Credit impact 'relatively contained': ECB chief

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WASHINGTON, Oct 21 (AFP): The head of the European Central Bank said yesterday the recent market crisis shifted turbulence away from emerging countries to rich ones, but its impact on credit would be "relatively contained."
"What has been notable about recent experience is that the epicenter of market turbulence has shifted from the emerging economies," the bank's president Jean-Claude Trichet said at an International Finance Institute event.
"This we saw during the 'dot com bubble' at the beginning of the decade and now, a financial market liquidity squeeze that simultaneously affected many advanced economies was triggered in late July."
"Given the relative strength of the underlying fundamentals - although pockets of vulnerability do exist ... the impact of the financial turbulence on the intermediation of credit is likely to be relatively contained," Trichet said however.
World markets were hit hard by turbulence stemming from a meltdown in the US market for high-risk subprime mortgages in August.
He added that hedge funds-widely seen as a destabilising factor for the economy due to their bearing on markets and perceived lack of transparency-actually played a role in calming the credit storm.
"Many funds with solid financing structures and/or strategies geared towards distressed asset management are likely to have prospered from recent events, thereby smoothening volatility," he said.