Financial Market ???

Well. What to say about that? Yesterday’s fall on the S&P/ASX200 of 4.09 per cent is the worst daily fall since January 2009. Adding to the drama, the Shanghai Composite fell 8.1 per cent and has now lost around 38 per cent since its mid-June peak. Europe and the US followed suit overnight with falls of 3 to 5 per cent

So what’s driving it? Panic – pure and simple. Try as others might, to pin some sort of fundamental rationale on the price action – I honestly just can’t see it.

I realise that much of the commentary we read and hear about, is on the global growth slowdown - and it’s all doom and gloom.

The problem is that there isn’t a lot of support for that view. Price action alone is not sufficient – because we know markets are bid up and sell down – sometimes for no apparent reason.

Just look at the Chinese stock market – on the way up and down! That’s what we’re seeing now in my view. Huge market gyrations driven by fear mixed in with some disappointing data and confusing price action.

Concerns over China, in my opinion are over-done. That’s not to say China isn’t slowing – it is. This is largely by design though and the fact remains that Chinese growth rates are still very strong.

Most importantly if there was any real trouble, if the Chinese authorities were worried about growth in any fashion, they would simply launch a major fiscal stimulus program and if necessary, finance it by printing money. The fact, that they aren’t doing this speaks volumes.

Realistically, the market has just been hit with some bizarre price action on the Chinese currency and Chinese equities, together with a commodities rout that is actually a major stimulus for global growth.

This is not advice or a recommendation, however, personally, I view this as one of the best buying opportunities in years.

The way I look at it though – there is nothing to suggest markets won’t punch up 10 per cent in short order – if say the Fed doesn’t hike interest rates (meeting in three to four weeks), or does hike in small increments… It wouldn’t take much.

For income buyers you are seeing some of the best yields in years – it’s easy to find grossed up yields, safe yields, up around 8 to 9 per cent. For those investing for growth – it’s similarly a smorgasbord of opportunity for long-term investors. That’s not to say that this – 5000 on the ASX – is the bottom. There could be another 10 per cent downside from here. Or not. Truth is no one really knows.

Most people who I advise are in well diversified and balanced investment portfolios, and should not be feeling the full effect of these market falls.

The US is improving slowly, China is developing and growing, commodity prices are very slow which should begin to provide some stimulus towards growth.

If you have concerns or issues you would like to discuss please let me know.


Jeff Noble