Dexia alive but diluted

Tuesday, the governments of Belgium, France and Luxembourg announced, they will invest 9.2 billion dollar in Dexia. After investing in Fortis, this is the second time the Belgian government inject capital into a destitute bank. At closing time on the Brussels stock market Dexia already rose 8.8 percent. So after the drop of 30 percent on Monday, shareholders are regaining confidence in the bank. On the other hand, the capital injection is involving a dilution of the dividend. So the gain less money on their investment. The government’s investment hasn’t solved all Dexia’s problems. Their stock is still low rated and a lot of their shares aren’t available for the free float anymore. Only 29.4 percent. The crises by Dexia has forced the chief executive and chairman of Dexia to resign.

In my opinion the crises is only temporary, the financial markets will recover slowly. The crises in Belgium is not as bad as the crises in America. But the connections between our banks and the American banks have made investors afraid and cautious. After the intervention of the Belgian government, people must have more confidence in Dexia because emptying their saving accounts will only enlarge the problem. I think this is the moment to invest in Dexia or Fortis because their stocks are so low and according to me, they will only raise.

http://www.forbes.com/markets/2008/09/30/dexia-belgium-update-markets-equity-cx_ll_0930markets16.html

Bart