It is said that global stock markets are intertwined/connected and that market p

Question

It is said that global stock markets are intertwined/connected and that market performance in one part of the world could have fundamental impacts or influences on the markets in other parts of the world (contagion). This phenomenon was recently exhibited across the markets in Asia and the developed states in Europe and North America. Required: Provide an account of the performance of the major global markets in the last 3 months to date, commenting of how stock markets performance in Asia impacted on the stock markets in Europe, North America and to an extent markets in Africa (at a secondary level). Clearly outline the reasons that were responsible for the stock market declines (fall in stock market indices).

Explanation / Answer

Yes, In the recent months there was contagion affect on the stock prices across the world due to the weak performace of the big Asian Economy China.

The Globe expected China to grow at an annual rate of about 7%. However, due to the weak commodity prices prevailing, China's grwoth data was unimpressive since it is major commodity producer. Therefore, the world bank and other global financial institutions lowered that growth expectation of China. Since China is considered the second biggest economy in the world after the US, this slow performance let to investors think that the growth around the world would be subdued for some more time.

Apart from this, China is alson considered to a leading exporter and since exports were reduced, ripple effects were followed around the globe. Since Africa imports more from China than any other counrty, Africa too had felt the tremors.

The emerging market funds were the most hit since the fall of China would impact these the most. Therefore, most investors reduced their exposure to these set of countries.

Also coupled with the fear of the US Fed hiking rates and the crisis in Greece continuing, the fear were acclerated and affected most parts of the global market.

China underperformed the most, followed by asian counterparts and emergings nations like Brazil, Russia, India, Turkey and South africa. Europe and US were also affected, but not to the extent of these nations

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