Financial Institutions

and Markets
FIN 304
Dr. Andrew L. H. Parkes
Day 16
How do financial markets work?

Chapter 17: Thrifts and Credit Unions

Chinese shares end more than 7% lower Tuesday, Jan. 2

The benchmark Shanghai
Composite Index tumbled
7.22% to close at 4,559.75
points.
Losses led gains by 780 to 17
in Shanghai and 599 to 8 in
Shenzhen.
The index plummeted as much
as 8-plus percent in late
afternoon trading.
Financial Institutions & Ma

Chinas stocks will they

fall?
Prescient again, I didnt
mean they HAD to fall
2

Chapter 17: Thrifts and Credit Unions

Ping An Insurance plunged by the daily limit of 10 percent to 79.55 yuan.
The country's second-largest life insurer said Sunday it planned to issue
1.2 billion A shares and no more than 41.2 billion yuan worth of
convertible bonds.

Heavyweight ICBC lost 8.60 percent to 6.9 yuan and trading of

BOC was suspended pending profit announcement.
PetroChina, which accounts for about 25 percent of the Shanghai
Composite Index, fell 4.73 percent to 26.18 yuan, the lowest closing
since its record high of 48.62 yuan on its debut on Nov. 5. China
Petroleum and Chemical Corp. (Sinopec) dropped 8.70 percent to
18.25 yuan.
Financial Institutions & Ma

Chapter 17: Thrifts and Credit Unions

Hua Sheng, an industry analyst and president of Yan Jing Oversea
Chinese University, said the drop was "normal and positive"
because it helped squeeze out assets bubbles.
Another analyst who declined to be named said he expected
the downward trend to continue through August.
XINHUA News -

http://news.xinhuanet.com/english/2008-01/22/content_7472244.htm

Hong Kong is now down by a third from its recent high of 31,600

STAY TUNED IN OVER THE SPRING FESTIVAL HOLIDAY!

Financial Institutions & Ma

Chapter 17: Thrifts and Credit Unions

Shanghai today?

Hong Kong yesterday!

Today? 225-issue Nikkei Stock Average plunged 752.89
In Japan , the benchmark
points, or 5.65 percent, from Monday to end at 12,573.05, its lowest
closing since Sept. 8, 2005.
Australia's main share index, ASX/S&P 200, suffered its biggest daily
loss on record with 7 percent being wiped out in the share market on
Tuesday. South Korea saw the steepest daily fall since Aug. 16, 2007 as the
benchmark Korea Composite Stock Price Index fell 74.54 points, or 4.43
percent, to 1,609.02 on Tuesday.
Financial Institutions & Ma

Chapter 17: Thrifts and Credit

Unions
Fed Cuts Rate 0.75% and Stocks Swing

Small Investors?

China Wonders if Its Stock Boom Is O

Financial Institutions & Ma

Chapter 17: Thrifts and Credit

Unions
Fed Cuts Key Interest Rate As Recession Fears
Well Up

The move is unlikely to be the last

cut, the Fed indicated. "Appreciable
downside risks to growth remain," it
said, vowing to "act in a timely
manner as needed to address those
risks." Markets see a high likelihood
of a half-point cut at next week's
meeting, scheduled for Jan. 29-30,
and see the rate falling as low as
2.25% by the end of the year. - WSJ
Financial Institutions & Ma

NEXT Jan 30?

Chapter 17: Thrifts and Credit

Unions
Bank Capital Equity or Net Worth
Two types of deposits
Reserves two types
Borrowing
Loans

What are they?

Deposit Outflow now!!!!
Financial Institutions & Ma

Chapter 17: Thrifts and Credit Unions

Show the balance sheet of the Third Savings
Bank.

The bank has $100,000 in checkable

deposits, $50,000 in time deposits,
$5,000 in bank capital, a 12 % required
reserve ratio and $70,000 in loans and
$70,000 in securities too.
What is the amount of excess
reserves?
Financial Institutions & Ma

Chapter 17: Thrifts and Credit Unions

Now explain what will happen
it the bank has a deposit
outflow of $2,000.
Now what about $5,000?
What are the four methods the
bank can use?

How to deal with a deposit

outflow?
Now that the stocks are
down!

Financial Institutions & Ma

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