India Stock Market Index interday decline of 11% worst since 2004

[Laidback Al]

<TABLE cellSpacing=0 cellPadding=4 width="100%" border=0><TBODY><TR><TD class=articleheader>Note - the ironic title to this article on the financial stocks

American influenza
US recession fear slaughters Indian shares, shaves 1400 off sensex


</TD></TR><TR><TD class=articleauthor>OUR SPECIAL CORRESPONDENT </TD></TR><TR><TD class=story align=left><TABLE cellSpacing=0 cellPadding=2 width=172 align=left border=0><TBODY><TR><TD></TD></TR></TBODY></TABLE>

Mumbai, Jan. 21: Stocks swooned and investors despaired as the sensex tumbled 2062 points at one stage on the bloodiest day for India?s stock markets.​

A brutal tidal wave of selling by foreign investors ? triggered by growing fears of a recession in the US [or possibly fears of bird flu????] ? sent the index plummeting to 16,951.50, an intra-day fall of almost 11 per cent.
A slump of such ferocity hasn?t been seen since May 17, 2004, when the market collapsed 17 per cent after the defeat of the Vajpayee government in the elections and statements by the Left on disinvestment.
?There was panic on Dalal Street. Today?s fall was beyond anyone?s wildest imagination,? said Ambareesh Baliga of Karvy Stock Broking.
In just eight trading sessions, the market has swung from euphoria to terror ? a wild mood swing that no one could have anticipated when the sensex hit its highest level of 21,206.77 on January 10.
The market had turned weak since then and slid continuously over the past six sessions but no one was prepared for Black Monday.
At the end of a vicious day of trading, the BSE sensex closed at 17,605.35 points ? a fall of 1408.35 points, or 7.4 per cent. The carnage wiped out investor wealth of Rs 6,63,975 crore.
A late rally of 653 points raised a glimmer of hope that the worst might be over.
Investors have lost Rs 11,85,285 crore in the past six days, with more than half of the losses coming from today?s session.
The straight road from paradise to perdition spelt panic for retail investors ? and Prime Minister Manmohan Singh and finance minister P. Chidambaram stepped in to assuage their fears after blaming the crash on the ?continuing uncertainties in the global economy and not any change in the fundamentals of the Indian economy?.
?I would like to assure the public that sustained orderly growth for capital markets is a priority concern for our government,? Singh told reporters in Delhi.
The eight trading sessions since January 20 has seen the index tumble 20 per cent ? which is an indication of a bear market, classically defined as a 20 per cent fall between a recent high and a low.
But market mavens believed that there was no real reason to panic. ?Investors should see this as an opportunity to enter the equity market and stay invested for a long term,? said Sanjay Sinha, chief investment officer of SBI Mutual Fund.
Besides global cues, the selloff was triggered by a technical factor: margin calls. This is a demand for cash that brokers send out to investors when the value of shares that were bought using borrowed money start to lose worth.
During a sudden crash, brokers ask such clients to either deposit more money or sell some of the securities in their account. Brokers said that with many investors unable to deposit the money, shares were sold ? and that had a domino effect on stocks.
Some pundits like Baliga expect the market to remain volatile. ?Though current valuations look decent, there could be more pain in store. But one does not know where the bottom is. Investors can look to make selective purchases at the current levels,? he added.
Not everyone was as pessimistic. ?The market will settle down in a day or two,? said Vallabh Bhansali, chairman of Enam Securities.​

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http://www.telegraphindia.com/1080122/jsp/frontpage/story_8812161.jsp

 

[Sally Furniss]

Re: India Stock Market Index interday decline of 11% worst since 2004

Note the date of this fall started 12 trading days ago. 13 trading days ago for EST.

First reports of BF at FT are 8 days ago http://www.flutrackers.com/forum/showthread.php?t=49068



Posted at 8:58am on 21 Jan 2008, NZ time
The New Zealand stock market reopens on Monday after shedding nearly $4 billion in value during the past 12 trading days.

