The past two trading sessions on the Singapore Exchange were horrifying. The Straits Times Index (STI) slumped 7.1 per cent in just two days to end at 2,884 points. I cannot imagine how it will be like today if not for the National Day public holiday. Thanks to the holiday, it gave a much needed breather for investors to take stock and to rationally think through actions to take in the coming days.
For stock markets which were opened today such as Japan’s and Hong Kong’s, the indexes continued to drop. The Nikkei 225 index gave up 1.65 per cent and the Hang Seng Index continued to decline at 5.66 per cent.
Looking at my Singapore equity portfolio, its current market value was down 13.7 per cent. This is paper loss and it proved that there is no way to hide from this financial storm. Even foreign currencies were not immune from this crisis. My Australian denominated investment declined 4.2 per cent on paper because the Australian dollar weakened against Singapore dollar.
Imagine what a credit rating agency can do to wreak havoc throughout the global financial markets. I recalled back in 2007/08, these credit agencies, such as Standard & Poor’s, Moody’s and Fitch Rating, were part of the sub-prime mortgage problem afflicting the USA then. They were inadequate in assigning appropriate credit ratings on these credit instruments. The world underwent a credit financial crisis that took the world two over years to recover. Instead of mortgage credit relating to investment in properties, sovereign debts are the problem now. It is hard to believe that nations can go into bankruptcy. Debtor countries need to borrow to fund government expenditure. Sovereign debt problem will take a while to sort out and this can severly impact economic growth of these nations and the ripple effect felt by Singapore and other countries is to be anticipated.
Copyright © 2011, limkimtong for Living Investment
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