Standard & Poor’s (S&P) disputed downgrade of the US’ sovereign credit rating to an unprecedented “AA+” came as no surprise, but it still sent shockwaves because the move crushed the confidence of holders of US debt and raised the risk of a double-dip recession, given the persistent weakness in the US dollar and cautious private consumption on rising borrowing costs.
Ahead of S&P’s announcement, mounting concern about the US debt crisis wiped NT$1.21 trillion (US$41.8 billion) off local stocks by market value, with the benchmark TAIEX plummeting 5.58 percent on Friday. Stock prices are expected to be under heavy pressure this week as investors survey the scene and likely still harbor doubts about the US’ economic prospects.