When the Asian markets opened Monday morning, August 08 2011, after the weekend, the situation would be a bloodbath all across was expected. After all, the United States lost its platinum AAA rating from Standard and Poor’s following the ‘debt ceiling’ bill saga.
With the stroke of the bell, investors started selling like it was the last chance they would get to preserve their hard earned money. A visible fear was present among investors which continues to be there even now; all thanks to the downgrade from S&P.
Japan’s Nikkei plunged around 2 percent at the end of the day to close at 9097 points, with Hang Seng crashing down harder, 3.5 percent at 20,490 points. The situation in South Korea was even scarier for some time! The Kospi index had bottomed out around 5.5 percent when the trading in the index was suspended for few minutes. At the closing bell, Kospi was 3.8 percent down at 1869 points. Even the Chinese composite and Taiwanese indices lost 3.8 percent each with India’s BSE closing with losses of around 2 percent.
On a broader scale, the S&P Asia 50 Index was the hardest hit; it showed a deep cut of 4.4 percent and is currently resting at 3206 points. The MSCI index for Asia was down to with a 3 percent cut at 782 points.
The market cap of all stocks put together has fallen by billions of dollars in the last few days with today’s day being one major contributor. Even if the debt ceiling bill was passed by US Congress, S&P is not positive about the economy anymore. Washington had said after the downgrade that the agency had done a $2 trillion mistake in its calculations. S&P admitted the mistake but said that even after considering it, there is hardly any difference in the calculations.
So the rating stays AA+ and with it there is residing fear among investors all over the world. The fear of another recession or economic slowdown in the coming months is lurking over; what comes next depends a lot on United States!
