Logo of Phnom Penh Post newspaper Phnom Penh Post - Investors face ‘scary season’ investors

Investors face ‘scary season’ investors

Content image - Phnom Penh Post
Despite Halloween season excitement, stock markets are mostly afraid. JEWEL SAMAD/AFP

Investors face ‘scary season’ investors

Despite a euphoric rally on Wednesday in global stocks to close the month, October lived up to its reputation as a chilly period for investors.

The broad-based S&P 500 ended at 2,711.74 up 1.1 per cent for the day, but with a loss of 6.9 per cent for the month, its biggest monthly decline since 2011.

The MSCI World Index, which contains stocks from 23 developing countries around the world, fell more than eight per cent, its worst drop in six years.

The CAC in Paris lost more than seven per cent, its biggest fall since August 2015, while the Hang Seng index in Hong Kong plunged more than 10 per cent, its deepest monthly dive in almost three years. Frankfurt and London also suffered significant pullbacks.

The losses have been steep, estimated at the end of Tuesday’s session as $5 trillion globally, according to S&P Dow Jones Indices.

“Even after this morning’s gains, global equity markets are left licking their wounds after a brutal month,” said XTB analyst David Cheetham. “The question going forward now is whether the worst of it is over or if there’s another wave of selling into year-end?”

Litany of worries

Key drivers of the selloff have included worries about effects of central banks phasing out easy-money policies, led by the US Federal Reserve, which has vowed to keep hiking interest rates.

The Fed has already raised the benchmark lending rates three times this year and is expected to increase again in December. Markets are nervous over the moves due to worries the higher rates will crimp growth and wreak havoc in developing economies that see their currencies plummet next to the dollar.

Adding to that angst is lingering uncertainty over the state of global trade relations, particularly connected to the US-China dispute. In the latest sign of trouble due to the dispute, a key measure of Chinese factory activity for October came in below market expectations, according to Wednesday’s data from the National Bureau of Statistics.

The trade war also has bruised the valuations of several large US companies that have been hit by higher costs due to tariffs. Investors punished Caterpillar after its earnings report earlier, part of a 20 per cent fall during the month.

Other factors include worries about a potential Democratic takeover in the US Congress with next week’s midterm elections, political uncertainty in the euro zone connected to Italy’s budget plan, and the future of Germany now that Chancellor Angela Merkel has announced plans to exit the stage in 2021.

Even with the declines, some markets remain relatively high by historic standards. Just a month ago, US indices stood at all-time highs, while the MSCI World Index reached its highest level since a January record.

Analysts see echoes in the stock market’s retreat from other Octobers, notably the 17 per cent drop in 2008 and the 22 per cent nosedive in 1987.

The S&P 500 since 1928 has averaged a gain of only 0.5 per cent in October, well below the 1.2 per cent gain in the average month, according to an analysis by Shamik Dhar, chief economist of BNY Mellon.

“This phenomenon is difficult to explain” Dhar said in a note, adding that the index should be too diversified to be affected by seasonal factors.

“Perhaps the markets are feeling the start of the autumn ‘blues,’” Dhar added in a note with images that included a haunted house and ghosts.

MOST VIEWED

  • With herd immunity likely in 2022, is Cambodia ready to reopen for tourism?

    The government aims to inoculate 80 per cent of the target population by June next year, giving it a head start among regional peers to reboot the sector but first, it has to do a few things to up its game A sign on a glass

  • US wants 'full access' to Ream Naval Base

    On June 11, the US embassy's Defense Attaché Colonel Marcus M Ferrara visited Ream Nava Base in coordination with Cambodian officials following the recent approval of Prime minister Hun Sen to allay the concerns on Chinese military presence at the base as raised by US Deputy

  • Jab drive heading to 5 provinces

    The government is set to vaccinate more than 1.2 million people in five provinces after finishing with Phnom Penh and neighbouring Kandal in an ongoing campaign administered by the ministries of Health and National Defence. The five provinces are Preah Sihanouk, Kampong Speu, Takeo, Kampong Cham

  • New immigration bill targets illegal foreigners in Kingdom

    General Department of Immigration (GDI) officials are discussing revisions to the new draft law on immigration to prevent foreigners from entering Cambodia illegally and to supervise those living in the Kingdom more effectively. The revisions draw wide support among civil society organisations. GDI director-general Kirth

  • Kingdom set to be a gold producer

    Cambodia will soon join the roster of gold producing countries after the government announced the commencement of commercial gold mining operations in the Okvau area in southwestern Mondulkiri province's Keo Seima district from June 21. Prime Minister Hun Sen on June 10 announced that after 14 years of

  • School reopening can’t wait

    With the Covid-19 pandemic now well into its second year, safely reopening schools has become an urgent priority. School attendance is critical for children’s education and lifetime prospects. The long-term costs of closures – both for individual children and society – are simply too large to