Markets tumble in Emerging countries
Markets tumble in Emerging countries
By Carter Dougherty. Copyright by The International Herald Tribune
TUESDAY, MAY 23, 2006
FRANKFURT Emerging market stocks tumbled sharply on Monday, as the jittery mood that had beset the financial world over much of the past week spread to fast-growing countries in Asia and Latin America and paved the way for another downturn in Europe and less severe losses in the United States.
With last week's worries that central banks would have to raise interest rates further to rein in newly resurgent inflation in Europe and in the United States still fresh in the minds of many investors last week, stocks in Asian markets including India, South Korea and Indonesia nose-dived Monday as traders rushed for other, more safe investments.
India, in particular, fell victim to a panicky atmosphere in which brokers who were trading with borrowed money had their loans called in. The local media carried reports that the police were on the alert for suicidal investors.
India was seen as particularly vulnerable because of the recent electoral successes of the Congress Party's Communist coalition partners, who have vowed to oppose some of the far-reaching economic policy proposals put forth by the government of Prime Minister Manmohan Singh.
A 10 percent plunge in the benchmark Sensex stock index led to a suspension of trading at midday, though share prices rebounded in the afternoon after Finance Minister Palaniappan Chidambaram held an impromptu press conference to urge calm, and the government pledge to help cover margin calls.
The index closed at 10,481.77 points, down 4.2 percent for the day and nearly 17 percent from a peak of 12,612 reached May 11.
"It has come down so significantly because it has gone up so significantly," said Sanjeev Prasad, head of research at Kotak Institutional Equities in Mumbai, India. "It had to happen at some point in time. The market kept going up without any change in the fundamentals."
Other markets in the region shared in the misery, as shares in Japan and South Korea slid to a two-month low, while Hong Kong stocks registered their largest one-day loss in five years. The main index in Indonesia closed down 6 percent, while Australian stocks wrapped up their worst week since the Sept. 11 terrorist attacks in the United States.
Other regions fell victim to the trend as well, as markets in Turkey, Egypt, Brazil and Mexico also plunged. In late trading, the Bolsa index in Mexico was down 895.18 points, or 4.4 percent, at 19,277.18.
In Russia, stocks posted their largest one-day fall since October 2003, when authorities arrested Mikhail Khodorkovsky, the chief executive of Yukos Oil, who is now serving a sentence for tax evasion in a Siberia. The key RTS index denominated in dollars fell 9 percent.
The possibility of a jarring shift in currency markets has also unnerved investors as the dollar, over the past several months, has begun a long-anticipated downward path against a broad range of European and Asian currencies.
Officials and some analysts stressed that although most indexes fell sharply, they remained comfortably higher over the year to date.
Rodrigo Rato, the managing director of the International Monetary Fund, did his best to calm markets. He said a slow realignment of currencies would help reduce huge trade deficits, mainly in the United States.
"It would be healthy for the world economy if the evolution in foreign exchange rates is measured," Rato said in Vienna, Reuters reported.
The sunny economic outlook for central European economies like Poland, Hungary and the Czech Republic could not insulate those countries from the trend. The Austrian ATX index, heavily weighted toward companies focused on the region, lost 7.5 percent.
Poland's WIG20 index dropped 5.6 percent, while the BUX index in Hungary slid 3.9 percent, and the Czech PX index sank 5.9 percent.
The German DAX index fell 2.2 percent, while the FTSE 100 lost the same amount, and the CAC-40 in France slid 2.6 percent. Peripheral indexes were hit harder.
In the United States, the S&P 500 index dropped 0.4 percent in New York, while the Dow Jones industrial average fell 0.1 percent and the Nasdaq Composite Index lost 0.9 percent in midday trading.
With a mixture of high oil prices, rising wages and quicker economic growth in Europe pushing up inflation, investors have been confronting the possibility that the U.S. Federal Reserve and the European Central Bank will have to ratchet up borrowing costs by more than expected to contain inflation.
"The difficult factor is the psychology or the sentiment," Alex Scott, an analyst at Seven Investment Management in London, told Bloomberg News.
"We've shifted, however temporarily or otherwise, from an environment where investors were fairly complacent and fairly ready to embrace risk to one where they're much more aware of risk and aware of the potential for volatility."
Anand Giridharadas provided reporting from Mumbai, India.