The NZX is the first market in the world to open this week and investors will be keen to see the impact of government proposals in the United States to try and boost its economy.

Because markets in the United States are closed for a long weekend due to a public holiday, sharemarket analyst Brian Gaynor says investors will be without the usual indicators they rely on.

However, he says the sharemarket is still a good investment opportunity with energy stocks in particular looking very good.

He says 2008 will be a year of significant change on the sharemarket and investors should choose their stocks wisely.

Stock Exchange managing director Mark Weldon says stock brokers are remarkably calm at the moment considering the volatility of the market. He says no real conclusions on the state of the market can be made before companies report their earnings next month.

The NZX 50 fell 65 points, or 1.8%, to 3664 on turnover of $98 million on Friday - its 12th consecutive day of losses.

The market finished down about 6% for the week and is at 15-month lows. Since its all-time closing high in May last year, the NZX has fallen 15% and lost $8.6 billion in value - $3.7b of that in this month alone.

The Australian 200 lost more than $A80b over the course of last week - its worst losing streak in 17 years. The Australian 200 Index was down 49 points to 5747.
$US150b US package

US markets are closed on Monday for the Martin Luther King Day holiday.

President George Bush called on Friday for for a package of tax cuts and other measures totaling around 1% of US gross domestic product, or up to $US150b.

Mr Bush said he wanted Congress to move quickly on a stimulus package that would focus on tax rebates for families and incentives to encourage business investment. The White House said the package could create about 500,000 new jobs.

However on Friday, the benchmark S&P 500 stock index ended its worst week in 5? years.

The Dow Jones industrial average was down 59.91 points, or 0.49%, at 12,099.30. The Standard & Poor's 500 Index was down 8.06 points, or 0.6%, at 1,325.19. The Nasdaq Composite Index was down 6.88 points, or 0.29%, at 2,340.02.

Trading was active on the New York Stock Exchange, with about 2.3 billion shares changing hands. About 2.9 billion shares were traded on the Nasdaq.
Other markets

European stocks also ended lower on Friday, dropping for the 10th time in 13 sessions.

The FTSEurofirst 300 index of top European shares ended the session down 1.2%, at 1,358.51, capping a dismal week during which it lost 4.8%. The index has lost nearly 9% since the beginning of 2008.

Around Europe: Germany's DAX index lost 1.3%, the UK FTSE 100 index ended nearly flat, and France's CAC 40 dropped 1.3%. The FTSE 100 index has fallen 4.84% over the last five days.

In the currency markets: at 8.05am on Friday, the New Zealand dollar was trading at US75.84 US, 86.46 Australian cents, 38.77 pence, 80.98 yen and 0.5193 euro. The Trade Weighted Index was 70.14.

Copyright ? 2008 Radio New Zealand

http://www.radionz.co.nz/news/latest/200801210858/volatile_time_seen_ahead_for_nz_sharemarket

 

[sharon sanders]

Re: India Stock Market Index interday decline of 11% worst since 2004

The markets
Flashing red

Jan 21st 2008
From Economist.com
Why markets in Asia and Europe are tumbling


AP

IT APPEARS to be an old-fashioned case of risk aversion. Stockmarkets are plunging (the FTSE 100 was down more than 300 points, or 5% just after noon in London, on Monday January 21st), commodity prices are dropping and investors are flocking to the safety of government bonds and currencies like the Swiss franc and yen. Speculative bonds now yield seven percentage points more than US Treasuries, the highest spread since April 2003.
For some, this merely represents a case of stockmarkets catching up with reality. It is now a year since the subprime crisis first emerged. In that time central banks have cut interest rates, investment banks have announced big write-offs and various rescue packages have been suggested. But the end of the crisis is not yet in sight. Indeed, another leg of the debt crisis may be under way, if problems of monoline debt-insurers (an obscure but important bunch who guarantee the timely repayment of bond principal and interest when the issuer defaults) are not contained. If the American economy is not now in recession, it is close enough not to make a practical difference to sentiment.

