What has really changed in investment markets? It’s fairly obvious that investment markets are in turmoil, what has really brought this about AND and perhaps you should consider whether market falls reflect opportunity or a threat to you.
There are a number of challenges that have been facing markets for some time and now these fires have been re-kindled by the triple Chinese currency devaluation.
The reduced demand from the Chinese market has initially impacted upon the commodities markets. Why should that be of any concern to investors, if you are not invested in commodities? Well one reason is that many of our banks have made very substantial loans to commodity companies, so if any of your investments include banking shares then their exposure to loans made to commodity companies could impact on the share price of the bank . We understand the bank with the largest exposure is Standard Chartered Bank.
If you have been following my previous blogs on market volatility then you will realise that I am of the opinion that the triple devaluation of the Yuan is of significance and will have widespread repercussions for global markets and investors. If you doubt this, consider the fate of the 2,500 workers at a steel plant in Redcar near Middlesbrough that are now looking for new employment as Sahaviriya Steel Industries announced it was halting operations at the Redcar plant on the northeast coast, blaming a sharp decline in steel prices.
This is a direct result of a weaker Yuan competing with a strong pound and the “dumping” of cheap steel by the Chinese steel producers. David Cameron has stated that the government will pump £80M of taxpayers money into the local area to assist the stricken work force.
Therefore we repeat our message to investors to be cautious in investment markets and consider increasing your holdings of good absolute return funds and seek out quality investments with good yields such as REIT’s.
This market correction however does provide investors with a better entry point for building positions in attractive long-term assets providing you are selective in your timing and choice of funds!