Fear and Panic reign in Stock Markets

STI index dropped 187.10 points or 6.1% on Monday (22 Jan), its worst one-day drop since October 21 in 1987 (-266.91 points or -25.3%). It continued to slip 50.6 points or 1.73% on Tuesday to close at 2,866.55 points. At this level, the STI has dropped to the level last seen at the start of January of last year 2007. The whole year of gain in 2007 was wiped out as of yesterday.

 

Clearly it was a sign of panic and fear that gripped the stock markets arising from the financial crisis and fear of economic recession in the US spilling over to the rest of the world. Singapore was not spared, so were the other Asian stock markets.

 

The Federal Reserve (Fed) in a dramatic fashion slashed federal funds rate by a whopping 0.75% to 3.5% in a single meeting. The emergency meeting was convened a week before the scheduled meeting to make this announcement of rate cut. This action was in my opinion to soothe nerves of investors and fund managers.

 

Despite the Fed interest cut, the Dow Jones Industrial Average still dropped by 1.06% to 11,971 points yesterday, but somewhat lesser than anticipated.

 

Written on 1/23/2008 8:31 AM

 

Copyright © 2008, 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.

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