The bears ruled the local equities market in 2008, crashing down stocks to new lows as investors headed for the exits following the economic crisis in the United States and other developed countries.
After five years of consecutive growth, the Philippine Stock Exchange index (PSEi) closed the year in negative territory, shedding a total of P3.909 trillion for the year or a decline of 49 percent from the end-2007 value of P7.978 trillion. As negative news kept hitting the stock market, investors unloaded their holdings, sending the main composite index down by 48.29 percent to close at 1,872.85 points as of Dec. 24, the last trading day of the year.
Analysts said 2008 was a year that most of the world’s economies would like to forget. The troubles in the world’s biggest economy reverberated around the world with stock markets recording sharp losses on massive selloffs. There were a couple of times in 2008 when virtually all stock markets across the globe plunged on the same day. This came as no surprise as the US economy accounts for one fourth of the world’s GDP.
The reversal of fortunes came all too sudden. It caught many off guard. This despite warnings of a US recession when the sub-prime loan fiasco first reared its ugly head in July 2007.
The US credit crisis has morphed into a black hole, threatening to push the global financial system to the brink of an economic meltdown.
It stemmed from risky mortgages by banks, forcing them either into bankruptcy or being bought out of necessity by the US government or other financial institutions.
The biggest bailouts were those of Bear Stearns, once the fifth largest investment bank in the US and now owned by JP Morgan Chase, and troubled giants Fannie Mae and Freddie Mac.
The global meltdown forced governments across the globe to step in to offer various bailout packages to stabilize financial markets, restore investor confidence and mitigate the impact of the crisis on the global economy.
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