Still cold outside - but markets are heating up for Banks and CEE countries

* Bank recapitalisation -PRIVATE capital to the (temporary) rescue - at least for one bank

Well, since yesterdays piece here on bankrecapitalisation, there has been some activity.
See piece from 2 Feb http://todaysmacrotrading.blogspot.com/2009/02/new-month-will-it-be-hot.html
Swedish Bank SEB was forced to announce they will be raising 15-20 Bn Sek in capital, with the (also) Wallenberg owned Investor guaranteeing 30% of it. Goldman Sachs and Morgan Stanley are also involved.

I am impressed they managed to raise private capital (excluding the "inhouse" capital from Investor) at this late stage in the process. (I have to think they will succeed).
On the other hand it seems too little too late.
Coincidentally, the Swedish Government today also announced a supportpackage for Swedish banks on 50 Bn Sek.

Strings attached, although not that fierce if you ask me;
-Stop for board bonuses, salary and compensation increases for 2 years for any bank participating in the Government program.
- The government are willing to participate in IPO;s if the private investors takes a minimum of 30%. Then the government participates on the same terms as everyone else.
The government will take no further initiatives themselves on this issue, Finance minister Anders Borg said. Yeah, right.

With a Baltic, Ukraine, PE, shipping industry, you name it, collapse around the corner, I have a hunch the government will soon be up to their eyeballs in this.

The share price for this coming IPO is yet unknown, but I would at least expect 10-20% discount compared to yesterdays closing price for SEB (which was surprisingly strong yesterday btw, hmmm). However, today the SEB stock was down 6 % ish at the most and currently is down "only" 4%. Swedbank is up 1.5% ish. Go figure.
Ive obviously missed out on something here, or?

All in all though, the situation is heating up for the European banks exposed to the CEE and the Baltics. So far basically all banks with exposure to these areas have been out stating their "willingness" to receive public sector or any other capital. I can see why. The Swedish Banks will be no exception, rather the opposite.


* PLN ready for ANOTHER fall, could be a very large and swift one as well.

Eur/Pln has broken through the 4.50 level (highest since 2004) and swiftly moved to 4.55/4.56. From here it looks like next stop will be 4.65 and 4.7450 on its way towards 4.85.
Last July Eur/Pln was down at 3.20,,,,
The difficult state of the Polish corporates mentioned in the piece from the 15 Dec, http://todaysmacrotrading.blogspot.com/2008/12/fxpln-corporate-hedging-gone-horribly.html is still valid.

This issue has even affected Polands GDP and is still likely to.
Several corporates have already gone bust because of their FX Options positions and the latest victim came yesterday, as Polands biggest glassmaker and founding member of the Warzaw stock exchange, Krosno, sought protection from creditors due to FX options losses.

Unfortunately, it seems many Polish treasurers have applied the Martingale theory to their riskmanagement, further adding to the severity of the problem. Alledgedly, there are further Option barriers higher up to be had from here and unless the Centralbank uses their 70 Bn Eur FX reserves, there is a high probability the market will be gunning for them shortly.

This is adding to the already dire situation with household and corporate hard currency loans. These issues are already pressing the PLN.
In Hungary the situation is similar on the hardcurrency front. As PLN is weakening, the 300 level in Eur/Huf should be severely tested.

There is also an ongoing deterioration in the availability of Eur in the CEE countries indicated by the cross currency basis widening, and in many markets currently trading at its widest. Unless further steps are taken (as earlier when the ECB temporarily relieved pressure on the on the PLN and the HUF by extending swaplines) to relieve pressure due to these hard currency bottlenecks, the currencymarket will have to do it instead by further weakening the local currencies. See piece from the 9 Nov http://todaysmacrotrading.blogspot.com/2008/11/cee-to-continue-under-pressure-despite.html




As always, good luck








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