Lehman Bankruptcy to Have Limited Impact on Asian Markets

While the Lehman Brothers bankruptcy announcement has sent shockwaves rumbling through the U.S. financial community, its impact on the Asian financial markets could be less than earth shattering, despite Lehman’s $1.6 billion in outstanding loans from seven Japanese banks, including Aozora Bank, Mizuho Corporate, Shinsei, the Bank of China, and a Hong Kong-based unit of Citigroup.

Following the announcement, banking stocks across Asia plunged as much as 16%, and, collectively, banks saw their biggest one-day loss since 1987. Adding to weak investor confidence was the fact that Lehman’s Tokyo-based unit, Teikoku Data Bank, filed for bankruptcy at the same time as its parent bowed out. At $32.7 million, Teikoku’s fall was the second largest bankruptcy in Japanese history.

However, in an article from the International Herald Tribune, the affected banks were optimistic about their ability to weather the aftermath of the Lehman buyout, saying that Lehman had overstated the potential losses from its collapse and that through limiting their exposure, their own losses would be manageable. In the meantime, Mitsubishi UFJ Financial Group Inc. and Nomura Holdings Inc. have capitalized on the fall of their overseas rivals and have bought significant shares of Morgan Stanley and Lehman Brothers, respectively.

Overall, the effects of Wall Street’s Jericho on online forex activity has not yet manifested fully. In the realm of currency trading strategies, the yen has seesawed in the past few weeks against other major currencies. As the consequences play out, the impact will become more visible, not only in the forex market but also in the derivatives market, where Lehman had a strong presence.