[Biweekly Symposium] No.385, US Financial Crisis and Risk Management
Author:Unirule
Time:2009-12-22 14:13:14 Clicks:
Topic: US Financial Crisis and Risk Management Lecturer:Dr. Lawrence H. Zhang Discussants:Prof. Zhang Ming, Prof .Sheng Hong, Prof. Mao Yushi
At the 385th Unirule bi-weekly symposium, Dr. Lawrence H. Zhang from Nomura Securities gave a speech on the subject of "US Financial Crisis and Risk Management". Dr. Zhang first talked about Risk Management and Modeling. He thought that all models have flaws. These models are based on simple assumptions while the real world is more complex. And in the real world, the relationships between variables change very quickly while the models could not adjust as quickly. Then he reached the conclusion that No model can forecast the future correctly. Admittedly, model could provide a tool of analysis, basic relationship still holds. So the best combination should be Model (quantitative) + Human Brain (qualitative). Then Dr. Zhang moved on to US Financial Markets. According to him, there were some sighs of stabilization. First, no more big financial institutions are going to fail. Government recognized finally the issue is not only about liquidity, but sovereign and survivability. Second, Contraction monetary policy induced historical low mortgage rate. Although housing price is still declining, but with less speed. Third, labor market is still a weakening, but it’s weakening less fast. At last, corporate earning is improving. Some banks post profits in the first quarter of 2009.US equity market rebound from the bottom, emerging market equity rebound as well. However, the US economy is still weak. Economy recovery may take a long time, as early as the end of 2009, most likely in 2010 or longer. Unemployment rate will continue to increase, maybe more than 10% and until 2010 or even 2011. Housing market price will decline for another 10-15%. Credit market is still weak and corporate and commercial property default rate may continue to increase. Financial institutions write downs will continue, although with less speed. The impact of Government rescue plan is still uncertain At the end, Dr. Zhang talked about the impact of US financial crisis on China Macro and Financial Market. The volatility of US equity will be contiguous globally, including China equity market. Global international trade will decline at least 10% in 2009. US economy will take long time to recovery, China export may continue to be weak. China financial market reform will be cautious, for example, securitization market development will be delayed. Dr. Zhang also warn the Chinese firms to be cautious US showed some early signs of recovery. There are still a lot of uncertain and opportunity when buying American firms for US financial market is still uncertain.