KEY POINTS:
The New Zealand dollar and sharemarket were being hammered today, after Chinese stock prices plummeted overnight (NZ time).
The New Zealand dollar went into decline across the board from about 7pm, falling particularly abruptly against the yen. The plunge picked up renewed momentum from about 7am today and the kiwi was still falling at 10am in hectic trading.
How serious is this? Does it worry you?
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Here is the latest selection of your views:
Donald Nash
Some are describing this correction as a mere blip and in the short term sense they may be correct, but the longterm implications are grave. Once again many have ignored or forgotten the lessons of recent history and indebted themselves unsustainably once the market readjusts to a more realistic level. Property sales in particular have softened significantly and continue to do so. Once-desirable developments are now largely ignored, and as a result realtors have begun urging clients to reduce their asking prices. Todays global market reaction to Chinas "woes" have reminded many just how overextended they really are, and I suspect another such event will trigger far more serious consequences, both here in New Zealand and overseas.
Saumil
This is just a temporary corrective phase. The long-term outlook still remains highly bullish for China as well as for rest of the world.
Ken Grant
A lot of people do not like to hear that. They are so extended financially that they live in hope of the market climbing forever. I truly pity them if this trend worsens, as they may face job losses while trying to support massive debt.
Roger
To me this looks like a blip. My philosophy is to buy shares based upon the long-term, assessing the basic soundness of the business and related share value. Thus short-term and foreign originated up-sets are best ignored, excepting where prices of previously selected stocks dip and therefore are at a discount to real value. Currently I have no spare cash so this particular instance does not affect me.
I have also held a long, though quite unsubstantiated, belief that these sudden "corrections" are not market driven but more likely purposely engineered by dealers and others who actually control the market to profit by.
RJ
Unlike NZ in other countries, people invest/speculate a higher percentage in shares than property. Countries with low interest rates have lent money easily to speculators in many countries. These borrowers have driven prices to unjustified levels. And then used this higher valuation to borrow and spend more. eg property prices have not gone up in ratio to growth, rentals, or productivity increase. Same is the case with certain share markets. When people buy recklessly any commodity will shoot through the roof. And history has many lessons for us eg the Dutch Tulip Crisis. There are many such lessons history has shown us,but does a smoker quit smoking reading the warning on the pack? The dot com Bubble is now a property bubble and according to some claims the biggest in history. And unlike shares which can plunge overnight, property take much longer to sell and reveal a downturn.
Kiwi TeeTee
This could be the start of the downward trend on the investment clock. After recent highs in easy money (lending) and rising real estate values, we now have the next two downward steps, rising interest rates (around the world, and maybe here soon too) and now falling share prices. To confirm the trend, there will next be falling commodity prices and overseas reserves, followed by tighter money and finally falling real estate values at the bottom of the cycle.
Jon Fraser
This is a temporary asset bubble correction to some of the over excitement for the Chinese economy in the recent years. There will be a small "flight to quality" from investors concerned about exposure to China, but overall the NZ economy will be fine. Monetary policy can be so effective at stimulating and maintaining growth particularly as we have seen with the great moderation in the past two decades in the US. We just have to ensure prudent fiscal policies are maintained.
Larry Baird
Many NZers have seen the new century in with good economic times, such as, excellent share market and property boom. However, with every big peak a big trough must follow. The unfortunate thing is they have over-spent and have very little "headroom" left to cater for things like raising interest rates. The jitters we are seeing are probably the beginning of the downward leg. So financially committed are we New Zealanders it will be interesting to see how we will fair in two years times. In 1987 I met so many people of the opinion that the good times will never end. So yes it does concern me!
Ross Nixon
The drop in the sharemarket / stock markets is likely to be severe over the coming months. It will be exacerbated by Hedge Fund managers and Derivative trading. Expect a severe recession / depression world wide towards the end of this year.
