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    • « Is the worst over? | Home | The Falling Market »

    What are the current risks in the market?

    By Pehon | July 31, 2007

    Over the last few months, we have seen the market being haunted by global threats to the equity market.

     From time and time again, stock markets have corrected from some time to another due to these reasons.

    But what are they and how do they affect the stock market?


    1. The first threat would be the expected interest hike by the Bank of Japan before the end of the year. A rate hike would trigger an unwinding of the yen carry trade, that has contributed so much to global liquidity. A rate hike would trigger a sell off due to the fears of a sudden decrease in liquidity in the market
    2. Tensions in the Middle East are causing alot of worry to the global stock market. Iran has been threatening the US with their nuclear ambitions. Although war is really unlikely, we could see a global sell off in tensions increase to unconfortable levels. With the US recently proposing the sharing of nuclear technology to India (a non-Nuclear proliferation country), it has given Iran a reason to continue on their ambitions. We will not see the end of this issue anytime soon.
    3. North Korea’s threat has suddenly seen a calming in this issue. So should no longer be a threat to the rest of the world’s stock market.
    4. A large scale terrorist attack similiar to 9-11 will see the market having a short term correction, as we have seen the last time. But nationalism has shown itself during 9-11, with the market rallying the day after the incident.

    The above threats has been with us for the past few months, and seem to be there to stay. A realisation of any of those horror stories could see an unwinding of global stock market. However, the chances of some of those happening is pretty low.

    Topics: Indexes&Economy |

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