Monday, September 22, 2008

Blood bath in the Wall Street…

The Wall Street melt down came as a bolt from the blue to not only all stock market investors but also for the global economy as well. With the 158 years old Lehman Brothers' announcement that it was filing for bankruptcy under the chapter 11 because of the failure of the rescue efforts and acquiring of the Merrill Lynch for $50 million by the Bank of America in an all stock transactions on the same day and the bailing out of American International Group (AIG) by the US fed, the stage was set for a greater show down.

The melt down in the Wall Street has triggered global chain reactions plunging the stock market to the never seen depths. Added to the hysteria were the rising mortgage defaults and plummeting market values in US.

The US mortgage giant Bear Stearns set the stage for the fall out whose sub-prime crisis are only well known. Following suite with the Bear Stearns, problems started with Freddie Mac and Fannie Mae. The Fed has to intervene wit h a massive $200 billion to shore up these institutions.

Picking up momentum in Chinese stocks?

The melt down was a good news for the long term investors of the Chinese stock market suggesting that they see a value for the stocks whose value has gone down by almost two thirds in the last 11 months. The investors with patience have started making investments albeit in small quantities while the short term investors in panic started off loading their worth in a jiffy.

The biggest Shanghai composite index has taken a beating of nearly 66 per cent since the last October. The foreign institutional investors appear to raising their holdings in the wake current low valuations.

Not all can buy stocks at the exact bottom levels but it would be prudent in adding stocks to your portfolio in batches near the bottom levels.

The Indian stock market reacted sharply and the sensitive index, the sensex plunged 470 points or 3.35 per cent on the same day. Some blue chip companies touched their 52 week low on that day showing the magnificence of the impact.

What are the lessons to be learned from the fiasco of the Lehman Brothers and the likes for the Indian stock market and the real estate business?

If ordinary borrowers of home loans can able to trigger housing loan collapse in the US, what could be the impact of rising interest rate for home loans in India and it is the simple word “Caution ” in the air. With the Indian housing market has been showing signs of slowdown and the property prices correcting, alarm bells started ringing for the borrowers as well as for the bankers and banks will become more cautious in lending credit.

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