Global stock markets tumble in 3Q

by **Cals** Fri 02 Oct 2015, 00:39

Global stock markets tumble in 3Q

By Esther Lee / The Edge Financial Daily | October 1, 2015 : 10:28 AM MYT

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KUALA LUMPUR: The worldwide rout in equities in the third quarter seems to have cast a pall on global economic prospects, given the general consensus that stock markets are six months ahead of their fundamentals.

Most currencies, especially in the emerging markets, have depreciated against the strengthening US dollar amid anticipation of an imminent interest rate hike in the United States. The ringgit is among the worst-performing currencies so far this year.

On the global front, the two economic superpowers, the US and China, took centre stage.

On Aug 11, China gave a glimpse of the impact it can unleash on global stock markets when it suddenly devalued the yuan. The sharp 8.5% fall in the Shanghai Composite Index drove markets across the globe into a sea of red.

While the world was already expecting China — the world’s second-largest economic power — to slow down this year, the shock devaluation by Beijing meant things could be worse than expected. Not surprisingly, it sparked panic selling.

The FBM KLCI plunged 42 points, or 2.7%, that trading day and indices across Asia crumbled. The Dow Jones Industrial Average experienced a virtual bloodbath when it shed 1,000 points in early trades that day, its biggest fall since 2008.

The US Federal Reserve’s hesitation to raise the interest rate on Sept 16 added more uncertainties in financial markets.

Back home, Malaysia faced its own set of problems that heightened investing risks on the local bourse and the country’s debt papers. Some have called it a “confidence crisis” marred by political uncertainties and a sharp depreciation of the ringgit, which breached 4.40 against the greenback — the first time since 1997 when a severe financial turmoil engulfed Asia.

The local note also depreciated substantially against other currencies in the region, including the Vietnamese dong, Thai baht and Philippines peso.

Notably, the ringgit fell 16.48% against the US dollar in the third quarter, and hit a low of 4.457 against the greenback.

Since January this year, net foreign outflow in equities totalled RM17.7 billion, far surpassing the RM6.9 billion outflows in entire 2014, according to [size=16]MIDF Research.

That said, Bank Negara Malaysia’s governor Tan Seri Dr Zeti Akhtar Aziz said Malaysia has to demonstrate that it can live in uncertainty and survive it.

“Whenever there are setbacks, we have shown time and again we have been able to recover from it quite quickly. This is what policymakers try to ensure, and this will still hold even during periods like this,” she said.
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