Goldman clients stay loyal amid market jitters

09:04, April 20, 2010      

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Despite market jitters, clients of Goldman Sachs are still standing behind the bank for now after the top US securities regulator slapped charges against the Wall Street powerhouse over its marketing of a subprime mortgage product.

Asia stocks tumbled Monday over Friday's fraud charges against Goldman Sachs from the US Securities and Exchange Commission (SEC).

The fraud case "certainly spooked investors in the US, and is likely to make the stock market undergo a short-term correction," Lee Jin-woo, market analyst at Mirae Asset Securities in Seoul, told Dow Jones Newswires.

However, across Asia, the investment bank's corporate clients appeared content to stay with Goldman despite the legal storm.

One of those clients is South Korea's Samsung Life, the country's largest insurer, which has retained Goldman to help handle the company's $4.5 billion initial public offering.

"I don't see any impact on the IPO process," said a Samsung Life official who was not authorized to speak publicly about the matter.

Goldman stepped up its defense against the allegations Monday by insisting its actions were "entirely appropriate" and that it would "vigorously contest" the charges, The Guardian reported.

Goldman for years enjoyed a duopoly with Morgan Stanley in Asia's prime broking space - the part of the bank that services hedge fund clients.

Asian regulators also seemed willing to wait and see how the SEC case against Goldman plays out rather than make any rushed judgments. As the financial world sifts through details of the case, it's unlikely Goldman clients would take any drastic action at this early stage.

Meanwhile, the British Financial Services Authority is also investigating the circumstances of this case and whether there are any implications for the UK regulated entities of the banking giant.

Press reports said Germany was considering taking its own action following the charges and looking into the possibility of seeking financial compensation from Goldman.

But, if the scandal deepens - say, for example, the SEC's probe widens and casts an even darker cloud over Goldman's reputation - clients may become more inclined to defect.

"Goldman Sachs is just the first to get rapped on its knuckles. The other big Wall Street banks will also have their turn. Nobody is 100 percent safe," said a hedge fund manager in Hong Kong, who uses Goldman's prime brokerage services.

Source: Global Times


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