The stock markets in the emerging economies slid over 18 per cent and the developed markets fell more than 14 per cent as the world equity markets lost $4.1 trillion in September, perhaps the worst month in nearly a decade, according to Standard & Poor’s Index Services.
Interestingly, the United States, which set off the financial crisis, performed better than other markets, losing 9.29 per cent during the month, Howard Silverblatt, senior analyst at S&P said in a statement.The Indian market suffered as much, with the S&P CNX Nifty declining about 10 per cent, its second sharpest fall since January 2008. As the crisis reached its climax on September 29, when blue-chip indices the world over registered record single-day declines on Black Monday, the emerging markets had fallen nearly 28 per cent and the developed markets lost 21.62 per cent during the third quarter. The US was down 8.85 per cent, while Russia was struggling down 45.52 per cent. That amounted to a $5.8 trillion loss for world markets in the quarter. The Philippines was the only market up during the third quarter, with a miniscule 0.04 per cent gain. This shake-up in the markets was due to a string of serious bankruptcies, bailouts and failures, beginning with the rescue of mortgage firm Fannie Mae and Freddie Mac, then the run on Washington Mutual which subsequently filed for bankruptcy, the Lehman Brothers collapse and the Merrill Lynch sell- off, that shook the confidence of investors.
American International Group (AIG) was bailed out by the US government and Wachovia’s banking operations were sold. lnvestor sentiment was also hurt by news of the possibility of Fortis filing for bankruptcy, which indicated problems in the European financial markets as well.
Year-to-date, S&P says, the 52 world equity markets together are in the red with a loss of $10.5 trillion. Year-to-date all 26 developed markets have lost ground, while 25 of the 26 emerging markets fell. Jordan was the only country up for the year, returning 0.96 per cent, according to S&R.
In India, the BSE realty index and the BSE metal index were the most severely affected during September, dropping by 32 per cent and 25 per cent respectively. According to Crisil, the Indian arm of S&P, concerns over slowing demand in the real estate market on account of a liquidity crunch and the increased cost of funding, weighed on investor sentiment. Expectations of lower demand for commodities, given the weaker global growth forecasts, affected the metals sector stocks. The FMCG and oil & gas sector indices, however, outperformed the overall market, although they declined 1.6 per cent and 7.6 per cent respectively.
Crisil expects the market will remain range-bound going forward. While developments in the US will be monitored closely, the focus would shift somewhat to domestic cues with the second quarter results likely to influence the trend in the market in October, Crisil stated.
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