(Sept 11): In the wake of destruction wrought by Hurricane Harvey in Texas, the US is set for another storm. Hurricane Irma, which is said to be one of the most powerful Atlantic hurricanes ever, is expected to hit Florida this weekend. At the same time, North Korea successfully conducted its sixth and largest nuclear bomb test on Sept 2, leading to fears of a US military strike.
Those events collectively roiled equity markets around the globe. In the US, the Dow Jones Industrial Average, Standard & Poor’s 500 index and Nasdaq Composite Index fell 1.1%, 0.8% and 0.9%, respectively, on Sept 4 from last week. UK’s FTSE 100 index declined 0.9% on Sept 5 from last week. Similarly, Japan’s Nikkei 225 tumbled 1.6% and Hong Kong’s Hang Seng Index shed 0.8%. At home, the Straits Times Index fell 0.8% on Sept 5 from Aug 31.
Our Singapore Market Portfolio, too, was not left unscathed. It fell 0.3% in the week from Aug 29 to Sept 5. We fear that things could get much worse if there is an escalation of conflict over North Korea. How badly could our portfolio be hit? It is hard to predict. However, there are mathematical models that seek to simulate the impact of certain event risks on different portfolios. For instance, Bloomberg has a scenario model for turmoil that arose from Russia’s war with Georgia, for the period spanning Aug 7 to Nov 20, 2008.