S&P downgraded 14 US banks, upgrade China bank

Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc. had long-term credit grades reduced to A- from A by Standard & Poor’s after the ratings firm revised criteria for dozens of the world’s biggest lenders. S&P made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit today. JPMorgan Chase & Co. was reduced one level to A from A+. S&P upgraded Bank of China Ltd. and China Construction Bank Corp. to A from A- and maintained the A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.(Source: Bloomberg)
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How often do you see 14 US banks downgraded by S&P in one go with 2 China banks upgraded?
Here's my thought on the news:
1. This is negative on KLCI as Asian market likely to react negatively to this news. Downgraded banks include those big banks like Bank of America, Citibank and Goldman Sachs will need to put higher collateral in their trading and pay higher yield for their next bond raising. Hence these banks may be more cautious in lending, causing growth outlook dimmer in 2012.
2. Although Malaysia banks are generally not directly exposed to US banks, today's leading decliner for KLCI should be banks. Reason: banks may be more cautious on lending in view of higher global uncertainty, lower loan growth means lower earnings growth, hence lower share price.
3. Welcome to the new world... where the economy power is clearly shifting from West to East. But in the short term, we may have to go through another year of volatility in 2012...