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Rout was always just around the corner

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FOR some, yesterday's rout of the stock market could be seen coming from miles away.

'This bear move has been coming for a while,' Christopher Day, head of research at Fimat Derivatives, a subsidiary of French banking group Societe Generale, said.

Goldman Sachs also forecast correctly last week that the bull market in the United States bond market was over, affecting the outlook for equity markets worldwide.

When bond prices go down, bond yields go up, making fixed-income instruments look more attractive relative to stocks.

Higher interest rates also tend to dampen corporate profits, further diminishing the appeal of equities.

Much of the rally in Asian stocks this year was based on predictions that interest rates would continue their gradual slide as the year progressed, but the recent jump in US bond yields has led many to question that assumption.

Some observers see the benchmark 30-year treasury yield rising as high as 7 per cent, after dipping below 6 per cent about the beginning of this year.

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