BusinessPeople Daily

Global markets ‘bloodbath’

Fred Aminga, Zachary Ochuodho and Agencies @PeopleDailyKe

Volatility in the global markets has seen stocks dip for a fourth day running, wiping $4 trillion (Sh405 trillion) off what had been record-high values ten days ago.

The world is watching the record-breaking losses on the Wall Street in glee expecting knock-on effects across Asia and Europe as London’s FTSE dipped to the lowest levels since 2016, as analysts call it a bloodbath.

After Wall Street, Tokyo led the markets bloodbath in Asia with the Nikkei 225 briefly diving almost seven per cent before closing down 4.7 per cent. Hong Kong lost more than five per cent in its worst day since summer 2015, while Sydney and Singapore each sank.

London’s FTSE 100 fell to its lowest level since late 2016, to a low of 7,079.4 at one stage soon after opening but had recovered to 7,154.26 points by the time of going to press. Financial analyst Aly Khan Satchu says Kenya should be concerned about the ripple effect of this volatility on the Eurobond, which is supposed to fund Kenya’s mega infrastructure projects. “I expect some contagion.

And I think, in particular, the Treasury Cabinet secretary needs to get his skates on and pull the trigger on the eurobond because market conditions which are very benign are unlikely to remain so,” he said.

He says that the developed markets were in a ‘’Goldilocks’’ moment for a long time lashings cheap or even free money, but it is becoming increasingly clear that the US Federal Reserve – and other central banks will not be far behind – winding down their extraordinary money-printing operations. This is sending interest rates higher and reducing risk appetite.

“The last two days have witnessed unprecedented volatility,” he said. “I am watching the crypto markets very carefully for example which have endured an orgy of selling and the concern remains that liquidity will be sucked out of the emerging markets and frontier markets,” he said.

However, Kenyan stock market declined slightly by 0.3 per cent even as the global stock share tumbled – sending a gauge of world stocks in what is touted as the biggest three-day slide since 2015. Reports from the Nairobi Securities Exchange (NSE) indicate that the NSE All Share Index lost 0.53 points to close at 181.38.

NSE 20-Share Index was up by 4.19 points to close at 3759.95 points, while the NSE 25-Share Index deepened by 6.90 points to close at 4543.65. John Kirimi, director, Sterling Capital Ltd said Africa, Kenya, in particular, is not directly integrated into the world financial markets and as such the effects of market movements in the US or Europe cannot bring immediate changes in the African markets as they do in Asia for example.

Kirimi said the sudden fall in the US market happens due to a market correction. A market correction is a situation where the market after rising haphazardly corrects itself and begins to move according to the underlying fundamentals.

“There is a feeling that the US may be raising their interest rates anytime now and so investors may be moving their money out of the stock markets into other classes of investments. It is early to give a definitive cause but the situation will clear as we go on,” said Kirimi.

According to Bloomberg reports, the US futures fluctuated before falling, while Treasuries steadied and the dollar rose. The Stoxx Europe 600 Index at one point slumped the most since June 2016, with every industry sector falling as much as two per cent.

While Japan’s Nikkei entered a correction as most of the shares on the 1,000-plus member MSCI Asia Pacific Index declined. Amid the sea of red, some safe-haven assets, including gold and European bonds, traded higher. Treasury yields swung before nudging lower.

Bloomberg says what began with rising bond yields has become a selloff across global equity markets, as investors fret the return of inflation and higher rates that could erode profitability for companies already trading at elevated valuations.

“Traders will be watching how the moves unfold from here – a sustained stock slump has the potential to undermine consumer and business sentiment, crimp borrowing and so start to curtail global growth,” reported Bloomberg. As assets decline, volatility is surging, causing pain for investors who had positioned for price swings to remain muted.

Elsewhere, oil slumped for a third day and metals joined the selloff having gained on Monday. Bitcoin tumbled for a sixth day, at one point trading below $6,000 (Sh607,551) for the first time since October.

At some point some banks banned customers from buying the crypto-currency with credit cards, coming a short while after crackdowns by authorities in China, Russia India and South Korea.

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