Many world stock markets now off 50% or more from peaks

Here's a club no country wants to join, yet its ranks are swelling: The 50%-Off (Or Worse) Stock Market Club.

Today brought another huge wave of selling in equity markets worldwide, as investors, understandably, keep focusing on the long list of negatives -- including still-severe credit market woes, forced asset sales by hedge funds as their clients bail out, and the likelihood of a deep recession ahead that will slash corporate earnings.

The wealth destruction around the globe from falling stock prices now has reached massive proportions.

Remember all that talk about "de-coupling," and how foreign economies and markets would hold up even if the U.S. took a tumble?

Instead, even though America is the source of the credit debacle that is ravaging the global financial system, many foreign markets -- both developed and emerging -- are faring much worse than Wall Street.

I tallied up how much some major and minor markets have fallen from their recent highs, most of which were reached in the second half of 2007.

Here’s a sampling (not meant to be all-inclusive):

Markets down more than 70%: Vietnam (-70.5%), Peru (-73.2%), Ireland (-73.4%), Russia (-73.9%), Iceland (-88.7%).

Markets down between 60% and 70%: Hong Kong (-60.1%), Poland (-62.6%), China (-69.8%).

Markets down between 50% and 60%: South Korea (-54.5%), Italy (-55.2%), Egypt (-56.9%), Brazil (-57.2%), Japan (-58.1%), Singapore (-58.2%), Turkey (-58.5%), India (-58.3%).

Markets down between 40% and 50%: Great Britain (-42.3%), Australia (-43.3%), U.S.-S&P 500 (-44.0%), Spain (-46.4%), Germany (-47.0%), Mexico (-48.3%).

Note that, for U.S. investors who own foreign stocks, the losses in many cases are worse because the dollar has rallied against most foreign currencies in recent months. A strong dollar means stocks denominated in foreign currencies have even less value when translated into dollars.

For example, the average European blue chip stock is down 45.6% year-to-date in euros, but down 53% in dollars. The euro today plunged to a two-year low of $1.262 from $1.285 on Thursday.

Given the huge rush by Americans into foreign equities during the boom years of 2003-07, investors who never took any of their paper profits now are seeing them wither.

Photo: A German stock trader in Frankfurt today, where the main market index dived 5% (Martin Oeser / AFP Getty Images)

Comments

[SJ]

The high cost of fuel this past year have all but destroyed our economy.Families have been stretched to the max between filling up the family car to get back and forth to work,higher utility bills and the effect of high fuel on every consumer product we need to purchase. Between all those there is little left over to save or invest. Most have had to dip into savings to get by as of late. Jobs and homes are being lost at an alarming rate.Just as gas prices have come down a tad OPEC is planning to cut production again. We have so much available to us between free energy such as wind and solar to technologies such as hybrid and elec plug in cars. Jeff Wilson just published a new book called THE MANHATTAN PROJECT OF 2009.Interesting read. All of our elected officials need to read up on the subject of renewable energy and the impact of our dependence foreign oil on our society and economy. He has a web site www.themanhattanprojectof2009.com A truly fascinating read!

[Miles Smoljo]

The DJIA can now be added to the list of markets that have lost between 40% - 50%. The Dow reached an all-time high of 14,164.53 on 9 October 2007. It closed today, 24 October 2008, at 8,378.95. (A 40% loss from the the all-time high of 14,164.53 would be 8,498.72).

[Peter Halferding]

Due to all these nice margin calls on US private investors who have to pull back the money they had put in European stocks, the net result of the plunge of the Euro vs dollar is that those European retirement funds who had put their money in bailed out Fannie Mae and Freddie Mac MBS-es and US bonds, now see an improved valuation.

They have bought US bonds relatively cheap, and are now seeing them as save due to the Fannie Mae/Freddie Mac bailout. In a similar vein, those who had bought appartments in NY city when the prices started plunging in the last years, see hardly any devaluation of their capital. As the Euro falls nearly as fast as the US house prices go down.

A low Euro will mitigate a considerable part of European's oversee assets, further improve Germany and northern Europe's export positions towards Asia (already much stronger than the US, Germany alone exports more than the USA since 2003), while Southern Europe's industry, far more under pressure from China than the North, will benefit from a lower exchange rate.

Speculators seem to bet that the ECB will adjust to a lower interest rate, following the FED, to stimulate the economy. Alas, the official charter of the ECB allows them to look after inflation only. As the fall in natural resource prices may reduce inflationary pressures, while Chinese exports might raise them a bit and asset deflation will reduce some, it must be seen whether the ECB would really bow to those political pressure and might keep interest rates flat and just look whether the current exchange rate will stick.

