The Chinese authorities last week removed restrictions on share trading (7% threshold) and after a calm day, the Shanghai deposit lost more than 5% overnight on Sunday/Monday trading, despite shares being bought by some state owned companies. Intervention, on a short term basis doesn’t seem to be working and is creating more uncertainty.
Over the long term it should work but we are enduring a great deal of volatility as China adjusts from a manufacturing based economy, to a more service and consumer led economy.
Expect continued volatility but those with a longer term view should consider buying on weakness, periodically. This is true not just of China but across markets in general, particularly when it comes to equities.
Investing in Europe appears to be a consensus view but the weaker than expected QE stimulus in December, the immigration crisis, falling commodity prices and the continued slowdown in China is really impacting on share prices.
The markets don’t like uncertainty but it is this uncertainty which presents opportunities. Many charts suggest that now is a good entry point for those with money in cash or in safer, more defensive assets.
A word of caution about investing in the UK with the likely referendum later in the year and falling commodity prices impacting the FTSE 100, although a greater reflection of the UK is the FTSE Mid-250.
Currencies are not immune to the volatility, with the Pound falling against the Dollar; hitting a 5-year low. The real story though is the recalibration of the Renminbi which has caused may investors to move funds out of China.
When & where to invest does of course depend upon your own personal situation and attitude, tolerance and capacity for risk. Blue Sky are here to help.