In the past two weeks, global stock markets have crashed amid panic selling. Led by Chinese shares, which have shed around 19 per cent, global stock markets have lost more than US$3 trillion (S$4.3 trillion) in value, nearly equivalent to the size of the German economy, the fourth largest in the world.
Economists do not pay too much attention to stock market gyrations, as they have little to no impact on the real economy.
But this time could be different, say Rabobank analysts. "One of the lessons learnt from past crises is that one ought to take the market seriously. Very seriously. From that viewpoint, the start to the year is a screaming warning sign," says the Dutch bank in a client note.
The speed of the falls has been alarming. The Shanghai Composite has dropped around 19 per cent in just two weeks, while the Straits Times Index is down 8.1 per cent in the same period.
One factor driving everything lower is the slowdown in the Chinese economy. It is expected to grow by just 6.5 per cent this year, the slowest in 25 years.
Oxford Economics' head of Asia economics Louis Kuijs says part of the reason for the cooling is a deliberate shift to a new economic model, one driven by domestic demand rather than a model led by government investment.
But the Chinese economy is also facing "cyclical weakness" as its property market continues to slump, he says. "I think some people underestimate the problems it is currently facing, especially in the property sector," says Dr Kuijs.
With the property market unlikely to turn around soon and manufacturing still looking weak, the slowdown could last a while, he adds.
This has added fuel to the fire, dragging oil - another indicator of the health of the global economy - to below US$30 per barrel, the weakest in 12 years.
Low oil prices help oil importers like China and Singapore, since energy bills are usually a big chunk of costs for companies.
But in this current situation, the low oil price is more an indication of a very weak global economy.
Prices of commodities such as iron, coal and palm oil have also dipped, affecting economies from Brazil to Indonesia and Australia.
Throw in rising global geopolitical tensions from Saudi Arabia to Indonesia - after last week's terror attack in Jakarta - and no wonder investors are scared.
ASIAN CRISIS: PART TWO?
But what many analysts are more concerned about is what the Chinese government intends to do with its currency.
One of the main triggers for the market rout has been the government's decision to devalue the yuan.
This first shock happened last year, when it changed its foreign exchange policy and pegged the yuan to a basket of currencies instead of just the US dollar. That led to the start of a crash that saw Chinese stocks slump 30 per cent over two months.
Yet another decision, this time to accelerate the yuan depreciation, was also blamed for the most recent rout.
DBS chief economist David Carbon says that China's yuan could fall by another 10 per cent because many of its main trading rivals, including Japan and Europe, have devalued their currency in recent years. The problem started when Europe and Japan began to print money with the objective of raising inflation in their economies. But the by-product was cheaper currencies.
He notes that the yuan has been one of the strongest performing currencies over the past few years, up by 35 per cent since the 2008 sub-prime financial crisis.
"China is not the culprit, but China has become so important to the global growth equation in the past decade and it caught most people off guard. Fear (and loathing) are practically the inevitable consequence," he says.
Should China continue to devalue its currency, the biggest risk ahead is contagion, especially to emerging markets such as Indonesia, Brazil and other parts of South America.
Many companies in these countries have borrowed heavily in US dollars to pay for their expansion in their home currencies. Many will have to repay their debts soon.
Emerging market policymakers may be tempted to also devalue their currencies to keep their exports competitive with their Chinese rivals.
So, if the emerging market currencies continue to tumble, companies there which earn their revenues in their domestic currency may end up not being able to pay for their US dollar-denominated loans.
The numbers are staggering.
The Bank for International Settlements estimated that up to US$3 trillion of non-financial emerging firms' debt was USdollar-denominated.
About US$225 billion of dollar debt needs to be repaid by next year, and US$500 billion by 2020, noted Standard and Poor's.
On the flip side, if revenues shrink and corporate balance sheets weaken, companies could also face difficulty paying offtheir debts, says Credit Suisse economist Michael Wan.
"I'm not worried now, but if balance sheets weaken there could bemore stress points," he says.
Either way, these issues are stoking fears of turmoil like the Asian financial crisis of 1998, which was also triggered by a corporate debt problem, when Thailand devalued the baht.
That led to hot money outflows from the region, which destabilised many Asian currencies, and resulted in a regional recession which lasted years.
There are signs that investors are becoming increasingly worried about emerging markets.
Last year, foreign investors made net withdrawals for six consecutive months resulting in the weakest fund flows to emerging markets since the 2008 crisis, according to a report by the Institute of International Finance.
A total of US$41 billion flowed into emerging market bonds and equities last year, down from the average of US$276 billion a year between 2009 and 2014.
For now, however, Dr Kuijs believes that the risks of another full-blown crisis are low.
But the road ahead will be far from smooth.
Global growth will still be weak, especially since there are no bright spots in the world economy. Interest rates are also expected to rise further, pouring more misery on people with mortgages.
In short, many people could start to feel the pinch soon, especiallyin Singapore which is forecasting an anaemic 1 to 3 per cent growth this year.
Investor Jim Rogers does not mince his words when he tells The Sunday Times that things are going to get worse worldwide and everyone will suffer. Says Mr Rogers: "Be knowledgeable, be worried and be prepared."
Additional reporting by Rachael Boon