Will the sub-prime virus hit China next?

Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

United states, Australia and now Germany and Paris. The sub-prime virus has infected financial institutions across the world. Is China the next target?

 

What began as an infection in the US, is now a global epidemic. Payment defaults on sub prime mortgages, or risky home loans given to people with poor credit history, has had ripple effects on economies and has shaken markets worldwide.

 

First casualty - New York based Bear Sterns' hedge funds, which had huge investments in the housing market, collapsed last month. This sent jitters across global markets and sent its boss Warren Spector home.

Then the sub-prime virus hit Australia. Macquarie Bank's fortress fund cautioned investors of 25% losses triggering global markets to tank yet again. Today in Europe, the crisis has forced France's biggest listed bank, BNP Paribas to freeze 3 funds with investments of over 1.6 billion euros.

 

Sensing panic selling and hence a liquidity crisis, European Central Bank said it will provide liquidity via overnight repo at 4%. So who's next?  Analysts say the crisis may hit Chinese banks, since they have significant exposure to us credit markets.