Monday, March 19 9:56 PM SGT

When global stocks crash, the shocks can spread far and wide LONDON, March 19 (AFP) - Who suffers most when the stock market crashes?

The obvious answer is anyone who deals in shares. But in a sophisticated economy, a share price slump can have nasty knock-on effects on far more than those who invest in, or play, the market.

As global markets have reeled in recent sessions to the lowest points for years, analysts are counting the wider costs and identifying the losers.

Private pension holders, investment clubs, bankers and traders, not to mention companies, can find themselves on the receiving end when the screens turn red and valuations plummet.

And if the rout is bad enough, the sheer weight of people losing money can snowball into an unhappy combination of falling confidence, a reduction of creditworthiness and spending, and therefore of orders for goods and services.

This can lead to job losses, and stagnation -- a vicious cycle of economic gloom fuelling market doom that affects almost everyone.

Any private investor anywhere who piled life savings into technology stocks at the height of last year's boom will have lost more than most. Funds which track technology stocks on both sides of the Atlantic are now worth 40 percent less than they were before the bubble burst last April.

But the fall-out is likely to be worst in the United States, analysts said.

"The extraordinary thing about the US is that it was caught up in a mania over these dotcoms," said Roger Bootle, an economist with the independent Capital Economics consultancy.

"People have been amazingly naive, they thought making money was easy. I don't think anything like that is true on the same scale in Europe," he told AFP.

The United States has a far more pervasive culture of private investment, private pensions, mutual funds and day trading, meaning that exposure to the market crash has been greater, analysts say.

"A lot more people in America invest and have direct savings into the market," said Justin Urquhart-Stewart, an economist with Barclays Stockbrokers. "In Europe, it doesn't affect people to the same extent."

In Britain meanwhile, besides some 12 million share owners there are millions more who own private pension funds or home loans which are linked to equity performance.

"People with pensions and things like that will have to remember it's a long-term investment and the market in the long term normally does well," said Urquhart-Stewart. "All they have to do is batten down the hatches and don't panic."

People about to retire might not have a choice of battening down the hatches, but Bootle said they would probably be insulated against the vagaries of the market.

"The value of their funds would be somewhat lower than they were a year ago, but most would probably be in schemes that would smooth these various things," said Bootle.

In Europe, the major losers are those who were enticed into the brave new world of share ownership through the privatisation of former state-owned giants such as Deutsche Telekom.

The number of private shareholders in Germany jumped 50 percent last year in comparison with 1999, but many are now staring at large paper losses.

"We are entering a period of great uncertainty and the small shareholders are showing a tendency of giving in to panic and anger because they have lost a lot of money," said Petra Kruell, a spokeswoman for a German small shareholder association in Berlin.

Further afield, falling share markets tend to result in job losses in financial centres, as brokerages find it harder to trade their way into profit and share offerings and takeovers dry up because of the tight financial situation.

"Where it could start hitting the UK is if the continued weakness of financial markets knocks on merger and acquisition activity and leads to retrenchment in the City with people being laid off," said Deutsche Bank analyst Bob Semple. "That would make it more visible."

Added Jeremy Batstone at NatWest Stockbrokers: "There's nothing like the threat of unemployment to make people rein in their horns a bit and that could have an effect on both consumer confidence and consumer spending."

As for companies, they will find it harder to raise cash if their share price falls. But many may also be spared an unwanted takeover bid as their rivals also fall on hard times, analysts said.

http://asia.dailynews.yahoo.com/headlines/business/afp/article.html?s=asia/headlines/010319/business/afp/When_global_stocks_crash__the_shocks_can_spread_far_and_wide.html

-- Carl Jenkins (somewherepress@aol.com), March 19, 2001