The Slovakian parliament is reported to have rejected the eurozone’s revamped European Financial Stability Facility (EFSF) rescue fund, a move that could rattle markets today.
The vote overnight was delayed at length while the country’s governing parties tried to get agreement.
But in the end the parliament voted against the proposal.
Any impact could be short-lived though (hopefully) because the vote seems to have been a ploy by the opposition parties to break the government.
Media reports claim the parliament will approve the fund later in the week, possibly on Thursday, with the opposition voting in favour, but only after the government is dissolved.
The vote came after the 16 other eurozone members had already approved changes to revamp the 440 billion euro ($US603 billion) Fund which was set up in as part of the first greek bailout back in May of last year.
Eurozone leaders agreed on July 21 to boost the EFSF’s powers in the hope of stemming the fallout from the eurozone’s deepening sovereign debt crisis which now threatens the eurozone, the currency, the banks and the economy of Europe as a whole.
Slovakia is the poorest country in the eurozone and has been opposed bailout Greece and other countries.
The enhanced Fund was planned to be the heart planned support package to be considered at the October 23 eurozone summit which will back the recapitalisation of the zone’s banks and help countries from Greece to Italy and Spain which can’t raise funds from the markets at the moment, or are paying too much for the money they can raise.
The news of the vote came after trading ended on global sharemarkets, but it did push the euro lower in late trading in New York and early dealings in Asia.
Earlier, shares in some of China’s major banks rose in trading in Hong Kong and in Shanghai after the country’s Government surprise and very public move to buy shares in its four biggest lenders after their shares have fallen 30% in recent months.
The move, publicised in China, Hong Kong and other centres through a story published on a Government news website, sent Hong Kong and Shanghai markets higher, although the surge eased as the day went on.
Hong Kong’s Hang Seng jumped by nearly 4% only to ease to end up 2.4% and China’s Shanghai Composite climbed 2.2% at one stage, but retreated to close up less than 0.2%.
The impact of the news from China spilled over into the region with Japan’s Nikkei Stock Average up 2% as investors returned from a three-day weekend, South Korea’s rose 1.6%, but Australia’s ASX 200 index could only edge up by around 0.6%.
Banking shares soared in Hong Kong after China’s state-run Central Huijin Investment, part of China’s sovereign wealth fund, bought shares in the country’s “big four” banks in what analysts believe could be an effort to stabilize the financial system.
Agricultural Bank of China Ltd shares surged more than 12% in Hong Kong (but 2% in Shanghai). Bank of China Ltd shares jumped 7%, Industrial & Commercial Bank of China Ltd added 7% and China Construction Corp put on 6%.
The rises were smaller in Shanghai, although that’s where the buying happened on Monday.
The price rises will probably fade again today, but hedge funds and the like will now be more wary about shorting Chinese companies for a while.
The government would have also been sending a message to these speculators that they could lose money on some of their shorts (which have to be closed out before you can take a profit).
The move, released by way of a statement on the official Xinhua newsagency website saw the key arm of the country’s sovereign wealth fund step into the market and buy shares in the quartet of banks.
It was the most startling news on a day when at least one more European bank revealed a surprise loss and the need to retain a government capital injection dating back to the GFC.
In Being, the last time the government revealed such a move in such a public way was back in 2008 in the GFC.
Later it was revealed that Huijin bought 14.6 million Shanghai-listed A shares in ICBC, 7.38 million yuan-denominated shares of Construction Bank, 39.1 million shares in AgriBank and 3.5 million shares in Bank of China, the four Beijing-based lenders said in separate statements to the Hong Kong and Shanghai stock exchanges.
While the purchases didn’t significantly increase Huijin’s holdings of 35.4%, 57.1%, 40% and 67.6% in the four banks respectively, the fund plans to make further acquisitions over the next 12 months, the lenders said.
Central Huijin is the government’s shareholders in these banks. Kerry Stokes Seven Group Holdings is a small shareholder in Agricultural Bank of China, having taken up its stake in last year’s float in Hong Kong.
The shares in the four banks are also listed in Hong Kong and they, along with the shares of some big Chinese resource and industrial companies have become popular ‘shorts’ for US and other hedge funds who are convinced the Chinese economy is going to crash.
The shorting of bank stocks and other Chinese shares have driven down the index which tracks these shares in Hong
