By Howard Salkow

Federal Treasurer went on breakfast TV to assure investors there is no crisis, adding it’s a correction.

The comment came in the wake of $60 billion being wiped out in the Australian share market’s worse day since the Global Financial Crisis (GFC).

The Australian dollar did not escape the carnage and hit a low of 70.37 US cents overnight, although it did rise to 71.8 US cents.  

It was a crushing day for world markets as a huge decline in Chinese equities sparked selling throughout Asia, Europe and the United States. In fact few markets avoided what was described as a bruising day. Few countries were spared the devastation and countries such as Sao Paulo, Mexico, Bombay, Greece also succumbed to the horror.

Writing in the New York Times and responding to why the stock market is so turbulent, Neil Irwin said that while the story started in China, it has since grown to include oil prices, emerging markets and the Federal Reserve.
He added that the sell-off in Chinese stocks may not matter much in isolation. “But it tells us much about the inability of Chinese leaders to bring its economy in for a soft landing. And that is something scarier.”

Back here in Port Douglas, locals and visitors from interstate who have a vested interest in the stock market, must be wondering and questioning whether Hockey’s faith in the economy is to be taken seriously. The Treasurer said the global economy is in better shape now than it was 12 months ago.

“I am absolutely confident that the fundamentals of the Australian and global economy are still good.
“The Australian banking system is in very good shape. China still has a ‘massive economy’ and its fundamentals were strong,” said Hockey. 
In terms of superannuation being impacted, Hockey said it depended on the nature of the super investment.

In stating the obvious, our Federal Treasurer has no option but to present a positive picture. Yes, we survived the GFC and we emerged in better shape than many other countries. But investors will be nervous especially after speculation the ASX would today plunge heavily. 

The Financial Review also reported that market analysts have said volatility will persist until better data or strong policy action on monetary easing emerges.

By mid-morning today, the Australian market had settled and according to skyNEWS, there was a recovery among the heavyweight banking stocks which helped the market claw back its losses and briefly push into positive territory. 

The Australian market tumbled four per cent on Monday after a more than eight per cent dive in the Shanghai Composite, the latest in a series of falls that have wiped trillions off the Chinese market.

“The underlying concern is global economic growth, but we do not foresee this materially decelerating,” said Michael McCarthy, CMC Markets’ chief strategist in Australia on skyNEWS.

“Some analysts are pointing to a stronger US dollar threatening fragile emerging market economies, while others point to weaker China manufacturing data and a 36 per cent fall in the Shanghai Composite.

“The continuing falls in copper and oil point to a souring of global industrial sentiment,” said McCarthy. 

Despite Hockey’s call for calm which may be sound advice, the Chinese market is the catalyst and it may only be the bravest of the brave who will be thinking of buying right now.

For now, this could be one helluva bumpy ride.