Investors should not expect a return to stability in US credit markets any time soon, with a new survey released by Fitch Ratings suggesting it could be the third quarter of this year or even later.
The Fitch Institutional Investor Survey, released this week, reveals that while there is unlikely to be any return to stability until at least the third quarter, a return to stability in the US housing market is likely to be even further off.
According to respondents to the Fitch survey, the most critical element in restoring stability to the credit markets is “confidence in financial disclosure of mark-to-market losses”.
It said that investors were clearly concerned about financial firms’ exposure to the current downdraft in securities prices and want clarity as to the market losses experienced to date.
It said a weakening economy was viewed as the greatest risk to credit markets among US institutional investors, with other risk factors including housing market disruptions, the failure of a financial institution or hedge fund and geopolitical risk.
Fitch managing director James Batterman said the results of the latest survey represented a significant reversal of investor sentiment since Fitch’s June 2007 survey when shareholder-friendly activities were cited as the biggest threat, and the broader economy was not generally considered to be a large risk factor.
