JP Morgan’s Great Loss

JP Morgan has always been considered as the strongest and most solid bank in the US financial market. However, recently, it suffered a loss of more than 2 billion dollars in 6 weeks in the “London Whale” case.

                     (Source: http://www.allvoices.com )

Last year in September, the same case happened in Swiss Bank, causing a loss of 2 billion dollars. After only half of a year, JP Morgan trod the heel.

The primary reason for the great loss may lie on the mistakes of the traders since these banks highly rely on the ability of the traders. Nevertheless, the banks should also be responsible for the case as they lack the general management of their traders.

The great loss of the JP Morgan leads to a variety of effects on the financial market.

First, the stock price of JP Morgan fells sharply. Just two days after the loss, the stock price dropped by 12% and the market share declined by 1.88 billion US dollars. After then, it encumbered the Dow Jones Index by 25 last Friday. Other banks, including Morgan Stanley, Goldman and Citi, also dropped by more than 3%. The decrease of the financial sector may be due to the fear of stricter regulatory policy carried out by the government.

Second, the loss may strongly affect the financial market, even lead to another crisis. Fitch has already downgraded the rate of JP Morgan from AA- to A+. If the case were not getting better, it could lead to a very serious situation. Under the background of economic crisis, the US still needs five to ten years to recover. The great loss blocks the recovery process. To solve this problem, the US government may strict tighten the regulatory policy on financial market to lower the risk.

Third, the case will also endanger the Obama’s election. Obama has already urged the government to tighten the regulatory policy on financial market. However, if the case were not dealt with properly, Obama might lose the favor with the voters. Remember that four years ago, it was Obama who took advantage of the subprime fallout to lead the voters against the Republicans. Obama would definitely not want the same history happening again on himself.

New Fortune 500

The Fortune Magazine has just established the new rank of the fortune 500. The oil giant, Exxon Mobil is ranked top for 452.9 billion US dollars while Wal-Mart comes off second best for 446.9 billion US dollars.

Exxon Mobile ranks top

(Source: money.cnn.com)

Although there are still some affects due to the economic crisis, the US economy bottoms out gradually. The total income of the 500 enterprises on list has increased by 9% in 2011 compared with the former year.

It is worth mentioning that the technology giants are taking more positions in the new rank. Benefiting from the great sales of iPhone and iPad around the globe, Apple has raised its rank from 35 to 17. The profits also increased by 85% to 25.9 billion US dollars, making it the second profitable enterprise in the US.

Apple raised its rank from 35 to 17.

(Source: wikipedia.org)

Except for Apple, other technology giants, such as Google, Facebook and Amazon also promoted their business by their great innovation abilities.

In the new century, with the great development of technology, these companies have become the hottest corp in the world. First, the growing needs of people rely on these technology giants. People need new set of electronic devices to conduct their daily living in the new world of technology. Second, these companies always bring about new things and new technologies to reality. The innovation ability leads to the booming of the technology giants. Third, these companies seize the mind of consumers. They conduct a lot of researches to develop new features of their products to meet the demand of the consumers.

However, Twitter and Yahoo are not that remarkable on the list. Although they are also technology companies, they lack the innovation ability and have defects in their business pattern, which lead to the unsuccessful result.

While the technology companies are developing at an alarming speed, traditional financial industries like banks are in their tough period. The highest rank of bank companies belongs to Bank of America, ranking 13 on the list. The second highest is JP Morgan Chase, ranking 16. These are far below the electrical technology companies and energy enterprises. This may be because of the impact of economic crisis.

Overall, the general debility of these corps is decreasing compared to the former year, which indicates that the economy of the US is recovering.

Bank Competition in Southeast Asia

A competition has just set on fire. To expand the scale, DBS Group Holdings LTD., CIMB Group Holdings Bhd. and other banks in Southeast Asia start on merger on a large scale.

Unlike international banks, the regional banks are less affected by the economic crisis. In recent weeks, these banks have made deals on merger over 8 billion US dollars. DBS will purchase the PT Bank Danamon, the fifth largest bank in Indonesia, for about 7.3 billion US dollars. CIMB also purchased the Philippines Bank of Commerce for 2.9 billion dollars.

DBS Group Holdings Ltd.

(Source: businessweek.com)

Before these mergers, there happened a series of purchases within Asia. They aim at the growing amount of consumers and enterprises of the 10 countries in the Association of Southeast Asian Nations. These countries have a large amount of populations and of course, a large amount of opportunities.

PT Bank Danamon will be purchased by DBS.

(Source: businessweek.com)

The mergers will lead to great changes within the Southeast Asia. First, these banks can strengthen themselves and therefore they will be able to compete with those existing large international banks, such as Citi Bank, JP Morgan Chase Bank, etc. Second, the enhancement can also improve the current economic situation after the economic crisis. However, this can also cause some problems. For instance, overheated merges can lead to the appearance of monopoly, causing a lot of problems in the Southeast Asia economics.

Before the purchase of the Philippines Bank of Commerce, the CEO of CIMB, Nazir Razak, declared that only a few enterprises were prepared for the development of unified economic zone because most of them still doubted about the formation of such kind of zone.

The Southeast Asia is developing at an alarming speed.

(Source: apcss.org)

After the Asian debt crisis in the 1990s, the market in Southeast Asia has been ignored for a long tome. However, as can be seen from the competition in recent weeks, more industries have focused on the unification of Southeast Asia and considered it as a great opportunity. I think the competition will still promote the unification of the area, including Indonesia and Thailand, as there are too many small banks existed.

The Great Purchase of Bright Diary

At the beginning of this month, Bright Dairy, a diary and food company in China, announced to take over 60% of the stock of Vita Wheat, which worth totally 1.2 billion pounds. Lion Capital will keep the other 40% of the stock.

This has been the largest oversea purchase ever in Chinese food industry. The purchase may also affect the food processing industry in China.

The Bright Dairy (Source: hudong.com)

According to Eastmoney, the products of Vita Wheat are sold over 80 countries. Except for the wheat products, it also owns Alpen, the bestseller brand of oat in the UK. Vita Wheat has a history of 70 years, starting from 1932. 

Since the Vita Wheat is the second largest manufacturer of cereal and grain food in the UK, it has the same strategic direction with Bright Dairy. Therefore, Bright Dairy can learn the manufacturing, researches and developments, marketing and also other experience of the Vita Wheat.

Product of Vita Wheat 

(Source: foodiewanderings.blogspot.com)

What’s more, this purchase can also accelerate the expansion of Bright Dairy in European countries. In this way the market share will also be promoted. The merger also promotes the economic benefits, enhancing the brand awareness.

Although the purchase may bring about some future prospects, there are still some obstacles in this activity, including law, political and financial problems. For example, the local population may resist the coming of external enterprises, so the Bright Dairy has to take the cultural issues into account.

On the other hand, there are still risks on marketing. First, the marketing talents are not suitable for the UK market, which will lead to a decrease on the sales of the wheat. Second, the exploitation is different in UK than in China, so it may reach a limit. Third, the pricing of the products should be proper to attract more consumers.

The local market should always be concerned.

(Source:johnmariani.com)

To enlarge the economic benefits, the integration after the purchase is very important. The Bright Dairy needs to combine the two enterprise cultures together. Some proper methods include increasing the benefits for workers, solving the problem of unemployment and promoting environmental protection, to build up a good corporate image to workers and consumers.