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World Stocks Tumble as Investors Worry About Corporate Corruption


Stock markets have taken a tumble around the world, triggered by a three day sell-off on Wall Street where analysts say investors remain worried about a series of corporate corruption scandals, and that more corporate bad news is yet to come. World markets are feeling the impact of the financial scandals that have taken their toll on WorldCom and others.

Where Wall Street leads, the rest of the world's markets tend to follow. Analysts are saying accounting scandals that have hit such corporate giants as WorldCom, Enron and Global Crossing are leading to a crisis of confidence among investors, giving markets around the world the jitters.

"All the problems with corporate governance and fraud have basically put the scare in the individual investor," said Scott Black, president of Boston's Delphi Management, which oversees more than a billion dollars in stockholder wealth. "There is a little bit of a panic mentality. They have been crushed in the market, and they see all the corporate shenanigans. They say why bother to play the stock market?"

Thursday's trading saw markets in Tokyo, Seoul, Hong Kong, Taiwan and Singapore all tumbling, and the dollar falling to its lowest level against the Japanese Yen since September. That led to sell-off's later in Europe, with markets in London, Paris and Frankfurt all sharply lower.

This, a day after heavy losses on Wall Street, where the Dow Jones Industrial Average fell below the 9,000 mark for the first time since last October. It was a sell-off that analysts say President Bush's address a day earlier on the need for strict corporate accounting rules failed to prevent.

"He really did not come out in a big way in terms of great ideas and tangible action," said Mr. Black. "The fact is that he and the Republican Party are wed to many of these companies that have had corporate fraud. They've taken political donations so I think it's difficult for him to be very tough on it."

The technology-driven Nasdaq has fallen 40 percent since early last year and has now lost three quarters of its value. Analysts such as Jim Paulsen who helps oversee $25 billion in stock at San Francisco's Wells Capital Management, describes Wall Street as being in the midst of its worst bear market in a generation.

"In terms of duration, it's longer now than anytime since prior to World War II. Personally, I think we're going to get close to a bottom here," he said. "Since March, we've had the stock market maybe drop 20 percent."

This, at a time when the American economy, the world's largest, is said to be recovering from its mildest recession ever, but at a slower pace than investors would like. Hugh Johnson of New York's First Albany Investment Company believes the market is also going through a major correction, a readjustment from the overvalued Internet stocks that propelled the market to new highs several years ago.

"I think we're going to look back at this period of history and say we over did it on the downside just as we over did it on the upside in 1999 and 2000," he said.

Still, analysts expect investors spooked about further losses to remain on the sidelines until they have confidence that corporate earnings will improve, and corporate financial scandals are over. Many are turning to what they consider to be safer places to put their money, including bonds and real estate, waiting to see the market hit the bottom before rushing back in to buy.

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