Investors Diary

Dear Investor,
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Friday, September 19, 2008

Wall Street Crisis

Dear readers,
After many Month of absence from the blog scene due to some unavoidable circumstances am happy to be back and rolling!!!! yepyyyyyyyy...

However and quite sadly the goings on at the World's famous Street has led to financial contagion across the other markets of the world and many investors are loosing alot of money in their cherished financial assets.

Short Selling
The emegence of this crisis fueled by the Subprime mortgage crisis led to panic across major markets. This neccessitated the drastic drop in the prices of vibrant and fundamentally strong companies across the globe.

Short selling
Short selling a phenomenon involving selling of borrowed shares in the hope of replacing them as prices continue to fall became the order of the day.
This did not augur well for most of the counters amidst rapid flow of information from one continent to the next.

Rescue package
As the Wall Street giants continue to wallow in financial crisis and illiquidity, the Fed government's rescue of Fannie Mae, Freddie Mac and AIG demonstrated clearly that the financial turmoil continues on Wall Street and it is a matter of time before sanity resumes and investor confidence is restored.

Financial Contagion
Other major stock markets also tumbled with news of this crisis including Russia, Paris,Toronto, Germany, Asian Markets as well as emerging African markets amongst others.

The Kenyan stock market was no exception and neeedless to say that most of these Wall Street investors had ventured into the Kenyan market through the much touted Safaricom IPO and their crisis in the far west will impact negatively in our market.
AIG for example is a major player in the stock market investing substanbtial amounts for perosns in Kenya and also abroad and more especially those who are keen on investing in emerging markets.
The rescue package might have come as a sigh of relief but time will tell where the markets are headed despite the slight rebound. Whether south or north!

Financial Reforms
The onset of this crisis has laid bare the need for stringent financial reforms to protect investors assets from rapid erosion once fundamentals change though in the slightest of ways. Further these reforms would ensure proper management of our financial markets and regulations of all financial innvoations icluding derivatives that are widely traded across the globe though not fully appreciated and understood by many.

Political will
This is imperative if rapid reforms and proper infrastructure is to be set up to avoid continuous problems facing investors young or savvy both in the developed economies of the world as well as the rapidly emerging markets.