For much of past year equity investors knew those salient facts but chose instead to take comfort from three more bullish factors.



First was that the Federal Reserve would rescue both the markets and the economy, as it has done so often before. Second, even if the American economy faltered, the rest of the world (particularly Asia) could take up the burden of producing global growth. Third, given the global picture, corporate profits could stay high.

All three assumptions are now coming under question.



Although the Fed may cut rates this month, it can take 12-18 months for the effects of monetary policy to boost the economy.


On the issue of decoupling, it is not clear that either Europe or Japan can escape America’s gravitational pull.



The latest data on Singapore (slowing exports and a decline in fourth-quarter GDP) suggest that other parts of Asia might not escape either. It is significant that emerging markets, which had been outperforming their developed brethren in recent months, are now starting to underperform. On Monday Hong Kong suffered its worst loss since September 11th 2001. As they review the evidence of decoupling analysts are cutting their profit forecasts.

An indication of the change in sentiment came when America's administration announced plans for a fiscal stimulus on Friday. In good times, that would have kick-started a market rally; in the current mood, the package was seen as a sign of desperation.

Share prices have now fallen far enough that European indices are in bear market territory having dropped 20% from their peaks. Indices for smaller stocks in Britain have fallen by a similar amount. However, it takes more than just a big percentage fall for a bear market to be officially under way; the decline also needs to be long-lasting (the 2000-02 decline was a classic example).


The markets have had short-term 20% declines in the past (1998, for instance) only to rebound quickly. Indeed, what was remarkable about the long bull run from March 2003 to June 2007 was that it occurred without any such corrections.


Share prices have fallen so far and so fast that an attempt at a rally seems almost inevitable. What may determine if this is a correction or a bear market is whether that rally can be sustained for more than a day or two.

 

[sharon sanders]

Re: India Stock Market Index interday decline of 11% worst since 2004

Bank of America just announced that their net profit is down 95% for the 4th quarter. They bought troubled Countrywide Mortgage.

Additionally - as a different subject - many of the SE stock markets are highly overvalued and any perceived econ prob in the US will deflate these markets and "correct" them.

 

[sharon sanders]

Re: India Stock Market Index interday decline of 11% worst since 2004

Gold is down as investors sell to cover stock market losses/margin calls.

Barrel oil is down to 87.40 as demand from world economic engine is less in a preceived/actual recession.

 

[sharon sanders]

Re: India Stock Market Index interday decline of 11% worst since 2004

Secretary of Treasury Paulson on tv now:

Rough notes as listening -

US economy resisilent

US long term econ fundamentals are healthy

Short term risks are to the down side

Faith in global econ

There is a global equity correction going on

Need to enate econ short term stimulus package "time is of the essense"

Short term stimulus will :

1) Swift,

2) robust (1% of GDP - no increased taxes),

3) broad based (KIS),

4) Temporary (focus on short term growth)


Trying to minimize housing crisis - meeting with industry in sub prime markets

Congress needs to pass FHA changes to increase affordable mortgages and increased accountabilty

State Tax-exempt bonds needed to finance affordable home financing

 

[Nancy]

Re: India Stock Market Index interday decline of 11% worst since 2004

Asia Enters Bear Market
By Daniel M. Harrison
Special to TheStreet.com
1/22/2008 7:10 AM EST
URL: http://www.thestreet.com/markets/worldmarkets/10399638.html

The major Asian indices officially entered a bear market Tuesday, as a recent spread of speculative short positions led to panic selling, mainly due to hedge funds unloading heavily on margin calls.


In Hong Kong, markets plunged. The Hang Seng experienced the biggest two-day decline since the 1997 Asian contagion, ending 2061 points, or 8.7% down, at 21,757. Some dealers said technical support levels were increasingly irrelevant now, but the index is expected to find support at 20,000 points after the index failed to bounce at 22,000. Volumes were up 32.6% from yesterday, at HK$155.76 billion, or $19.95 billion.

