18 Aug 2009, Harsharan Bagria, Risk magazine
Of the 62 institutions that responded in June, 72% believe the credit market is past the worst point of the recent disruption, in contrast to 29% when the same question was asked at the end of the first quarter.
With many assets still pricing below their true economic value, 85% of the polled investors said they are buying to take advantage of the situation, a 14% increase over the first quarter.
But respondents are still cautious about the issues of loss-taking and the length of the economic recession. Almost half of those surveyed said credit losses have yet to peak, compared with 68% in the Q1 report. Meanwhile, the majority of respondents believe the current recessionary conditions will continue for at least another 12 months in the UK (83%), the eurozone (86%) and emerging European markets (83%). That response is in contrast to their US counterparts, 23% of whom asserted the recession had reached its trough in the second quarter, and 44% of whom believed the recessionary conditions would not last beyond June 2010.
In terms of individual risks that could have a destabilising effect on the credit markets - including liquidity issues, a major bank collapse and housing market disruptions - the survey showed investors are now less fearful than they were at the end of March. Nevertheless, 27% still believe liquidity risk remains high, while 20% consider geopolitical risk a serious concern, compared with just 10% in the first quarter.