The lower Euro today effectively reduces already near 20% of foreign asset deflation. It allows them to fix the internal banking problem and grow exports even far stronger.

Germany, the Netherlands and Switzerland, countries who have operated hard coin policies for many decades (Germany) as well as centuries (Netherlands and Switzerland) may now already due to the exchange rate going down have convincing arguments to southern European governments and France to just hold on the current interest rate and look what happens.

If current exchange rates stick, they are already on a sound trajectory.
This already will also make Berlusconi and Sarkozy happy (as their more basic good oriented economies face less pressure from imports and improve export prospects). It is a difficult task to learn Italians and the French, who often used devaluation as instrument, how to create a more export capable economy with a hard coin and foreign exchange markets just setting prices, but sticking to the price level may start to learn them how to do that trick.

For US exports this is however very bad news. US exports to Europe is far larger and more important than US exports to Asia. Also in Asia they will now see even more fierce competition from European exports (as these have gone down in prices due to the lower exchange rate and the Asian habit to peg to the dollar).

The ultimate issue for the global economy is how fast China will be able to stimulate internal demand. Because that will fill their industrial production plant. If that plant remains mainly export oriented, they get stuck for several years with massive overcapacity and they will not buy German machinery anymore. I do not think Europeans will be able to shift production that fast to Eastern Europe, building more factories there, and thus providing substitutes for the northern-European capital goods exporting countries.

The bottom line is: the massive US deleveraging now underway still hits US asset holders far worse than Europeans, a decline in export possibilities might hit both continents, but probably also hits the US far worse at the current low Euro exchange rate.

So, although this might seem that the dollar is getting stronger, a view that it is mainly a demonstration of the stronger pressure in the US to deleverage assets and have weakening effects that will hit the US economy even more severe than other countries looks closer to reality.

[R2K]

"If you are under 13 years of age you may read this message board, but you may not participate."

How many 13 year olds to we really expect to read this page? :)

The DJIA will probably bottom out at 50% loss. Not so bad considering peru.

[Steve]

We get screwed and we screw them. This happened before when Middle East and Japan bought USA real estate at the peak and we bought it back $ .20 on the dollar, look at Pebble Beach. Now it is derivitives and we buy back America again on the cheap. Remember all the concern about debt to China, that just dropped by 70% see above. The one thing America is still good at is screwing other country's economies. We win again, who needs a war.

[Some guy on the internet]

Opportunity knocks. Some of these markets are or will be tremendous buying opportunities The U.S. market will probably fall for another 6 months, and then will also be a good buying opportunity but without the potential growth of these other fallen markets.

[Rocky]

So much for all that "expert" advice about diversifying internationally. It's hard enough to keep track of what is going on in the US, let alone in foreign countries. Exposure to foreign investing usually means paying much higher investment management fees or brokerage commissions, as well as foreign exchange costs and risks. Another fad bites the dust.

[James Monachino]

Survival of the Fittest - -

No winners in this down turn just survivors. The USA has a developed financial infrastructure that helped propagated the International problem but also has the skills, talent, and distribution system to slowly rectify the problems.

No quick fixes here just alot of hard work that will eventually begin from the bottom up not the top down as being suggested with the trillion plus starter fluid that has been dumped on the problem.

The world wide slow down is being driven by Deflation. An economic condition few people alive have experienced and difficult to remedy.

Meanwhile, watch for more of the same problems to persist into 2009. With Global Banks and Financial Institutions de-leveraging and trust among lending institutions still low it will continue to propagate:

* Lower Corporate Profits
* Lower Governmental Tax Revenues
* Higher unemployment
* Falling commodity prices
* Continued erosion of Commercial and Residential Real Estate markets
* Less available disposal able income
* Impinge on organic growth of businesses due to credit constraints
* Increase Personal, Business, and Governmental Bankruptcies

The depth and breath of the problem suggests a multi year event that will continue to elevate the value of cash.

James Monachino

[Wisdom Seeker]

Perhaps it would be better to list the markets that are NOT down more than 30%? If there are any? Less than 40%? Buehler?

[schwartzer]

Abolish the Central Banks globally i.e.Federal Reserve Banks and we will rid ourselves of these parasites!
See "Money Masters" and "Freedom to Fascism" on youtube

[Robin Datta]

The New American Century is here: when the US crashes, everyone else crashes with it. Full Specturm Dominance!