Monday, August 24, 2015

Monday mayhem

Stock markets all over the world are going through an excruciating phase. On 24th August, global value of shares has shrunk by nearly US$ 10 trillion, almost the size of China's GDP. This loss on a single day is colossal, averaging around 6% in various stock exchanges.

China's market continues to sink despite the government permitting pension funds to invest 30% of their funds in stocks. This permission was given on 23rd August. It is ironic that communists in India are crying wolf over the Indian regulators permitting Employees Provident Fund Organisation to invest 5 to 15% of their incremental funds in equity. EPFO may have incurred substantial loss in their equity investments already. Bitten once, will it become twice shy? We can expect the communists to gloat over this development.

US $ is appreciating against all currencies save Yen and Euro. Japan and Europe will find their exports falling because of this. Federal Reserve Board of the US may postpone its intended increase of prime rates. Global uncertainty is escalating. RBI's moves will be worth watching.

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