March 18 (Bloomberg) -- Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $126 billion under management, comments on the market impact of a levy on Cypriot bank deposits.
Cypriot President Nicos Anastasiades, who bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus, appealed to lawmakers in Nicosia the ratify the levy.
“The first reaction is there, Europe goes again and there’s a contagion risk.
‘‘In the short term, it could lead to some worries regarding renewed contagion across Europe.
‘‘It sets off a bit of risk-off since risk-on has been in place for quite a while and equities have rallied generally, and so we could go through a little rough patch today until we get more clarity on what’s happening in Europe.’’
‘‘In Italy, banks don’t need to be recapitalized; Spain already has a bank bailout in place and Irish banks already have been recapitalized. The risk of the same occurring is extremely low and close to zero, but we could go through a short period of nervousness until we see how the rest of Europe responds and the ECB responds.’’
Impact on the rest of the world
‘‘If it happened three years ago, you had to be pretty worried because the U.S. economy was a lot more fragile and there was more concern about China having a hard landing.
‘‘Now we’ve got a situation where bailouts are already in place for Ireland, Portugal and Spain, and economic indicators out of Europe are pointing up, instead of down.
‘‘The general trend is improving rather than getting worse. So, it’s coming at a time when the world is stronger.’’
Japan adds to optimism after Haruhiko Kuroda was confirmed as Bank of Japan governor last week by parliament:
‘‘The pro-stimulus leadership team at the Bank of Japan, led by Kuroda, is I think a sea-change in Japan.’’
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