After holding up strongly in recent weeks, China followed the island's lead, plunging 354 points, or 7.2%, to 4559. The Nikkei dropped 753 points, or 5.7%, to 12,573.

The big Asian selloff began last Wednesday, when the Hang Seng lost 5.4% in one day, the most since Sept. 11, 2001, and it continued Monday, when it declined 5.5%. In the last five days, the Hang Seng has shed 17.8% of its value, and now lies 16% away from a 52-week low.

It is thought that the selloff is a result of initial short selling by traders, who saw weakness in key technical support levels last week, and once prices were pushed below the 23,400-level, hedge funds were forced to cover margin calls, leading to further declines. After that, short sellers targeted other Asian indices, say market participants.

"Bids have thinned out, which is exacerbating falls even more, despite market turnover having dropped for 3 consecutive days," says Steven Wong, a trader for Daiwa Securities in Hong Kong.

"This is definitely margin calls, and panic selling now," says Andy Lam, associate director of Harris Fraser in Hong Kong. "There could be more as fund managers are raising cash redemptions."

Lam points out that since this week's selloff in Asia has tracked a decline in Dow futures of around 600 points, if the Dow Jones Industrial Index ends less than 500 points lower, Asia will rebound sharply Wednesday.

Insurers, which have borne the brunt of the selling in the last week, fared worst. China Life Insurance (LFC) dive-bombed 16%, to HK$27.60, while shares in Ping An (PIAIF) plummeted 12.5%, to HK$59.55. In Shanghai, Ping An ended at 79.55 yuan, after being suspended in accordance with a rule that states shares can only fall a maximum of 10% in one day.

Among other financials, HSBC Holdings (HBC) plunged 8.10%, to HK$104.40, ending at a 52-week low, while Hong Kong Exchanges (HKXCF) tumbled 9.9%, to HK$156.30.

Telecoms dived too, though remain about 30% above yearly lows. China Netcom (CN) was off 15%, to HK$19.96, while China Telecom (CHA) finished 12% lower, at HK$5.33. China Unicom (CHU) dropped 10.4%, to HK$14.80, and market leader China Mobile (CHL) slipped 7.5%, to HK$108.90.

Even if markets in New York hold up, market participants expect Chinese "N" shares like Baidu.com (BIDU) and Sohu.com (SOHU) , and Sina (SINA) to decline dramatically, as they catch up with the Asian selloff after markets in the U.S. were closed for Martin Luther King day Monday.

"Chinese shares are falling hard, because a lot of investors realize that it is still the best performing market year to date, so they are selling," says Lam.

Energy shares in Shanghai led the index to its biggest one-day decline since February 2007. PetroChina (PTR) lost 4.7%, to 26.18 yuan, while China Shenhua Energy (CUAEF) slumped 8.2%, to 55.59 yuan. China Petroleum and Chemical (SNP) shed 8.7%, to 18.25.

In Japan, even a stabilizing of the yen price, and recent declines in share values, couldn't hold back a sharp drop in equities. The yen rose mildly vs. the dollar, from 106.80 to 106.33 by the end of the Asian trading session.

Among the big decliners, Yahoo Japan (YAHOF) lost 9.3%, to 38,850 yen, while Kobe Steel (KBSTY) fell 8.5%, to 311 yen, and Sony (SNE) was 6.9% lower, at 5110 yen.

The price of gold fell 1.7%, to $867 an ounce in Asian trading. Traders say that the price of the yellow metal is now following the lead of equity price movements, rather than acting as a hedge against them.

Other markets in Asia fared equally badly. The Taiwanese Taiex, which has gained the most in the region this month after a recent China-friendly election victory, lost 528 points, or 6.5%, to 7581. The Korean Kospi fell 74 points, or 4.4%, to 1609.

In India, markets continued a drop for the second day. The Bombay Sensitive Index fell 875 points, or 5%, to 16,729.


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Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at www.theglobalperspective.biz. He lives in New York.
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