Last Friday, the stock markets in Singapore took a beating due to Wall Street falling 512 points in overnight trade. During the weekend, it was more bad news as Standard & Poor's downgraded U.S. credit rating.
Cue another bloodbath on Singapore shares!
The Straits Times Index (STI) was down 4.8% on heavy volume the downgrade by S&P added more uncertainty to an already jittery outlook for the world economy. Frankly, I think it’s overdone.
The S&P downgrade was expected and is the right decision. However the downgrade doesn’t really change anything. I know I’m playing devil’s advocate here but the global economy is still depended on the U.S. Countries like China, Japan, the Middle Eastern countries; all of them still need to buy U.S Treasury bills (even with the downgrade) because their economies depend on it. They can’t stop buying T-bills even if they wanted to!
In simple terms, nothing has change due to the downgrade. The world economy is not suffering due to the downgrade and the collapse of share prices is overdone. Unless the world suffers another financial shock, like Italy needing a bailout, I don’t expect share prices to go too much lower than they are now.