billions dollars fraud undergo are yet to be exposed by financial institution during the volatile period.

When it happens, it will be a domino effect. To make things worst, in order to meet the default, banks who suffer the losses (as what happen to SocGen), must throw stock on hand to seek liquidity. When the stock volume selling are huge, it can easily send the stock exchange down south.

In short, it doesn’t matter how “good” are Malaysia economy outlook. We already live in global village. When SocGen make a huge losses, I can bet with you, even oil rich country like Saudi, Kuwait and even Brunei, are jumping up and down. It doesn’t matter SocGen are “halal” or not, the domino effect will eventually bring everything that tied with it.

The the worst part for Malaysian are none other than EPF movement. Will EPF being force to “strengthen” KLSE before all the dust settle? We wouldn’t know.


One Response to “Government feels good will not save the market, SocGen problem just start”

  1. Maverick SM

    The government, in particular, Nor Mohamad Yakcop had always used the EPF’s money as a tool to do artificial insemination and economic balancing. It’s unhealthy but where else can they find a willing and ultra cash rich godfather to act in accordance with their fancies?

    The only consolation is that the EPF CEO is a prudent man; I believed so, by observation of the situations so far.

    moo_t : I do welcome the new practice to release funds on the housing loan. IMHO , EPF hold too much money but failed to imitate Berkshire Hathaway. It is ridiculous for EPF to implement the stupendous and unofficial policies to not invest in “non-halal” good ROI business. Through stringent screening, no business are halal.

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