DON’T PANIC: IT’S NOT A GFC
Jittery market posts massive rally as leaders step in to ease frayed nerves
THE nation’s top business leaders are confident the world is not on the brink of another financial crisis.
But investors have been told wild stockmarket varia- tions could be the new normal, after Australian stocks had their best day in almost four years yesterday following Monday’s bloodbath.
Treasurer Joe Hockey said he was “confident that the fundamentals of the Austra- lian economy ... are still good” and business leaders, including Stock Exchange boss Elmer Funke Kupper, said this week’s events were likely just a correction to a recent record run globally.
THE Australian share market yesterday shrugged off fears of a Chinese slowdown to bounce back with its strongest gains in almost four years, recouping $37.3 billion of the $60 billion lost the previous day.
The standout performance in Australia came despite a 3.6 per cent overnight fall in the US and an average 4.7 per cent fall in Europe.
The ASX 200 proved the glittering jewel of the Asia Pacific, with its 2.7 per cent climb to 5137.3, its best day since October 2011, leaving in its wake Japan’s Nikkei, down 4 per cent, and Hong Kong’s Hang Seng, up just 0.7 per cent.
The Shanghai Composite had another day to forget, tumbling 7.6 per cent to back up Monday’s 8.5 per cent fall.
The gains came as Prime Minister Tony Abbott and Treasurer Joe Hockey joined business leaders including QANTAS boss Alan Joyce and ASX CEO Elmer Funke Kupper to calm panic amid predictions of further falls for the Australian dollar and possibly another rate cut next year.
As the local stock market opened in the red, plunging 1.5 per cent, Mr Hockey moved to reassure investors.
“There is no crisis now. It is a correction,’’ Mr Hockey said. “The fundamentals of the Australian economy and the global economy are still good.’’
Mr Abbott, on Thursday Is- land, said he had been briefed yesterday by Reserve Bank Governor Glenn Stevens.
“I think it’s important that people don’t hyperventilate about these things,’’ Mr Abbott said. “It is not unusual to see stock market corrections. It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effects … but the fundamentals are sound.”
Mr Joyce said it was wrong to suggest global markets were on the verge of another GFC. “The fundamentals of all the economies are a lot stronger than a year ago,” he said. “That’s the important thing we should take into account, not the day-to-day actions of the markets.”
He was backed up by Mr Funke Kupper, who said he believed the recent sea of red ink on global markets was a case of them “coming back to earth”.
“I don’t think it’s GFC 2,” the ASX boss said. “We always knew there would be significant moves when the US started to raise rates.”
Less optimistic was AI Group boss Innes Willox, who said Australia faced a range of problems.
“When you go to bed and you watch the Dow Jones fall by 1000 points within five minutes of opening, you know that there’s a problem,’’ Mr Willox told ABC Radio yesterday.
“What we now have is Australia being encircled by a range of problems; we’ve seen the China slowdown and we’ve seen that market stall; we’re seeing oil prices now at $40 or less; we’re seeing iron ore at $55 and likely to drop again.”