Global bearishness hits Asian equities

Global bearishness hits Asian equities

Mumbai: The outlook on India’s equity market is negative for the next few weeks, say analysts.

Indeed, the Sensex, the benchmark index of the Bombay Stock Exchange, was down as much as 3% in early trading on Monday, following sharp corrections in US and European indices last week. It recovered some to end at 18,737.2, down 0.9%. All other key Asian markets fell between 2.4-3.8%.

The Asian markets were reacting mostly to what happened in the US where the Dow Jones Industrial Average, the benchmark equity index in US, fell 223 points, or 1.69%, on Friday, its last trading day, after major banks flagged further losses on their debt portfolios.

“The trouble in the mortgage market could be much bigger than estimated," says Jose M. Linarus, the London-based head of global equity research at JPMorgan Chase & Co. “We are yet to know the impact on European banks, especially those in UK. Some of them will be hit hard."

The bearishness in global markets is bound to continue and this will have a direct impact on Indian equities, according to Shankar Sharma, director of Mumbai-based First Global Stock Broking Ltd. “The outlook for the remaining period of this (calendar) year is not positive as Indian fundamentals are also weak," he said. “We are expecting a significant slowdown in key economic growth figures."

Many global brokerages also estimated that a slowdown in India’s GDP growth, could affect equity market growth in the medium term.

“We expect India’s GDP growth to slow to 8.9% in 2007 from 9.6% in 2006 because of higher interest rates, stronger rupee and a less supportive global economy," says Lehman Brothers Holdings Inc., in its latest global equity market research report.

The report, however, pegs India as the least vulnerable economy in Asia, though not completely immune from a global slowdown.

Equity indices of Japan and China, the leading Asian economies, shed around 2.5% each. Among other key Asian markets, Hong Kong’s Hang Seng index saw a sharp 3.8% slide. The respective indices of South Korea and Taiwan also ended with over 3% loss, while in Singapore, the Straits Times lost 2.4%.

“The credit markets are highly bearish as the impact of the mortgage crisis in developed markets, could be deeper than earlier estimates," says Ullal Ravindra Bhat, managing director of Dalton Capital Advisors, a foreign institutional investor in India.