“The stock exchange movement that one currently observes most probably results from a major movement of +deleveraging+”, i.e. of sales of titles by constrained actors to free of debts itself, Friday the Minister for the French economy Christine Lagarde estimated in front of the press. ( Finance Information City )
The speculative funds, appreciated for their talent to make inflate the placements of their customers while resorting to the debt with great volume, from now on are clearly indicated as the principal persons in charge of the continuous fall of the stockmarkets in spite of the succession of governmental plays.
Friday was one day black on the world Stock Exchanges, Tokyo releasing 9,6%, London 5%, Paris being limited to 3,54%, after being fallen up to 10%. Wall Street also signed a new meeting of fold, with a fall of 3,59%.
Admittedly, fears on the worldwide economy weigh, “but the main reason is that the speculative funds are forced to liquidate their positions because they had too much practised the action leverage on derivatives of credit”, of type CDS (credit default swaps), affirms Al Goldman, strategist at Wachovia Securities.
These derivatives of appropriations became cumbersome products, which systematically make lose money with their holders, obliging the funds to sell their actions to ensure their survival.
“The concept of compulsory sales does nothing but exacerbate the feeling of uncertainty already present on the stockmarket, which feeds the sales panics”, Patrick O' Hare belongs to the company of Briefing.com financial informations.
In this scorched earth policy, the sector of the hedge funds, symbol of dérégulée finance, comes to know the worst quarter of its history. The investors withdrew some more than 31 billion dollars, according to the figures of the specialized company Hedge Fund Research (HFR).
On the whole, the sector melted of more than 10%, losing 210 billion dollars to the third quarters, under the combined effect of the bad performances of their investments and the escape of their customers. From now on their credits on a world level rise to 1.720 billion dollars.
The financial crisis, which rose by rebound from collapse from the market from the real estate credits at the risk (“subprime”) should push many funds, often of small size, to put the key under the door.
After 350 liquidations in first half of the year, the year 2008 could see the disappearance from approximately 7% of ten thousands of funds which exists, according to HFR, but some expect a tidal wave much more consequent.
“Part of this industry is dying, perhaps half. Thus they liquidate their credits in catastrophe, in an animal fear, and without consideration for the economic news”, explained recently to AFP Eric Galiègue, director of the cabinet of analysis Valquant (group Day by Day).
In this context of concern, the leaders of one of the largest funds, Citadel, convened Friday a conference call to reassure, and promise that they intended “to thrive in the new era of finance”.
Citadel, which, according to the press, boxed a retreat of 35% of the value of its principal funds, asserted solidity of its situation by explaining why 30% of its capital were in cash and Treasury bills, and that it had an intact credit line of 8 billion dollars.
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