Stock market experts: massive collapse not feared; moderation recommended
In light of the current precarious market situation, Helsingin Sanomat asked a number of experts in stock market matters three basic questions:
1. Is there a danger of a stock market crash?
2. What is the main cause of the market crisis?
3. Should investors take their money out of shares and mutual funds?
Kim Lindström, private investor, adviser at Nordnet Securities:
1. No there isn't. We have already experienced a mini-collapse. Many shares have come down so much that they can be seen as attractive targets for buying.
2. Everyone is afraid of a recession in the United States, and this is reflected on the markets. There are factors in the real economy lurking in the background, but it is more a matter of market psychology.
3. Absolutely not. Economically strong companies with good prospects are interesting now for long-term investors.
Jarmo Leppiniemi, professor at the Helsinki School of Economics and Business Administration, and chairman of the Finnish Association of Stock Investors:
1. I don't believe that anything like that will happen, but you can never know for sure. A collapse is not necessarily seen in advance. There are no causes in the real economy.
2. There has been economic imbalance for a long time in the United States. Problems of the housing market were the last straw. The consequences are often the greatest in remote markets such as those of Finland.
3. I would not do that myself, at least not for funds that are intended as long-term investments. However, if assets are needed within the coming six months, selling soon might be worth considering. On the other hand, many companies are paying out good dividends in the spring.
Matti Ahokas, bank analyst, Handelsbanken Capital markets:
1. What does a collapse really mean? I do not expect such a thing. Vacillation on the market has largely been caused by the fact that the nature of the market has changed. New kinds of investors have come, who invest in the short term. Fluctuations have come to stay.
2. We have behind us a surge that has lasted for nearly five years, and the valuation of many stocks rose high during that time. The housing problems in the USA changed the atmosphere, although it could turn out to be a minor factor. The third factor is rising inflation. For that reason, central banks are not able to make very big changes in interest rates.
3. It depends on what one has invested in. The stock market is broad. I would put an emphasis on good dividend payers. Forecasts for corporate results continue to be good on the average.
Vesa Puttonen professor at the Helsinki School of Economics and Business Administration:
1. Stock markets have declined significantly. I don't expect any sudden one-day collapse. There are certain fields, such as the banking sector in the United States, where fairly big declines in individual companies can be seen. In the Finnish stock market, valuation levels have already declined considerably, and suspicion of a possible weakening has already been factored into the prices.
2. The United States economy is going into a slump as a result of the insolvency of home buyers. This is an even bigger bubble than the techno-bubble was at the turn of the decade. People in the United States decided to get rich by owning homes. This is unravelling in the form of a decline of about one third in housing assets.
3. The level of valuation is such that now, if ever, is a good time to stay in the stock market, if you are in it. There are a few obvious bombs that people should not be sitting on. In addition to banking in the USA, the Chinese stock market is such a sector. It's valuation has risen sharply in recent times. China is now in the same situation as the US housing market was a short time ago.
Sirkka-Liisa Roine, President, Finnish Foundation for Share Promotion:
1. I do not feel that the signs point in that direction. A collapse would require a worldwide depression. Nothing like that is in sight.
2. The rise has been long and fear of a turnaround is natural in this situation. Then we got the subprime crisis in the USA, which triggered a bigger turnaround.
3. It is not possible to give just one piece of advice for this. It depends on the situation of the investor. If cash is needed soon, a cautious investor will take out what is needed. If one is on the move for the long haul, there is no reason to take action.
Helsingin Sanomat / First published in print 12.1.2008
More on this subject:
 US subprime lending crisis felt in Finland as well
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