SINGAPORE--Asian market players are heaving a deep sigh of relief as news of the US Federal Reserve s $85bn (?0.35bn) rescue package for global insurer American International Group (AIG), came in on Wednesday.
With $1.1 trillion in assets and 74m clients in 130 countries, Asia had a significant exposure to the Fortune 500 firm.
Coming just after banking giant Lehman Brothers collapsed under the weight of a $613bn debt, the Federal Reserve's move on Tuesday was a bid to prevent further collapse of global financial markets and shore up confidence.
"A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance," the Federal Reserve said in a statement.
"The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy," it added.
Economists and analysts contacted by ICIS news were not surprised by the Federal Reserve s move to rescue the international insurer which was on the verge of filing for bankruptcy protection.
"The Federal Reserve s move is obviously to prevent a deeper recession in the economy. If AIG were to fall to bankruptcy, the global economy might be ripped," Arden Dai, an analyst with Frost and Sullivan Shanghai, said.
"Lehman Brothers had an asset base of about $639bn and its collapse sent regional markets down 10% in a mere two days. I cannot fathom what could happen if a company with a $1.1 trillion dollar balance sheet topples," said Song Seng Wong, regional economist at CIMB-GK Research.
With $1.1 trillion in assets and 74m clients in 130 countries, Asia had a significant exposure to the Fortune 500 firm.
Coming just after banking giant Lehman Brothers collapsed under the weight of a $613bn debt, the Federal Reserve's move on Tuesday was a bid to prevent further collapse of global financial markets and shore up confidence.
"A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance," the Federal Reserve said in a statement.
"The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy," it added.
Economists and analysts contacted by ICIS news were not surprised by the Federal Reserve s move to rescue the international insurer which was on the verge of filing for bankruptcy protection.
"The Federal Reserve s move is obviously to prevent a deeper recession in the economy. If AIG were to fall to bankruptcy, the global economy might be ripped," Arden Dai, an analyst with Frost and Sullivan Shanghai, said.
"Lehman Brothers had an asset base of about $639bn and its collapse sent regional markets down 10% in a mere two days. I cannot fathom what could happen if a company with a $1.1 trillion dollar balance sheet topples," said Song Seng Wong, regional economist at CIMB-GK Research.
