Greek and Chinese equity sell-offs appear worse than they really are, and the ASX futures know it - up 4 points

Here are two ways of describing what happened in Greece last night:

  1. Athens Stock Exchange experiences biggest drop since 1980s!!!
  2. Athens Stock Exchange reverses last three weeks of gains.

They're both factual, but one is naturally more alarming/alarmist than the other. On a similar note, there are some fairly alarming reports of an 8% sell-off on the Shanghai Stock Exchange late in yesterday's session, but that was from top to bottom, on a daily closing basis it was 5.43%. And when was the last time it was at this post-sell-off level? One week ago. The headlines really should be highlighting that certain markets are overcooked, and Europe has certainly been primed for the expectation of broad asset purchases from the European Central Bank next year, so it is not surprising to see trigger fingers a little twitchy in its most vulnerable markets.

I won't go into detail on these two events too much, other than to explain today's first and second charts. In the first chart I've taken a handful of large cap Greek stocks from the Athens Exchange, from the Rivkin Trader platform, which shows traders a more complete picture of what markets did leading up to this 'huge' sell-off. In a similar way that the second chart shows the move in Chinese equities (I've used the MSCI All China ETF) pre and post last night's sell off, all that has happened here is that traders have blown the froth from the top that has accumulated over the past few weeks. They're less liquid and more concentrated exchanges than that of Australia or the US, for example, and these moves are not easily comparable to the effect that would be had on sentiment if it were the S&P 200 or S&P 500. So life goes on.

Lastly a quick sanity check for all of those who might be feeling a bit bogged down by Australia's worsening fiscal picture and the dim news coming from our big buddy China - while the Australian economy needs a lot of work, thankfully we are not kidding ourselves from a 'listed economy' perspective. The chart here shows 2014 year to date moves in the ASX 200 (black line) versus the S&P 500 (orange line) in percentage terms. While we're not naive enough to think because our market hasn't risen dramatically recently that it can't go lower, one can breathe easier in our market than those Greek and Chinese ones illustrated above it, which rose dramatically and in an unsustainable manner, prior to last night's moves.

Chinese producer prices are due out at 12:30pm today Sydney time. It will be interesting to see whether input prices has fallen more than expected (-2.4%), which could spark some optimism given this cooling inflationary environment's ability to allow Chinese policy makers to assist when needed.

Today’s charts are taken from the Rivkin Trader platform. 30,000 global instruments available to trade including FX, commodities, index, ETFs and international shares. Trade Australian share CFDs from just $8 or 0.10%. Click here or phone 1300 748 546 to get your free $100,000 demo account.

Upcoming economic announcements: Westpac consumer confidence at 10:30am (AU), Chinese consumer (exp. 1.6%) and producer prices (exp. -2.4%) 12:30pm, all Sydney time.


comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.