Markets wary of volatility
CHINA’S fifth interest rate cut since November failed to put a floor under its stockmarket yesterday.
But it did temporarily ease global jitters. Having plunged more than 20 per cent over the previous four trading days, the benchmark Shanghai Composite fell a more modest 1.3 per cent yesterday.
Australia’s ASX 200 closed up 35.5, at 5172.8 points, after sliding 85 points earlier in the day after a negative lead from Wall Street. The rally helped vitamin maker Blackmores join an elite club with its shares hitting $100 a pop.
But IG chief market strate- gist Chris Weston said while overall market trading yesterday was not as frenetic as earlier in the week, there was a sense that it could become volatile at any moment.
“Things can get dicey quickly,” he said.
Markets have been zigzagging for weeks on deepening unease over the ramifications of slowing growth in China, the world’s second-largest economy and the driver of much of the global growth of the past decade.
The Chinese central bank announced late on Tuesday that it would once again slash interest rates and allow banks to lend more money.
But the apparent inability of Chinese regulators to calm the markets continues to spook investors already fretting over when the US Federal Reserve will raise interest rates.
Ronald Wan, chief executive at Partners Capital International in Hong Kong, said the prevailing sentiment was that investors wanted to cash out no matter what the Chinese government did. “Confidence is already damaged,” Mr Wan said. “Doubts over the effectiveness of policies are getting bigger.
“The market will remain under selling pressure for a while.”
Credit Agricole economists Sebastien Barb and Gary Yau said China’s latest attempts to prop up the economy would only help calm markets in the short term.
“It will likely not be enough to fix China’s growth problem,” they said.
The bigger problem was how to rebalance the economy away from excess reli
ance on in- vestment in construction and property without tipping the economy into contraction.
Resources and banking stocks led the rebound on the Australian market yesterday.
Commonwealth Bank added $1.05 to $76.13, Westpac 38¢ to $31.28, NAB 30¢ to $31.39 and ANZ 8¢ to $28.07.
Among the miners, BHP Billiton jumped 60¢ to $23.94 despite its 86 per cent significant fall in annual profit the previous day.
Rio Tinto gained 44¢ to $48.89.
One of the star performers was Blackmores, with its stock rising $9.56, or 10.6 per cent, to $100.
It posted an 83 per cent profit surge to $46.6 million on Tuesday on the back of skyrocketing sales to China.
The milestone caps off a dramatic rise for the company, with Blackmores shares only breaking $40 a share for the first time in January.
The Blackmores milestone is the second time in the month an ASX-listed company has breached the $100 mark after blood products and vaccines supplier CSL did so for the second time in its history.
CBA shares came close to the mark when it was trading near $96 in March.
The Australian dollar, which touched US70.44¢ earlier this week, was trading at US71.13¢ late yesterday.