Investors do not find enough funds for stock transactions (getty)
The lack of liquidity is besieging investors in the major financial markets, especially the “Wall Street” market in New York, which has lost the market value of the companies registered for trading in it since the beginning of this year, about 9 trillion dollars, according to data from the US financial market.
This number is very close to the losses the market suffered in March 2022, when stock markets were on the verge of collapse due to the Corona pandemic and before the US Federal Reserve intervened by pumping trillions of dollars and buying collapsing bonds.
And the head of the research division at the American “Gold Money” company, Alasdair MacLeod, sees in a tweet on Monday that the level of liquidity in the market is approaching its level in March 2020, the month in which the global financial markets collapsed and threatens a global financial crisis.
Large countries face a shortage of liquidity, and these countries have relied on funding along with the United States, led by China, which faces large funding gaps estimated at about a trillion dollars, according to estimates by the Japanese Nomura Bank.
Nomura believes that Beijing will have to issue debt bonds this year to finance economic growth due to the closures caused by the Corona pandemic. Japan is also facing a crisis in the service of its debt, which has risen to $ 12 trillion, and is now threatening the flight of liquidity from the declining Japanese yen to the US market. In Britain, there is a funding gap estimated at $ 1.5 trillion.
In turn, the Bank for International Settlements, which monitors central banks and monetary policies around the world, believes that the shift in the course of global monetary policy has had a negative impact on investing in risky assets and global stock exchanges.
In its latest report, the Bank for International Settlements warned that the world is facing a liquidity crisis, due to the high volume of global debt and the tightening of monetary policy by central banks, and what matters in money markets is the amount of liquidity which is available. to investors in equities.
It seems that the great need to meet the increasing liabilities in the world debt increases the demand for loans by companies and countries at the same time, as the volume of global debt has become equal to 3 times the global GDP.
Analysts believe that the liquidity drought crisis is due to four main reasons, namely the rise in the US interest rate, the rise in the dollar exchange rate, which is the most important lending and financing machine in global financial markets, and secondly the need for countries in Europe, Asia and emerging markets to borrow at rates higher than budgeted Before the surprising crises of rising food subsidies and fuel prices in the wake of Russia’s invasion of Ukraine and the sanctions imposed on Russian companies and their financial institutions.
As for the third factor exacerbating the liquidity crisis, it is due to the withdrawal of major US commercial banks from financing and providing loans to stockbroking firms and to emerging economies and their companies.
In this regard, major investors and bankers in the United States told the British newspaper “Financial Times” that liquidity in the US market has become in its worst conditions since the beginning of 2020, and that investment managers in “Wall Street” are experiencing problems. in financing transactions of purchase and sale of shares.
US banks are currently avoiding investing in bonds with maturities of 10 years or more due to geopolitical risks.
Michael Edwards, an official with the US hedge fund, “Miss Multi-Strategic”, in turn says: “US banks do not want to put their liquidity in stocks and bonds, and therefore they are now reluctant to finance buying or selling. transactions in the Wall Street market. “
It is noteworthy that geopolitical risks have led to the emerging markets losing about $ 5 trillion this year due to investment flight.
And the liquidity crisis in the economic term is the lack of “cash money” in bank accounts, or the lack of financial assets that can be converted into cash in a short time.
There are fears that the liquidity crisis will lead to governments and international companies failing to pay debt payments and igniting a bankruptcy crisis that will have serious consequences on financial markets, weak commercial banks and emerging economies.
The US Federal Reserve warned in its last half-year report about the lack of liquidity. The bank said: “Liquidity conditions deteriorate in financial markets due to the war in Ukraine, tighter monetary policy and high inflation, but it emphasizes that US banks have sufficient liquidity.
At the end of 2020, US banks had a large volume of liquidity estimated at $ 3.7 trillion, and the major US banks were not active in providing financing during the past year due to inflation concerns.
Despite this historic liquidity, however, US banks fear the possibility of an outbreak of the bad debt crisis as a result of the global crises that have hit the global economy. Analysts have noted that bond traders in China have shied away from investing in government bonds, which last year were among the most attractive to foreign investors.