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Credit crisis: Global market value reduces by $ 20 trillion

By Swapnil Mayekar in Mumbai
October 03, 2008 12:54 IST
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All major global equity benchmark indices hit a 52-week low on September 29-30, 2008, on account of the global credit crisis, which has slowed down the world economy. The global stock market value plunged to $ 42.21 trillion on September 30, 2008, from a high of $ 62.57 trillion on October 31, 2007, losing almost $ 20.36 trillion in market capitalisation.

The value of the US equity market has dropped by $ 5.13 trillion (26.94 per cent) to $ 13.92 trillion, while the United Kingdom's market cap plunged by $ 1.49 trillion from its high to $ 2.72 trillion. France witnessed value erosion of $ 1.11 trillion, while Germany's market value dropped by $ 773 billion from its 52-week high during the period.

Asian stocks fell the most from their 52-week high, witnessing value erosion of $ 6.35 trillion, compared with the decline in the US and European markets. Among the Asian markets, the Indian market was the worst hit, registering a 51 per cent drop ($ 914 billion) in its market capitalisation from $ 1.81 trillion on January 10 to $ 894 billion on September 30 this year.

The crisis, which began with bad home loans to subprime borrowers in September 2007, is threatening to push the world economy into a recession. The banks' subprime-related losses surged to $ 588 billion worldwide till September 30, 2008. Of this, mortgage companies accounted for 57 per cent ($ 334 billion), European financial companies (39 per cent or $ 230 billion), whereas Asian bank and financial institutions accounted for 4 per cent or $ 24 billion of the total losses.

The Citigroup has reported asset write-downs and credit loss of $ 60.8 billion followed by the Wachovia Corporation ($ 52.7 billion), Merrill Lynch & Co ($ 52.2 billion), Washington Mutual ($ 45.6 billion), UBS ($ 44.2 billion), HSBC Holdings ($ 27.4 billion), Bank of America Corp ($ 21.2 billion), J P Morgan Chase & Co ($ 18.8 billion) and Morgan Stanley ($ 15.7 billion).  

All major global bank stocks hit their all-time low in September this year. Global banking giants, which have been affected by the US subprime crisis, have seen their market value eroding by an average 54.17 per cent from their peak, while the top three Indian banks fared marginally better with a 44.46 per cent decline in market value from their all-time high on January 14 this year.

The market value of the top 10 foreign banking firms fell from $ 1,090 billion to $ 499.77 billion from their peaks in September-October last year. In comparison, the market capitalisation of the three Indian banks dropped from Rs 126,793 crore (approximately Rs 1.27 trillion) to Rs 70,425 crore (Rs 704.25 billion).
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Swapnil Mayekar in Mumbai
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