By Carter Dougherty. Copyright by The International Herald Tribune
TUESDAY, MAY 23, 2006
FRANKFURT Emerging market stocks tumbled sharply on Monday, as the jittery mood that had beset the financial world over much of the past week spread to fast-growing countries in Asia and Latin America and paved the way for another downturn in Europe and less severe losses in the United States.
With last week's worries that central banks would have to raise interest rates further to rein in newly resurgent inflation in Europe and in the United States still fresh in the minds of many investors last week, stocks in Asian markets including India, South Korea and Indonesia nose-dived Monday as traders rushed for other, more safe investments.
India, in particular, fell victim to a panicky atmosphere in which brokers who were trading with borrowed money had their loans called in. The local media carried reports that the police were on the alert for suicidal investors.
India was seen as particularly vulnerable because of the recent electoral successes of the Congress Party's Communist coalition partners, who have vowed to oppose some of the far-reaching economic policy proposals put forth by the government of Prime Minister Manmohan Singh.
A 10 percent plunge in the benchmark Sensex stock index led to a suspension of trading at midday, though share prices rebounded in the afternoon after Finance Minister Palaniappan Chidambaram held an impromptu press conference to urge calm, and the government pledge to help cover margin calls.
The index closed at 10,481.77 points, down 4.2 percent for the day and nearly 17 percent from a peak of 12,612 reached May 11.
"It has come down so significantly because it has gone up so significantly," said Sanjeev Prasad, head of research at Kotak Institutional Equities in Mumbai, India. "It had to happen at some point in time. The market kept going up without any change in the fundamentals."
Other markets in the region shared in the misery, as shares in Japan and South Korea slid to a two-month low, while Hong Kong stocks registered their largest one-day loss in five years. The main index in Indonesia closed down 6 percent, while Australian stocks wrapped up their worst week since the Sept. 11 terrorist attacks in the United States.
Other regions fell victim to the trend as well, as markets in Turkey, Egypt, Brazil and Mexico also plunged. In late trading, the Bolsa index in Mexico was down 895.18 points, or 4.4 percent, at 19,277.18.
In Russia, stocks posted their largest one-day fall since October 2003, when authorities arrested Mikhail Khodorkovsky, the chief executive of Yukos Oil, who is now serving a sentence for tax evasion in a Siberia. The key RTS index denominated in dollars fell 9 percent.
The possibility of a jarring shift in currency markets has also unnerved investors as the dollar, over the past several months, has begun a long-anticipated downward path against a broad range of European and Asian currencies.
Officials and some analysts stressed that although most indexes fell sharply, they remained comfortably higher over the year to date.
Rodrigo Rato, the managing director of the International Monetary Fund, did his best to calm markets. He said a slow realignment of currencies would help reduce huge trade deficits, mainly in the United States.
"It would be healthy for the world economy if the evolution in foreign exchange rates is measured," Rato said in Vienna, Reuters reported.
The sunny economic outlook for central European economies like Poland, Hungary and the Czech Republic could not insulate those countries from the trend. The Austrian ATX index, heavily weighted toward companies focused on the region, lost 7.5 percent.
Poland's WIG20 index dropped 5.6 percent, while the BUX index in Hungary slid 3.9 percent, and the Czech PX index sank 5.9 percent.
The German DAX index fell 2.2 percent, while the FTSE 100 lost the same amount, and the CAC-40 in France slid 2.6 percent. Peripheral indexes were hit harder.
In the United States, the S&P 500 index dropped 0.4 percent in New York, while the Dow Jones industrial average fell 0.1 percent and the Nasdaq Composite Index lost 0.9 percent in midday trading.
With a mixture of high oil prices, rising wages and quicker economic growth in Europe pushing up inflation, investors have been confronting the possibility that the U.S. Federal Reserve and the European Central Bank will have to ratchet up borrowing costs by more than expected to contain inflation.
"The difficult factor is the psychology or the sentiment," Alex Scott, an analyst at Seven Investment Management in London, told Bloomberg News.
"We've shifted, however temporarily or otherwise, from an environment where investors were fairly complacent and fairly ready to embrace risk to one where they're much more aware of risk and aware of the potential for volatility."
Anand Giridharadas provided reporting from Mumbai, India.
posted by Carlos T Mock at 10:16 AM
0 Comments:
Post a Comment
<< Home