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Home Business News

Why Investors Around The World Are In Panic Mode

Nairametrics by Nairametrics
February 9, 2016
in Business News
Why Investors Around The World Are In Panic Mode

Photo Credit: Youtube

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The world is in panic mode as stock markets around the globe recorded massive losses on Monday. From Asia to Europe to the United States stocks are taking a beating. Whilst this was happening, the Nigerian Stock Exchange recorded major gains yesterday as the index gained 2% after three straight days of losses. Yesterday’s gain had to do mainly with Dangote Cement’s 9.7% gain on the day and as you may already know  when Dangote Gains big the index closes positive.

The problem according to most media reports around the world is that investors are scared stiff about the likelihood of a spillover from emerging markets to developed markets. As the world deals with falling crude prices and the negative media hype surrounding it, investors also believe the developed world may have run out of options available to avoid another major recession. Very few (that is if there is any) developed nation is growing above 2% in GDP and things are more likely to get worse than get better. Emerging markets just like Nigeria, needs the economy of developing nations to grow as that means that they can continue to at least buy our meagre exports. If the growth continues to thin out then demand will drop and then commodity prices will rise.

China is also a major concern as investors are still obviously concerned about the slow growth emanating from there and the huge debt the country is said to have China is said to owe about $28 trillion which is much more than what the United States owe. If the Chinese economy collapses on the back of this debt then the world economy could enter another major economic crisis. The Chinese stock market already dominated the news late last year and early this year as Chinese investors watched their stock market crash before them.

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It is important to note that there are still some good news amidst all these concerns. The US is adding jobs and their economy is still strong despite slow growth. The European Union has been able to contain some of the economic crisis from its poorer members. The German economy is strong and the UK seems to have settled in on a slow but steady growth path. Nevertheless, sentiments still play a role and will trump reality. Perception is reality in the world economy and investors surely don’t care about fundamentals. The Nigerian stock market proves just that.

These sentiments also does affect what we do here in Nigeria as investors who are pulling out of equities in much safer countries are unlikely to channel the funds to Nigeria. The implication of this is that equities will probably continue to remain very bearish for a pretty long time.

Tags: Nigeria GDP
Nairametrics

Nairametrics

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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