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Video Transcription - Page 1
"Japan Banks Have Little Subprime Exposure"
Host 2: Martin Soong
Host 3: Sri Jegarajah
Squawk Box is CNBC Asia’s morning show which focuses on updates after the US market closes.
Japanese banks have very minimal subprime exposure, notes Patrick Mohr, strategist & head of quantitative research at Nikko Citigroup. He gives his outlook for the Japanese market with Todd Everts of Wall Street Global, CNBC's Martin Soong, Amanda Drury & Sri Jegarajah.
Patrick Mohr: : Well I think you that in the short term certainly the market’s going to be weak… I mean we’re seeing a barely market today but I don’t think that the market’s going to stabilize in the short term. Certainly Japanese banks do have exposure but in the grand scheme of things, if you look at the percentage of credit ride offs and the percent of total, it’s about 2% as opposed to the US banks which are about 50%. So you know in the short term certainly nerves are being rattled but when you think a much bigger perspective on this Japanese banks really don’t have that much exposure so I think that in the short term I mean there is a gap between perception and reality and we are encouraging our clients to exploit that gap but of course you’ve got to have a stomach for volatility.
Host 1: Yeah you got to have a very strong stomach. So if you just want to seed it out I mean maybe it’s not such a bad place to put your money into Japanese Yen considering the very volatile risk environment that’s going on at the moment, I mean the yen does tend to gain.
Patrick Mohr:Absolutely, I mean because the carry trade we’ve seen, the yen strengthened time and time again in times of crises over the last few years and you know I don’t think this is going to be any different so if you’re really looking for safety, yeah, I would tend to agree with that…just hold your money in yen.
Host 2: Okay, so the good news is Japanese banks don’t have that much just very minimum marginal subprime exposure there. The bad news is at home you’ve got an economy…exports are slowing as well weakening external demand but these guys have strong balance sheets. Are you surprised that they are going outbound using some of their capital to gobble up hugely distressed assets in the West, the US or even Europe?
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