Panic selling affecting markets, says analyst

Mon, 20 Aug 2007

Part of the recent drop in equity markets has been precipitated by panic selling among investors , it has been claimed.

A period of stock market volatility led to some equity holders shedding their stock, thus sending the market into further falls, culminating in one of the worst weeks the FTSE 100 has ever experienced, said an expert at New Star.

Gregor Logan, joint deputy chief investment officer and manager of the New Star Tri-star Unit Trust, said that the trend is also spreading, with Asia and emerging markets suffering.

"So far there is little evidence of contagion to the real economy, but perhaps that is simply because there has not been enough time for the transmission mechanisms to work," he speculated.

He added that this uncertainly has led to poor visibility for earnings and quality of assets, particularly where financials are concerned.

Furthermore, his colleague and fellow chief investment officer Stephen Whittaker said that the Bank of England's monetary policy committee may have its decisions affected by the volatility.

However, a welcome boost has come for investors as the US Federal Reserve announced a 0.5 per cent cut in its primary discount rate.

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