Volatility in the global market could continue for another two to four quarters since recessionary pressures in the US economy might take so long to subside, said Ronald Arculli, chairman of Hong Kong Exchanges and Clearing Ltd (HKEx).
Arculli, in Mumbai to explore bilateral ties between the two markets, told FE that volatility in the international market, including in emerging markets like Hong Kong and India, has been caused by external factors, earlier the subprime crisis and more recently by problems related to credit derivatives in the US.
The US, he said, is the world?s largest economy, contributing more than 25% of the world GDP. India and China are leading trading partners of the US. In this scenario, it would not be right to say the Chinese economy has decoupled from the US, he said. ?However, in spite of the troubles in the US economy, both the Chinese and Indian economies will continue to grow, albeit at a lower rate,? he said.
Arculli said financial markets were unsettled by the economic downturn that triggered volatility in the stock market. ?I think it will take some time to work out and it will not be proper to say that the markets have bottomed out now,? he said.
?It seems that the US economy is in a recessionary mode. It will take a little while to work out, may be six or 12 months,? he added.
Following the sub-prime crisis in the US market and the credit derivatives problem coming into light, the markets across the globe have witnessed extreme volatility. Before these problems were sighted, equity markets all over the world were trading at or near their all-time high levels. Since then, a major correction has crept in and Indian makets have seen a swifter correction than its peers. The 30-share Sensex of the BSE trades almost 30% below its peak level of 20,280, hovering now around 15,600 levels.