Question

Project Financial Management

Saudi and American Stock Market Crashes

U.S. stocks careened lower Monday 9th of March 2020, with major indexes swinging perilously close to the first bear market in more than a decade as a price war for oil and fallout from the coronavirus frightened investors. With different fears, the Saudi stock market might be seen differently from most other markets in the world during and after the 2006 crash. What happened in two crashes, reasons and lessoned learned?

Marks assigned 40 marks

Required: 2500-3000 words

Answer 1

Before 9th march, 2020 there were a worst weeks for trading since after the financial crisis of 2007-08 indicating mishaps in coming weeks. On 9th march, stock market of almost more than 70 plus countries fell because of Covid-19 Corona pandemic attack and stock market entered in to bear phase showing the declining trend and shocking waves all over the world. US stocks market fell over 7% and Saudi-Russia oil price war not only affects their indices but it also effects the index of almost more than 50 countries.

Dow Jones future prices experience a 1300 points drop because of Corona virus and oil price war. Because of sudden crash of US markets and it leads to breaking of circuit in a single day and trading halts for 15 minutes. The S&P fell by almost 7.6%.

Oil price war still continues even from many weeks. Because of drop in oil prices by 25% by Russia provoke the Saudi and Saudi drops its prices by 40% and it leads to shake the stock indexes of Europe, Asia, North America, etc. Almost every exchange or it effects global indices. It leads to biggest drop in indices since the financial crisis 2008. This oils prices spark when Russia rejected a proposal by oil exporters to cut supply to cope with lower demand due to the Corona virus pandemic attack. And Russia drops it prices and it leads Saudi to drop its prices by 40% and it is the highest drop in oil prices since the Gulf war 1991.

Because for Corona virus outbreak, investors were loosing their confidence and they start selling their stake and exit the market. Foreign investors are selling stake and wants to exit the market. There is a fear in the market because of Corona virus and we are moving towards recession. Everyone is avoiding investment at global level because of Corona virus outbreak and there is also a panic in the market because of oil price war.