‘Violent’ stock market crash could be round the corner as hidden liquidity crunch ‘blows up’ in investors’ faces, warns think-tank

  • Bank of International Settlements warns of ‘violent’ market crash
  • Low levels of market volatility persist despite conflicts and crises across the world
  • Investors buying assets on the misguided presumption of a level of liquidity
  • Share prices continue to plummet as investor confidence decreases

A potentially ‘violent’ stock market crash could be on the horizon as financial markets become dangerously stretched, a think-tank has warned.

The Bank of International Settlements said that suspiciously low levels of volatility in the markets seen this year suggest a lack of liquidity that could trip up investors who assume they can dispense of assets when a sell-off begins. Continue reading

BIS warns on ‘violent’ reversal of global markets

The global financial markets are dangerously stretched and may unwind with shock force as liquidity dries up, the Bank of International Settlements has warned.

Guy Debelle, head of the BIS’s market committee, said investors have become far too complacent, wrongly believing that central banks can protect them, many staking bets that are bound to “blow up” as the first sign of stress.

In a speech in Sydney, Mr Debelle said: “The sell-off, particularly in fixed income, could be relatively violent when it comes. There are a number of investors buying assets on the presumption of a level of liquidity which is not there. This is not evident when positions are being put on, but will become readily apparent when investors attempt to exit their positions.

“The exits tend to get jammed unexpectedly and rapidly.”

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