credit update 20 09 07

Most Asian stock markets rallied with the Nikkei up 3.67%, Hang Seng up 3.98%, All Ords up 2.48% and Straits Times up 3.35% at yesterday's close. The rate cut in the US and the Bank of Japan's keeping the overnight lending rate at current level lifted market sentiments and saw surge in Japanese shares led by Mitsubishi UFJ Financial and Toyota Motors.

As widely anticipated, the Bank of Japan kept the interest rate pegged at its current level. BOJ officials say that they do not see at the moment a need to radically change their forecast of 2.1% growth in the fiscal year. The decision was not unanimous, with one of its nine members calling for a rate hike. The split is seen by some that the central bank will still seek gradual rate hikes in the future.

The subprime mortgage lender Accredited Home Lenders Holding agreed to be bought at a lower price by Lone Star and to drop a lawsuit against the private equity firm. The lawsuit pertained to Lone Star's attempt to back out of the merger agreement after market conditions for mortgage lenders deteriorated. Meanwhile, Absolute Capital Management, a UK hedge fund, halted withdrawals of investors after seven of its eight funds "contain quoted investments which the board believes are not immediately realisable at their stated values due to their illiquid nature."

Morgan Stanley is hard hit by the credit cruch as it reported a 17% drop in profits in the last quarter. It also took a $940m write-down the value of its loans.

US stock market extended its rally for the second day with the S&P 500 up 0.61% and the Dow Jones Industrial up 0.55%.