Asian markets sank Thursday with investors spooked by news that Netherlands-listed fund Carlyle Capital, expects its lenders to seize its assets and cause its likely liquidation. Carlyle Capital is an affiliate of private equity firm Carlyle Group.
Carlyle said it has defaulted on around $16.6 billion of its debt and said the only assets held in its portfolio as of Wednesday were U.S. government agency AAA-rated residential mortgage-backed securities. During the last seven business days the company had received margin calls in excess of $400 million. Carlyle was unable to pay the margin calls, so its lenders had proceeded to foreclose on the mortgage-backed securities collateral.
The U.S. dollar remains in the doldrums, falling to record lows against the euro and 13-year lows against the Japanese yen. It has also set a record low against the Singapore dollar. Several Asian currencies are also hitting multi-year highs against the dollar despite falling stock markets, as the gloss quickly comes off the U.S. Federal Reserve's plan to inject liquidity and unlock the credit market's freeze. Investors remain skeptical that the move would solve the fundamental problems faced by credit markets which have rattled financial markets and threatened global economic growth.
A jump in oil prices to a record above $110 a barrel also raised fears of more strains on consumer spending and corporate profits, further dampening sentiment.