(FORTUNE Magazine) – TRADING on the global stock bazaar, where orders chase the sun from Tokyo to London to New York -- with stop-offs on the Continent and in Hong Kong, Singapore, and Sydney -- does not seem so chic anymore. The computers and satellite dishes are still plugged in, but since Black Monday the customers have been hanging back. Says Richard Hannah, an analyst with London stockbrokers Phillips & Drew: ''In a crisis the natural reaction is to bring your money home, where you can look after it better. That's been happening all around the world.'' The big chill stems from a brutal fact: Except for Tokyo, global stock markets dropped further than did New York (see chart). While the Dow Jones industrial average fell 25% between October 13, when the slide began, and November 10, London's Financial Times 100 index plunged 33%. The Continental bourses, just beginning to modernize after a couple of hundred years of lethargy, were hit even harder. Though London was booming almost up to Black Monday, Paris, Frankfurt, and Milan had been slowly but steadily retreating for most of the year. Yet when the crash came, Paris and Milan dropped almost as much as London, while Frankfurt fell further. Hong Kong was the world's biggest loser, in more than one way. The Hang Seng index took the deepest dive, 47% over 29 days. But more worrisome to international investors was the exchange's panicky four-day shutdown starting on Black Monday. Says William Purves, chairman of Hongkong & Shanghai Banking Corp.: ''There is no point in pretending that the reputation of Hong Kong as a financial center has not suffered. It has.'' Though Singapore was down 44%, the fact that the exchange kept operating with relative calm should give it a boost in the rivalry between Hong Kong and Singapore for regional dominance. Stocks were way down Down Under too. Sydney dropped 44%. Tokyo's Nikkei index climbed back from several big dips right after Black Monday. As of November 12, it was off 19% from its high in October. But the . resurgence is not necessarily reassuring. The Tokyo market is still dramatically overvalued, with a recent price-earnings ratio for the Nikkei index of 60. Much of the rebound is attributable to government intervention, including a lowering of margin requirements -- which may be exactly the wrong move in such an overpriced market. Thus the Tokyo market remains a potential time bomb for global traders. In early November the government added more powder to the bomb by ramming through privatization of Nippon Telephone & Telegraph, selling 1.95 million shares for some 37 billion. The price was about four times the market's dizzying P/E. Among institutional investors, Britons were probably hardest hit. They have been the most globally minded and the most committed to stocks. Between October 15 and November 4, British pension funds saw the value of their holdings in world stock markets drop $65 billion to $70 billion, according to estimates prepared for FORTUNE by InterSec Research Corp., a Connecticut firm that advises pension funds on foreign investing. U.S. pension fund managers, whose holdings of foreign stocks rose from $3 billion in 1980 to $57 billion by the end of September, had their losses partly offset by the rapid appreciation of most foreign currencies against the dollar. Still, brokers on the Continent claim that American institutions, along with the British, accounted for the bulk of the selling on their markets in recent weeks. THE POLITICAL leaders across Europe who have been pushing free-market policies and stock ownership were hurt too. Britain and France account for roughly two-thirds of the more than $60 billion raised by governments around the world since 1980 through the sale of shares in state-owned companies. The privatization drive by the Thatcher government in Britain recruited more than seven million new share owners since 1983. French Premier Jacques Chirac's conservative government set an even faster pace, luring four million first- time investors in the past year alone. When the market collapsed, most of Europe's small investors were caught. By the Friday before Black Monday, for example, 1.6 million investors in France had snapped up shares in Cie Financiere de Suez, a formerly state-owned financial group. The shares had been pitched in a glitzy TV ad campaign featuring actress Catherine Deneuve. The government delayed trading after the crash, and when the shares went on sale, they traded nearly 20% below the offering price. To minimize backlash, finance ministers in France, West Germany, and Spain moved quickly to shelve all pending privatizations until at least next year. If and when governments return to the market -- and all insist they will -- they will almost certainly forgo the kind of hyped-up advertising they used the first time around. Says Stanislas Yassukovich, chairman of Merrill Lynch Europe Ltd.: ''The concept that state-owned companies should be sold on television like toothpaste has been thoroughly devalued.'' While the crash has curtailed the deal market in the U.S. (see ''LBOs Are Taking Their Lumps''), there could be a rash of takeovers in Europe. The new strictures in the U.S. come mainly from shakiness in the debt markets -- particularly for junk bonds -- and European corporations have never relied as much on debt for making acquisitions as have their U.S. counterparts. For a number of Europe's cash-rich, debt-free corporations, the fall in share prices is making takeovers, hostile or otherwise, relatively inexpensive. Europe's crash is a source of great frustration to politicians. Nigel Lawson, Britain's rotund Chancellor of the Exchequer, speaks for many when he insists that there was no good reason for European stock markets to have followed Wall Street off the cliff. He blames the ''globalization of the herd instinct,'' arguing that Europe's economic houses are in far better order than Washington's. LAWSON, once described as ''a gunfighter of the intellect,'' showed the combative side of his personality in the way he handled the privatization of British Petroleum. Underwriters had just committed to take $12.3 billion of BP shares, but foreign firms had not been able to sign up customers before the market crashed. Facing big losses, they pressed the government