The five days that shook the market
By Gabriel Chen 
IN INDIA: DUMBFOUNDED... Stock brokers reacting as they watch the Bombay Stock Exchange?s listed prices at the premises of a financial consultant in Mumbai on Tuesday. -- AP
REMISIER Chew sat numb at his desk, staring at his trading screen in disbelief.
Out to lunch for an hour, he had returned to his office in Raffles Place last Monday to find the local stock market nose-diving in an almost unimaginable tailspin.
His screen was awash in a sea of red, with blue chip stocks such as SingTel and DBS Group Holdings buckling badly under a tremendous selling onslaught.
What started as a trickle of sell orders in the morning had burgeoned several- fold as waves of selling drove the Straits Times Index (STI) down by a sickening 80 points in a matter of minutes.
By the end of the day, the STI had lost 187.1 points to end at 2,917.15, its worst one-day drop since Black Monday in October 1987 - even worse than the aftermath of the Sept 11 attacks. About $36 billion of Singapore share value was wiped out, while globally, the loss was about US$2.4 trillion (S$3.4 trillion).
'It was like the world was coming to an end. I wasn't sure if I should cut my losses or hold my position,' recalls Mr Chew, who declined to give his full name. He saw his paper losses balloon to many thousands of dollars.
For the rest of Monday, and then again on Tuesday, he stood by horrified as a hapless witness to a savaging of local stocks. The same carnage was seen on bourses around the region, such as in Hong Kong, China, Australia, India and Tokyo, and in many other key global markets. Big money was lost with breathtaking speed.
'Some of my remisier friends lost at least half a million dollars during those two days,' Mr Chew added.
OCBC Securities in Church Street was uncharacteristically quiet on Monday and Tuesday, devoid of the regular retirees who typically spend hours hogging the computer terminals at the branch, trading stocks each day.
They had either sold their holdings and ducked for cover, or were just holding on and praying for better days. Tellingly, most of the activity was centred around the cashier, where investors who had borrowed money to buy their shares faced 'margin calls'. This is where they are forced to sell their shares or top up their loans with extra cash - as the value of shares plummeted.
'Some of their faces were green,' said a 60-year-old retiree who wanted to be known only as Mr Lo. 'If anyone tells you they're not affected, they're probably lying. You can't jump into a pool and still be dry.'
Another bruised investor, Mr Vincent Tay, 30, regrets not cashing out when the market peaked last November.
'I would've made a tidy profit of $10,000 but I was greedy,' said the businessman who has invested mostly in Singapore-listed China firms such as Synear Food Holdings, China Hongxing and Yangzijiang Shipbuilding.
His stocks are now worth half their original $50,000 value.
In the frantic downward spiral, the margin calls escalated as investors dumped shares. And with no buyers on the horizon, the steep sell-offs got worse and worse. One trader said the frenetic selling was a lethal cocktail of fear and panic.
'There were rumours circulating, such as that about Chinese banks hiding their losses. People didn't care if they were true or not, as they kept throwing shares away,' Mr Chew said.
Another witness to the nerve-jangling plunges was DBS Asset Management's senior portfolio manager and equities strategist Peter Chiang, who was besieged by phone calls from clients seeking reassurance.
'I never found myself so popular,' said Mr Chiang, adding that a key concern was whether the firm had enough cash on hand to pay investors wanting to redeem battered unit trust holdings.
Still, amid the maelstrom, some seasoned investors stayed calm. Renowned commodities trader Jim Rogers, 65, who moved to Singapore recently, was unflustered as the markets were tanking.
'It didn't take a genius to figure out it was going to happen. Things are going to get worse in a year or two in most financial markets, not just in Singapore. But Singapore is going to be less affected than most financial markets,' said Mr Rogers, who spent the morning at his gym, then ferried his four-year old daughter Happy to school.
But for most in the investment world, explaining the brutal sell-down was no easy matter. Yes, there were worries over a United States recession in the wake of a crisis in the US mortgage market brought about by imprudent lending.
The US, the biggest economy, is a vital export market for Asian markets. If US consumers slow their spending, that means trouble.
But this scenario had been unfolding for months, and there had been no recent dramatic news to explain the sudden slump.
