The ‘America Corporation’ Confidence Collapsed

▽Rapid decline of company confidence〓The most critical shock of the Worldcom incident is the collapse of confidence built among the investors. The management structure of the American companies showed some major problems with company scandals such as Enron, Global Crossing, Tyco, Adelpia, and Dynergy since last year. The Fox News reported on the 27th that the investors worried saying “who do we trust?” because a biggest accounting corruption incident was happened in addition to that.

The British weekly economy magazine Economist pointed out on the 24th that the reason why the stock prices were falling and the investment of foreigners were diminishing was because the trust against the clearness of company management was radically declined.

The US Trust, an affiliated company of a stock broking company Charles Shwab claimed that they surveyed the high investors responded about the confidence rate and 85% of the respondents said they could not trust the financial statements of the listed companies.

▽Confusing economic indicator〓The economic indicator cannot provide a clear answer whether the American economy will recover or not.

The current account deficit that draws near 4% of the US Gross Domestic Product, the expenses for anti-terrorism, and the tax reduction policy are acting as negative factors of the recovery of the American economy. The decline of retail sales and the consumer confidence rate that marked the lowest in February are evoking a worry about the slowdown of private consumption as well.

On the other hand, the leading composite index of May, which shows a rising curve, and the housing sales rate evoke an expectation of the gradual recovery of the American economy.

▽Anxiety of the global financial market〓The American stock market, which merely exceed the status right after the 9.11 terror, is in danger of collapse once again because of the dullness of business showings and the collapse of company confidence. The Blumburg Press, an economy exclusive, diagnosed, “the stock market is very unstable” although the decline of NASDAQ general index was hesitated because of repelling buying, and the DOW Jones industry general index, which fell down deeply, kept the state of yesterday.

The Nikei general index of the Tokyo stock market of Japan had a sudden drop by 4.02% on the 26th compare to the last day but showed a recovery less than 2% on the afternoon of the 27th. The European stock market, which showed a rising curve for few days, dropped by 2.16% in the UK’s FTSE100 index, 1.73% in the French CAC40 index, 2.47% in the German DAX30 index.

konihong@donga.com