US$46m written off, says there might be more.

Standard Chartered has taken US$1.7 billion of assets from a structured investment vehicle (SIV) that it manages onto its balance sheet and has written down US$46 million as a provision against the SIV’s losses.

The bank cautions that there could be more write-offs in coming weeks. SIVs such as Stanchart’s Whistlejacket raise money in the short-term commercial paper market and invest in mortgages and other asset-backed securities.

Stanchart’s move follows similar action to support SIVs by HSBC and other banks. Like other banks, it blamed the losses on the dislocation in the credit markets and the liquidity crunch.

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Global equity markets have been volatile in the past few months. Losses on sub-prime mortgages have morphed into a more general credit crunch problem arising from the loss of confidence within the global financial system.

Due to the lack of transparency, banks find it difficult to determine what sub-prime exposure banking counterparties have, although this has become more apparent recently as more billion dollar mea culpas emerge. Indeed, each announcement brings the problem closer to a close as the ultimate loss is a fairly deterministic amount (US$200-300 billion).

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(NEW YORK) Local governments and school districts in Florida scrambled on Monday to assess the damage to their investment portfolios from subprime mortgage loans, as the credit crisis reached into pockets of the investment world previously thought to be out of harm’s way.

Florida last Thursday froze withdrawals from its Local Government Investment Pool, a sort of money market fund for the state’s public agencies, after nervous investors pulled out US$10 billion in 15 days.

On Monday evening, public school superintendents, municipal finance directors and county clerks from all over Florida participated in a tense conference call to inquire about the fate of their money - money that was supposed to gain modest interest in a supposedly risk-free, easy-to-access fund.

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Next year, a healing process should begin, says senior director.

(DANA POINT, California) The worst of severe rating cuts of collateralised debt obligations tainted by US sub-prime mortgages is probably over and 2008 should begin a ‘healing process,’ a senior director at Fitch Ratings said.

Deteriorating value of US sub-prime mortgage debt has resulted in US$67 billion of rating cuts of CDOs by Fitch, including top-tier ‘AAA’-rated debt that now has been lowered on average to ‘BB’-rated debt known as junk bonds.

Asked if Fitch expects further CDO downgrades ahead, Richard Hrvatin, a managing director at Derivative Fitch in New York, said the worst cuts were behind.

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They are also hit by the US sub-prime mortgage crisis.

(TOKYO) The US sub-prime credit crisis has slashed Japanese banks’ earnings and pushed their already lacklustre share prices even lower, but lenders aren’t likely to see relief without an improvement in loan demand.

Slowing down: Large Japanese banks are hurt by slower lending, weak fee income and ties to the troubled consumer finance sector

On top of sub-prime related losses, large banks such as Mitsubishi UFJ Financial Group Inc, and Sumitomo Mitsui Financial Group Inc are bruised by slower lending, weak fee income and ties to the troubled consumer finance sector.

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Plan may offer relief of up to 7 years for some sub-prime loans.

(WASHINGTON) Mortgage industry executives worked on Saturday to hammer out details of a homeowner rescue plan that would freeze interest rates on some US sub-prime mortgages for up to seven years, but questions remained over how to avoid investor lawsuits and other legal challenges.

Struggling: Two million mortgages face resets and 500,000 of these could lose their homes

The negotiations among lenders, servicers, investor groups, regulators and other parties were aimed at allowing United States Treasury Secretary Henry Paulson to announce a framework for the plan today, with full details expected on Wednesday, said a mortgage sector source involved in the talks.

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There are really only two issues investors have to focus on over the next eight days or so, and one more for the weeks beyond that. The first one, short-term, is whether the US Federal Reserve will cut its Fed funds rate by 25 or 50 basis points at its Dec 11 meeting and the second is whether the market will ‘buy in anticipation and sell on news’ once the cut is announced.

The longer-term issue is of course, whether rate cuts will help forestall what an increasing number of people believe is a forthcoming US recession or whether it’s all a case of too little too late.

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(HONG KONG) Temasek Holdings may be selling shares in Chinese companies to buy stakes in US and European financial institutions, the Hong Kong Economic Times reported yesterday, citing unidentified people.

Temasek has recently held discussions with US and European financial institutions and ‘the pricing is reasonable’, the Chinese-language newspaper said, citing people familiar with the situation. The talks prompted it to pare its holdings to raise capital for potential acquisitions, it added.

European and US financial institutions have been suffering because of the sub-prime crisis, forcing them to court potential buyers such as Temasek.

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Sub-prime fallout still not over; defensive stocks recommended.

Investors feeling dizzy over the recent market swings may have to face another 6-10 weeks of market volatility, till the actual impact of the US sub-prime fallout becomes clearer.

But in the medium to longer term, domestic and regional fundamentals could come into play again and lend support, Carmen Lee, head of research at OCBC Investment Research said yesterday.

‘In the short-term, the volatility in the market will likely persist for the next six weeks to another 10 weeks because this sub- prime thing has not really blown over and that there could possibly be more coming up,’ she said.

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NEW YORK - The Dow and S&P 500 rose on Friday, capping a dismal November with a four-day rally, as financial stocks rallied on optimism over a proposed rescue for struggling homeowners and on heightened expectations for more interest-rate cuts.

Tech stocks were left behind, however, after Dell Inc fell by its most in seven years after a disappointing outlook, driving a 0.3 per cent drop in the Nasdaq for the day. Investors also appeared to be rotating money from tech, until recently a market leader, and into the downtrodden financial sector.

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