to withdraw the offering. Lawson went ahead with the original deal, and Goldman Sachs, Morgan Stanley, Shearson Lehman, and Salomon Brothers each lost about $100 million on the deal before taxes. Lawson was unperturbed. But he should not be surprised if the Americans are tougher negotiators next time. Hong Kong will have trouble with new deals too. The British colony's wounds were self-inflicted, and it will take more than a market rebound to heal them. According to Hongkong & Shanghai Bank's William Purves, a blunt-speaking Scotsman who is a pillar of the local business establishment, recovery depends on tighter regulation. That prescription would have been hooted down in laissez-faire Hong Kong just a few weeks ago, but no longer. Not only did the stock exchange close for nearly a week, the government also had to bail out its futures market. Moreover, the People's Republic of China joined the rescue, a circumstance that could have significant consequences in the future. The Chinese will take over Hong Kong in just ten years, and as part of its agreement with Britain, Peking has promised to let Hong Kong remain capitalist for 50 years after 1997. But the heart-stopping glitches that showed up in the colony's permissive economic system can hardly be reassuring to the comrades. Says Marc Faber, managing director of Drexel Burnham Lambert (Hong Kong) Ltd.: ''Hong Kong proved unable to solve its problems simply and elegantly. And now there's a precedent for intervention by the Chinese.'' Chinese officials, who have been among Hong Kong's most audacious speculators, learned some hard lessons in capitalism. Traders from just one of China's provincial governments, for example, bet millions of state funds on futures. ''They never understood that things could go badly,'' says a Western broker. Once they did, the Chinese were quick to criticize. One official termed the stock exchange ''immature.'' Says Faber: ''The Chinese are helping out a bit, but if a market upheaval led to riots, they would send in the troops -- and bill Hong Kong.'' Hong Kong's fumbling is bound to bolster Singapore's bid to become the dominant Asian financial center. While Hong Kong has long prided itself on self-regulated markets, Singapore has adopted U.S.-style regulation. Says Elizabeth Sam, chairman of the Singapore International Monetary Exchange: ''From the outset we wanted an exchange with a proper framework. We took a good look at the American system and adopted many of its features.'' In Hong Kong, officials are beginning to question the premise that the colony can thrive only if officials leave economic affairs alone. British administrators largely left running of the stock and futures exchanges to local brokers. Lydia Dunn, a director of the conglomerate Swire Pacific and senior member of the colony's Legislative Council, says that self-regulation meant ''poachers and gamekeepers were the same persons.'' Ronald Li, 58, a broker and chairman of the Hong Kong stock exchange, ran the operation like a family store. When the sell-off hit Wall Street, Li telephoned Financial Secretary Piers Jacobs before dawn to warn that the | market would have to shut down for a while. In the hands-off tradition of colonial administrators, Jacobs sleepily went along, not realizing the shutdown would last four days. Says Purves: ''I don't know what my response would have been at that hour, but I hope it would be to ring back after breakfast.'' Li claimed that he and his governing committee of local Chinese brokers wanted to prevent panic and allow brokers to clear a backlog. As Li put it: ''I'm sheltering us from other people's turbulence.'' Li, however, failed to mention trouble among his own people in the futures exchange, of which he was deputy chairman. When the market crashed, the exchange faced a tremendous number of defaults. Local futures brokerages, including one owned by Li, had allowed speculators to buy $23,000 contracts on deposits of less than $2,000. When the stock market shut down, outstanding futures contracts totaled nearly $2 billion, but the fund protecting investors was under $3 million. Eventually the government organized a $512-million loan to the futures exchange. Some 34 brokers -- nearly a third of those trading on the futures exchange -- have defaulted on contracts totaling over $230 million. Ronald Li's own futures trading firm defaulted on $1.3 million in contracts, though he came up with the money from one of his other companies. HONG KONG hopes to bounce back by appointing a commission to investigate its weaknesses and then by quickly fixing them. Legislator Lydia Dunn questions the need in a small market for a futures exchange, which she terms ''little more than a licensed casino.'' Purves expects more regulation by Hong Kong's Securities Commission, which seemed helpless during the crisis. ''If changes are made and if the commission gets more involved, tougher, and able, Hong Kong will recover.'' He adds: ''I wouldn't like to see this place so hidebound by regulation that you couldn't breathe.'' In any case investors are bound to be wary for a while of an exchange that locks its doors when bears roam the world. But in the end nothing much will matter if the whole world slides into a crippling slump. Hong Kong and Singapore won't have much to say about that. Europe will have a larger role, principally by boosting domestic demand. The keys to any revival in global confidence lie in the two markets that together account for two-thirds of the world's equity capital -- the U.S. and Japan. The two questions for equity investors around the world are: Can the U.S. put together the right set of policies to dodge a recession, and can the Japanese successfully switch from an export economy to one based on domestic demand? Until the answers are in, the global trading wheel won't be spinning so fast.

CHART: TEXT NOT AVAILABLE CREDIT:NO CREDIT CAPTION:GLOBAL STOCK SLIDE. Wall Street tumbled and every other stock market except Tokyo fell even further. Frankfurt and Paris had been easing down since spring, while New York and London plunged from a point not far from their highs. DESCRIPTION: Percentage decline in stock values in Tokyo, New York, Paris, London, Frankfurt, Singapore, Sydney and Hong Kong exchanges, Oct. 13-Nov. 10, 1987.