More economic pain seen in 2009, but some hope too

By Kim Coghill and Claudia Parsons

SINGAPORE/NEW YORK (Reuters) - Many investors said good riddance on Wednesday to one of the worst years on record and prayed that government rescue plans will pull the global economy out of its fierce tailspin later in the new year.

More pain is expected in the near-term as bleak economic reports roll in, flagging more bankruptcies, bad debts and layoffs through at least early 2009, and more sleepless nights for everyone from central bankers to consumers struggling to pay off mortgages and credit card bills.

The biggest financial crisis in 80 years, sparked by a U.S. mortgage meltdown, made this year one of the worst ever for investors as recession stalked the global economy.

"It has been a shocking year, hardly anything was spared in the market carnage," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

The slump wiped out nearly $14 trillion in market value, according to the benchmark MSCI world index of larger companies.

"If there's any optimism, it's on the basis that stock markets recover in recessions," said Justin Urquhart Stewart, director at Seven Investment Management.

"Now we have the real recession, rather than the phony recession. Last year we were so optimistic, that we were fooling ourselves. It's now gone too far the other way. We've discounted a huge amount of bad news."

Full-year losses on major world stock indexes ranged from 31 percent in London to 65 percent in Shanghai.

CRISIS VICTIMS

The crisis of 2008 has radically changed the financial landscape, bringing down U.S. investment banks Bear Stearns and Lehman Brothers, saddling other banks with huge losses and freezing the credit system that keeps world business humming.

Victims of the crisis are still piling up, with announcements almost daily of fresh company losses, more layoffs, and slumping prices for assets from cars to homes.

LyondellBasell, the world's third-largest petrochemical firm, said it is considering filing for Chapter 11 bankruptcy protection as it tries to restructure debt.

Next Monday, members of the U.S. House Financial Services committee will take their first close look at the alleged $50 billion fraud by Wall Street financier Bernard Madoff, whose burned investors ranged from bearish "Dr. Doom" economist Henry Kaufman to actor Kevin Bacon.

Madoff faced a deadline on Wednesday to tell regulators how much he is worth and where his money and other assets are.

Oil surged to $44.60 a barrel on Wednesday but was still down 54 percent in 2008, hit by the economic slowdown. Oil has plummeted since a high in July above $147.