October's downturn in stock markets could be a blessing. Most markets haven't yet crashed in a way that is damaging to economies (except in Asia) but the falls were a timely reminder that prices go down as well as up. Barring a more severe shock, the effects of the volatility could be benign. A saner approach by investors and capital raisers is expected.
This is especially needed in emerging markets, particularly from bond issuers. The widening of bond spreads because of falling stock prices means that borrowers may stop demanding the impossible from their lead-managers. A string of deals at unrealistic prices has made new issuers arrogantly dismissive of investor concerns.
Equity issuers, too, have been warned that a booming market might not always be there to cover up their mistakes. Private-equity funds, used to paying over the odds for companies and still delivering multiple returns on listing, may have to rethink. M&A departments will still be busy, but wilder excesses, as seen in the battle for MCI, may be curbed.
There is still a lot of cash about and the complacency of issuers has been fed by an easy supply of funds.