Masterclass, Money

Share Market Volatility

Published on August 26, 2015 12:39 pm, by

Share market volatility is normal.  The worst thing investors can do is panic and sell without understanding the cycle of investing and why the share market ebbs and flows.  Research shows and that there are downward corrections but a significant overall upward trend.

This week’s panic has been sparked mainly by events in China.  Here we share some key information about what’s been happening in China:

  • China has revalued their currency – downwards. China’s economy has been slowing down, however the government devaluing the currency is being seen as a sign of things to come.  With China being one of the biggest economies in the world this troubles investors.
  • China’s stock markets have gone up by over 150% in the last twelve months. This week they have dropped by more than 30% with potentially more to come.  This has sparked smaller corrections across the globe.
  • Many Chinese investors borrow to purchase shares, the dropping value of the market has meant that they need to sell their shares to pay back their debt. The amount of available stock contributes to falling prices.
  • Weak manufacturing figures in China prompted the falling prices. Globally there is concern that companies who rely on China for the production of goods will be affected.
  • The Chinese government has announced an interest rate cut. The intention is to make debt more manageable.  Some experts believe this will allow the share market to regroup while others believe the Chinese stock market is currently overvalued.

In Australia the share markets appear to be rallying.  Australian investors are snapping up “bargain” stocks.  It’s a good time for investors to remember that shares go up and they go down.  In general terms people understand that selling after a fall is a bad idea, however market dips cause concern and panic.

We would suggest remembering that the share market can be volatile.  Your investments were made for a reason and if you are considering selling it could be the perfect time to seek advice or get back in touch with your adviser if you have one.

Over the long term shares tend to move up, however they take a journey that includes ups and downs along the way.

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Jen is an experienced banking professional who loves wine, coffee, finding a bargain and of course her three beautiful children. Since Jen's first budget led her to buy a home at 20, Jen has passionately helped others to make better decisions with their money.

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