Oct. 19 1987 remains the largest one-day correction in world equity markets. The DJIA lost 22.6%, and the S&P 500 20.4%. Closer to home, the drop in the HSI lagged that in New York due to the time difference. But drop it did, from 3362.40 at close on Oct. 19 to 2241.70 at close on Oct. 26- a staggering 33.3% drop. (For the data, see here. This NYT story explains the lack of data for the intervening days: the market had already dropped 11.1% on Oct. 19, ahead of the US melt-down, and was closed for the following four trading days as a result).
Could such a melt-down happen again? Nouriel Roubini of NYU and Roubini Global Economics draws the parallels between 1987 and 2007 here.
My take: yes, there are some strong parallels, and a major melt-down is certainly possible. But timing any such melt-down is extremely difficult. It could happen tomorrow, next week, next month, next year, or even next decade.
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