Global investment industry faces business adjustment in three quarters

Ye Huiyin Monday Comfort Cui Health Shanghai Report Although the global investment banking situation seems to be less than 2008 years bad, various market and investment banking indicators show that the major investment banks will face tough times in the third quarter. After Citigroup and Morgan Stanley, Goldman Sachs last weekend joined a downgrade of the U.S. growth forecast.　　Goldman Sachs said August 19 that it had downgraded the country's economic growth forecasts for the second half of 2011, the third since the month, as the US economy "lost further momentum of recovery".　　This means that several of the world's best-known investment banks will reconsider their portfolio and asset allocation to U.S. capital markets. However, Glenn Schorr, managing director of Nomura Securities and research in the US finance department, said in an interview with our correspondent that this time it would not be so bad for the main business in the US, but it would be hard to say to European banks: "Unless an investment bank unfortunately has a large number of rapidly shrinking asset classes, They are directly linked to sovereign ratings, or they will not be in a situation like 2008 years. After that lesson, the odds are slim.　　"Even in the worst second quarter, the US and Europe's nine largest investment banks lost nearly a 37% of their average in the fixed income market, but they could still maintain a level of $1 billion trillion," said Nomura's global investment bank report.　　However, Glenn Schorr warned that the third quarter was a worse season for investment banks, where the bond market was likely to be as bad as in the second quarter, but the stock market was "a disaster".　　He said investment banks must face and adapt to new changes in the global economy and make the necessary adjustments to their business units and portfolios.　　The 10-year bond vane analyst predicts that while the sovereign debt crisis is still not showing signs of fading, investment banks will not significantly reduce their holdings of sovereign bonds, but could lower their corporate bonds and equities, which are directly affected.　　Xu, a pioneer futures macroeconomic analyst, said that in the long term, big investment banks and their customers would not have a substantial reduction in their holdings of sovereign debt, but rather a reduction in corporate debt that holds a higher proportion of U.S. debt to avoid possible risks.　　At the same time, analysts believe that the 10-year Treasury note could be a bellwether for the third-quarter investment bank's performance forecast for fixed-income trading.　　Glenn Schorr said the investment bank's bond underwriting business in the second quarter and the 10-year Treasury bond rate had a direct impact on its fixed-income trading earnings, and if the debt-affected countries ' interest rates for 10-year bonds were to change markedly in the third quarter, their trading volumes would also be significantly increased. "Given that some of the investment banks are still doing well, they will be willing to invest in 10-year Treasury bonds and benefit from the deal, bullish on long-term yields." Short-term bonds are unlikely to yield more. The Nomura report shows that global investment banks have suffered heavy losses in bond trading in the two quarter. Even the best performingClay and JPMorgan also fell 17% and 20%, respectively.　　Goldman Sachs and Credit Suisse fell by 64% and 70% respectively. The report showed that the growth in fixed-income trading for the two-quarter investment bank was still lower than that of its bond underwriting and 10-year bond rates. "So when the Treasury market starts to recover and interest rates start to rise steadily, it could compensate for the loss of investment banks in other asset trading operations," he said.　　Glenn Schorr added. But while investment banks still tend to invest in long-term assets, such as 10-year bonds, to get higher yields, this will also affect their current earnings, so Clenn Schorr warns that the bank's books in the third quarter remain unattractive. "At the moment, investment banks don't have much choice.　　"The stock market is an exception to the hedge despite a glimmer of hope for the bond market, but the coming third quarter is not always a stock player's paradise." Glenn Schorr says: "People will forget that investment banks can hedge their portfolios, whether they are long or short, but equities are an exception." "There is a direct correlation between the business of several sectors of investment banks and the barometer of the stock market."　　So when the stock market falls, investment banks have little way to avoid losses.　　BlackRock Bodor, chief equity strategist at BlackRock, said in a market report released on August 15 that intense market turmoil affected investor confidence. "The current share price is about 35% lower than in the middle of 2007, while corporate profits are higher than the same period." But that does not mean we think the stock market will rebound in the short term because the market will still be affected by short-term economic and debt conditions.　　"However, Bodor is still optimistic about the long-term development of the stock market: US non-financial companies now account for about 11% of the company's financial position, up to the highest level in the past 60 years," he said. From a revenue point of view, earnings in the second quarter of this year showed firm profit growth of 18% per cent, while earnings rose 10% in the same period.　　The company's profits will almost certainly be higher than it was at the end of 2007. In this case, investment banks need to focus on long-term business sector adjustment. "Investment banks must adapt to the environment, and the only way is to restructure their business and reconfigure their asset investments." Glenn Schorr said.