Euro2day – Investors in some international equity markets were handed a partial reprieve on Tuesday as a clutch of markets rebounded from the sharp falls of recent days.
European markets made a strong recovery, while India’s Sensitive Index rose 3.25 per cent after Monday’s 4.2 per cent slump. Hong Kong’s Hang Seng index was 0.4 per cent higher at 15,865.
However, the upswing was not universal and analysts warned sentiment was likely to remain fragile in the coming days. There was a 4 per cent slide in the Philippine Stock Exchange Index, while stocks also fell in Australia, China, New Zealand, South Korea and Taiwan. Japan’s Topix benchmark fell 2.3 per cent after rising sharply earlier in the year.
The big question confronting investors trying to make sense of these swings is whether they are “fundamental” or “technical” in nature. Do they, in other words, reflect a genuine change in the underlying global economic outlook or are they just driven by short-term trading pressures that will soon disappear?
Unsurprisingly, governments insisted on Tuesday that technical factors were primarily to blame. Many analysts agree. “This is a flight to sanity,” declared Ben Garber, analyst at Moody’s in New York.
In a frantic search for yield, hedge funds and other asset managers have been gobbling up emerging market assets. This has boosted stock markets across the world and tempted local investors in countries as diverse as Indonesia, India and Brazil to join the rush.
