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BoE's King Warns of Stocks Downturn Risk

Reuters
Wednesday, 14 Nov 2007 | 9:03 AM ET

Stock markets around the world could be in line for falls and this could cause major ructions for the global economy, Bank of England Governor Mervyn King said on Wednesday.

"It's very striking that despite developments we've seen in the last three months, equity prices are on average higher now than they were in August.

This is true around the world and in emerging markets, they're 20 percent higher. There must be some downside risks there," King told reporters at a news conference.

The MSCI world equity index hit a record high at the start of the month and some Asian stock markets are up almost 50 percent since the start of the year.

A fall in equity markets, he said, could have a bigger impact on the world economy than the recent credit squeeze.

"The repricing of risk we have talked about for some considerable time hasn't really fed through to markets such as equity markets and if there were to be an adjustment of risk premia in equity markets, with a fall in asset prices, then that could have a bigger impact on the world economy," King said.

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