Selling slows as commodities warn
Asia Pacific share markets will trade under pressure again today following overnight falls in US and European shares, and an ongoing rout in industrial commodities. Investors are likely to turn to Shanghai for a lead, after yesterdays’ 8.6% sell off sparked the current global weakness.
The share markets in China are largely disconnected from the economy, driven by government policy and insulated from international investors. Much of the recent selling relates to rule changes around share financing for investors. A leap in 30 day index volatility to 65% suggests uncertainty around the ongoing impact of reduced margin capabilities, although analysts estimate most of the rule change related selling is at least three quarters complete. This means a significant rally today is as likely as further selling.
Strong reporting from the US is underpinning a more positive view, and gives further pause to the bears. The Australian share market was one of the few to advance in the last twenty four hours, possibly due to a weaker AUD, and low expectations for the reporting season that kicks off this week may mean sellers are scarce. However, low volumes point to a lack of commitment, and further falls in oil and copper may see materials stocks reverse yesterday’s gains.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
Asia Pacific share markets are under pressure due to overnight falls in US and European shares, coupled with a continuing decline in industrial commodities. Investors are also looking to Shanghai for guidance after a significant sell-off there.
Chinese share markets are largely disconnected from the economy and are driven by government policy. They are also insulated from international investors, which makes them unique compared to other global markets.
The recent sell-off in Chinese markets was primarily due to rule changes around share financing for investors. This has led to increased volatility and uncertainty, although analysts believe most of the selling related to these changes is nearly complete.
Yes, there is a chance for a market rally in China soon. Given that most of the rule change-related selling is believed to be nearly complete, a significant rally is as likely as further selling.
Strong reporting from the US is providing a more positive outlook and giving pause to bearish sentiments. This is helping to underpin a more optimistic view among global investors.
The Australian share market advanced possibly due to a weaker Australian dollar and low expectations for the upcoming reporting season. This has resulted in fewer sellers, although low trading volumes indicate a lack of strong commitment.
Falling oil and copper prices can negatively impact materials stocks, potentially reversing any recent gains in these sectors. This is a concern for investors watching commodity markets closely.
For further insights on market trends, you can contact Michael McCarthy at CMC Markets by calling 02 8221 2135.
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