The crisis in world markets is not yet over, Paul Hansen, Stanlib's Group Director Retail Investing, said on Wednesday.

"An end to the fall in US house prices remains a key to ending the crisis. This has not yet occurred," he said.

This meant that uncertainty and risks remained high and it was impossible to predict how many financial companies would fail, he added

This followed Monday's filing for bankruptcy of global investment bank Lehman Brothers and on Wednesday, the United States Fed buying almost 80 percent of the shares of AIG, one of the biggest insurance companies in the world – thereby throwing it a lifeline.

Hansen said the probability of further failures was fairly high.

"Developed market economies are slowing and recessions in the US, UK, Europe and Japan are distinct possibilities. This puts pressure on company earnings."

Global markets in strong down-trends

He added that global markets were in strong down-trends.

"As yet, there is no evidence that these are ending, although sentiment is extremely negative and in most instances shares look good value, for example in Asia – excluding Japan."

Hansen noted that the JSE All Share Index was down 25 percent from its high and was currently close to the lows seen in January 2008.

"Part of the JSE's fall is related to the sudden sharp fall in commodity prices, which in turn is related to both the stronger dollar and fears about Lehman Bros and AIG," Hansen said. Investors in the DJ-AIG commodity index had sold $10-billion of commodities since Monday – which was more than five percent of all funds tracking commodity indices.

Lehman had $5-billion in the commodity index business.

"The FT quotes John Reade, a commodity strategist at UBS, who says investors in commodity indices were increasingly aware that they did not own hard assets, but rather a swap on an index of commodity futures with counterparty risk... Therein lies the rub and the panic with regard to Lehman and AIG," Hansen said.

Now that AIG had been given a lifeline, he said the panic selling of commodities might end and possibly turn the other way.

"Although the JSE's financial and industrial index has fallen over the past few days, it remains nine percent above its lows in July.

Sapa