October’s downturn in stock markets could be a blessing. Most markets haven’t yet crashed in a way that is damaging to economies (except in Asia) but the falls were a timely reminder that prices go down as well as up. Barring a more severe shock, the effects of the volatility could be benign. A saner approach by investors and capital raisers is expected.
This is especially needed in emerging markets, particularly from bond issuers. The widening of bond spreads because of falling stock prices means that borrowers may stop demanding the impossible from their lead-managers.
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