The Straits Times Index (STI) plunged 3.35% on 15 August (Wed) and continued to drop by 3.7% with STI ending 3152 points on 16 August (Thurs). With the latest drop, STI has lost 14% from its July 24 record closing high of 3665. But this is still up 5.6% for 2007. (Source: The Straits Times 17 Aug) Singapore is not alone. The world financial markets are also in this similar sad state.
This is a case of flight from risk by investors as they fear that they will lose heavily if they hold on to their financial assets, e.g equities, bonds, hedge funds, unit trusts, etc. Worse still, some hedge funds and home mortgage lenders were declaring that they were in financial difficulty.
The consumer confidence in the US has dropped too thus resulting in poor consumer sales by Wal-Mart and Home Depot. This may result in slowing demands by the world’s largest economy and this in turn affects the other economies that depended on the US for its purchasing power.
The unwinding of the Yen carry trade accelerated dramatically on 16 August. (The Business Times 17 August) This added further stress to the global financial market. (For an understanding of Yen carry trade – Read my previous posting.)
When will the financial woes end? No one dare to predict. The scary part is, no one knows how enormous these problems in the global financial market are. The financial markets of the world are inter-connected and a problem in one country feeds into another country.
For today’s trading on the Singapore stock exchange, the STI went through a free fall, dropping as much as 5.7% at one stage to below 3000 psychological level (STI at 2972) before picking up through late afternoon buying by bargain hunters. It ended at 3130, a drop of 0.68% from yesterday’s close. Such was the “madness” of the stock market today. This is certainly not for the faint heart.
Written on 8/17/2007 5:29 PM
Copyright © 2007, the author known as LKT in Singapore.
The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.