Stock markets around the world were unsettled on Monday, following the announcement on Sunday that the world's fourth largest investment bank Lehman Brothers Holdings would file for bankruptcy in the United States.

The JSE closed in the red on Monday amid negative market sentiment as the US credit crisis continued to rock markets internationally.

"The market is still down, but it has come back from its lowest levels and there is a lot of bargain hunting in our markets," a local trader said.

The trader added that the market is anticipating the outcome of the US interest rates decision tomorrow.

The Johannesburg Securities Exchange's All Share Index slipped two percent when it opened at 9am on Monday – clearly in sympathy with global markets.

"It's unsettling – we've had so much bad news lately," said Sasfin's David Shapiro.

However, he added that Lehman's problems had long been coming and that "no-one was in shock".

"We've been in this situation for over a year now," Shapiro said.

The markets had needed the adjustment.

Investments few people understood

"We were dealing in investments few people understood – these had to be flushed out of the market and the system needed to sober up."

Few people had understood Lehman's balance sheet, he said.

"Their assets were only worth what someone would pay – and banks like Britain's Barclays declined to buy Lehmans."

Shapiro said he was not alarmed at the moment, as on the JSE on Friday there had been a strong recovery in resources and some of the excesses were now being taken out.

He noted that both Richemont and Remgro had also gone ex-dividend.

"We have seen the worst and slowly we'll work through this."

The Lehman bankruptcy would be significant for stocks like Investec in London, but much less significant than for a bank like Absa, he said.

Old Mutual will be under pressure

"Old Mutual will also be under a bit of pressure."

Shapiro said most people who had wanted to get out of the market had long gone. Private clients were not phoning in to sell their shares.

"Life is going to go on. The downside appears to be limited.

"There's also this perception that no one's going to pay back their debts – and this is wrong."

In Shapiro's opinion, greed brought the downfall of not only Lehmans, but Merrill Lynch, and Bear Stearns, too.

"Lesser concerns may now go and there will probably be a lot of mergers," he said.

The United Kingdom's Guardian and the London Daily Telegraph called the Lehman bankruptcy one of the "worst banking collapses in history".

"Let's recognise that this is a once in a half-century, probably once in a century type of event," Alan Greenspan, the former chairperson of the US Federal Reserve told the Telegraph.

It was the worst "by far" he had seen in his career.

Sapa