Another remisier, who wanted to be known only as Mr Tan, said that back in 2001, it had been simple enough to explain to clients why markets were hammered after the terrorist attacks. But this time, it was much harder to pinpoint a specific cause.
Searching for an explanation, some traders attributed the sell-down to hedge funds - powerful private investment vehicles with billions of cash at their disposal. These funds were trimming their positions to raise cash to cope with redemption calls over in the US, which was closed for a public holiday on Monday.
Others said US President George W. Bush's stimulus package announced the previous Friday to shore up the ailing US economy was such a disappointment that it triggered Monday's plunge.
Whatever the case, with so much uncertainty in the market, even experienced traders panicked. Said a trader: 'Mid-afternoon (on Monday), when the index fell below the 3,000 support level, many people were hit badly. Institutional traders lost a lot of money.'
Mr Chew, like many of his peers, went home drained and shaken from the day's activity, dreading what Tuesday might bring. Wrung out from the day's drama, many money managers still ploughed on through the night when foreign markets are open.
Mr Julian Sandt, chief executive of fund management firm Orchid Capital, kept watching the news at home, as European markets were well down when they opened in the afternoon. 'I slept but it was less than normal, because you try to follow and watch the situation intently.'
As widely anticipated, Tuesday was no better, as Asian shares dived for a second straight day. 'The mood was so bearish. I was just lying low and staying out of the market, waiting for it to be all over,' Mr Chew said.
Just after lunch, the STI was down 171 points. Some traders were getting anxious, but there were also bargain-hunters who were drawn out by what appeared to be cheap-as-chips prices.
'As value investors, we're driven by the companies' worth and fundamentals. When prices fall, it gives us a chance to buy them,' said Deutsche Asset Management portfolio manager Sam Hanbury, who remained unfazed by the market slump.
Still, there were others who were more hesitant about sinking remaining funds into stocks, preferring a cautious stance.
Fund manager Lion Capital's chief executive Daniel Chan said: 'In terms of valuation levels, the Asian markets were starting to look rather attractive but one needed to be convinced that the Asian growth story won't be seriously derailed if the worst were to happen.'
The STI later trimmed its losses to close only 50 points lower at 2,866.55. The recovery came after late-afternoon rumours - which later turned out to be true - of a US interest rate cut.
The Federal Reserve's dramatic and unusually large 0.75 of a percentage point cut in interest rates after the Asian market closed on Tuesday had a big impact on global markets as stocks started to bounce back - albeit unevenly, and with continuing volatility. The cut means loans to businesses and consumers are cheaper - and this boosts confidence.
While fear certainly overcame markets on Monday and Tuesday, the rate cut after that 'stimulated' Asian markets, noted Mr Elan Cohen, JP Morgan Private Bank's senior portfolio manager.
The roller-coaster rebound during the rest of the week allowed the STI to claw back all of the losses suffered during those two days.
'The speculators have dried up for the moment as people are not so gungho as to go into the market,' Mr Tan said.
He said that he would lie low during this volatile period and stay out of trading shares until there is more clarity about the direction the market will take.
The two-day sell-down was alarming for many inexperienced investors - but those with more experience tended to look at the big picture.
'If you're a trader, you'll buy at these levels, and sell at 10 per cent or 15 per cent higher,' said the chief investment officer of Fortis Private Banking Singapore, Mr Lim Kok Boon.
'If you're overexposed, you'll look at the next two weeks for the bounce of the market to re-adjust your positions. If you're long-term, you'll buy part of the exposure now, and see what happens in the next few months, weighing in economic data and policy response.'
Mr Rogers expects the market to go down further. 'The market likes rate cuts, the market likes the fact that the Federal Reserve is flooding the world with money, but I'm saying it's false hope.'
He said he is 'waiting for a rally, and then sell short more investment banks and more financial institutions'.
Short-selling is when an investor stakes his money on a particular share falling in price. The investor borrows a share (on payment of a borrowing fee), sells it and hopes to be able to buy it back in the future at a cheaper price.
Mr Rogers said the worst is not over. 'Once you have lots of fear, then we're going to start hitting the bottom, but I've not seen much fear yet.'
Additional reporting by Tan Dawn Wei http://www.straitstimes.com/Free/Sto...ry_200559.html 
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The five days that shook the market 
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