The World this Week October 22 - October 26 2012

The World this Week October 22 - October 26 2012 from Karvy Private Wealth

A real life case from Global Economic Crisis

Ripple Effect of the Subprime crisis

•   The effects of the US Subprime Mortgage crisis on the global market were huge. The crisis had ripple effect on the Asian, European as well as the Australian market.

•  The Asian market witnessed a massive sell off. It also has hit the stock markets of Australia, Germany and Thailand such that BNP Paribas had to hold all it withdrawals and IKB Deutsche had to seek a bailout of $11.1 billion.

•    Post the housing bubble burst in US the underlying mortgage defaults increased which affected adversely the global markets.

•    In the Great Britain, the stock market experts failed to realize the underlying faults and WestLB had to file bankruptcy.

•    One of the giant of Australian financial services Macquarie Bank, declared that the investors may lose 25% of their money.

•   The Nikkei stock average in Japan has decreased by more than 2%.

•   In Germany, France and Britain major indexes have fallen down, but by less than 2%.

•    Australia and Hong Kong's benchmark indexes have fallen down by above 3%.

•    South Korea's key index has dropped by 4%.

•   The First State Investment had withdrawn its entire share from the Asian financial market.

  

Source: Multiple

                               

                               

Metals losing its sheen at current levels...

The Asian Indices are witnessing down pressures mirroring losses in Chinese markets due to credit tightening and South Korea fighting with inflationary pressures.

Analysts were already expecting a profit booking trends owing to soar prices. Metals and commodity index also witnessed volatility with gains in US Dollar. The sectors to watch post correction are auto, capital goods and construction. These sectors are set to rally after the Chinese market recovers, Euro issues improve and Dollar strengthens in coming months.

According to experts profit booking was on expected lines as valuations were at all-time highs. They are advising retail investors to exit metals and other commodities which are under pressure due to gains in US dollar. The sectors to look at post correction are auto, capital goods and construction space. Long term investors should continue to stay put, they said.

With Metals at their high it's advised for retail investors to exit at these levels whereas long term investors can hold it till the market recovers. Market has a strong support at 5940 levels and it's difficult to sustain at current levels which rallied with foreign liquidity in emerging markets.

Weakness in global markets can take Nifty to 5700-5800 levels. FIIs like CLSA believe any corrections in emerging markets are buying opportunities. High beta sectors like metals and realty are more prone to slow down there speed.

The Metal and commodity market are expected to bounce back but till then it's advised to wait and watch the metal that are losing sheen at current levels.

Source – ET