The credit crisis that started in US, whacked the stock market hard.
The chart below is two years weekly chart of S&P 500 that represent Wall Street, ST Index the Singapore counterpart and KLSE Composite.
The three index clearly shown that the moved downward mimic each other..With the American market lead the way.
The S&P 500 went toppish on October 11, 2007 at 15,761 points, than to a of 12,570 on March 17,2008.It rebound back to a high of 14,216 on May 19 before falling to a low of 12,344 on July 15. Before the heavy fall due to the credit crisis it went to a high of 13,053 on August 11. Last week it closed at 9,406 points.
The Singapore market reached its peak on October 10, 2007 at 3,906.16 and fall to a low of 2,745.96 on March 17, 2008. It corrected to a high of 3,269 on May 5th and closed at 1,878.51 last week.
Our local bourse when to its height of 1,524.69 on Jan 14, 2008,and fall to 1,296.33 on March 7. It recovered to 1,305.9 by April 29 and closed this week at 905.23.
Since its high, wall street has fall by 40.3%, Singapore by 51.9% and Malaysia by 40.6%..
Stock market is one of the leading indicator of the country economic health. Singapore become the first regional economy in recession and looks like it will remain so for at least a year. According to Song Seng Wun, an economist at CIMB "In terms of the recession, we have written off 2009 and there's a question mark over 2010. We're expecting up to two years of contraction in GDP (gross domestic product) because Singapore is such a small, open economy and so dependent on external demand,"
For Malaysia, CIMB also has cut its growth forecast for 2009 to 3 percent from 5 percent. That is way below the government forecast of 5.4 percent growth and the Bank Negara's 4-5 percent. According to research from investment bank UBS, Malaysia is third ranked in terms of exports as a percentage of gross domestic product in its emerging market universe, after Singapore and Hong Kong
The Malaysian Institute of Economic Research (MIER) forecasts economic growth to slow to just 3.4 percent next year as exports slow on the back of declining demand due to the global financial crisis.
MIER also expected that the country will not change its fiscal policy therefore its budget deficit is likely to surge to its highest level in five years this year and will remain stubbornly high in 2009 as economic growth slows in the face of a global credit crisis. MIER stated that the country's budget deficit could exceed 5 percent of gross domestic product (GDP) this year, the highest since 2003, and could be as much as 4 percent in 2009. The government predicts the budget deficit will drop to 3.6 percent of GDP in 2009 from 4.8 percent predicted for this year.
So Mr. Limp..better listen to your younger brother.
