Next Investment Wave (NIW) - Take outs 15/07/2015 -
•What happened in China?
•What caused the decline in the Chinese stock market?
•Repercussions of Greece exiting the Eurozone?
•US interest rate hikes
•Sites worth noting
The latest episode with the Chinese stock market could entice Chinese investors to look for investment options offshore and consider options such as Australian Property.
In general while Australian property prices are at historical highs the underlying factors that have driven capital growth trends in the past such as low interest rates, steady wages growth, low inflation and access to leverage, not to mention higher demand due to immigration and slower building supply, could carry on in the foreseeable future.
Good credit rates are currently available in the market.
What happened in China?
The stock market rallied by over 120% and subsequently declined by 30% which prompted authorities to intervene by freezing stock market activity to prevent further declines.
What seems to have increased trading activity and population participation in the stock market? "Shadow banking in China" Institutions that provide credit services outside the mainstream banks were providing loans enabling investors to use equity as collateral.
What caused the decline in the Chinese stock market?
Reaching historical highs normally triggers stock sell offs as investors are sceptical that the trends could carry forward. This move subsequently produced a decline in stock prices triggering investors to try to exit their positions. The implication of these declines for geared investors was that they had to exit positions to meet loan requirements.
Interesting facts - shadow banking in China represents about 69% of the market. This suggests that China may have lost a degree of control over their monetary policy.
Declines in economic activity stemming from China are likely to reduce global growth forecasts.
Repercussions of Greece exiting the Eurozone?
According to Bill Gross from PIMCO a Greexit from the euro zone has the potential to trigger Bond sell offs. It is estimated that it could produce volatility across international equity funds.
This would very likely have a long term impact on the economic recovery in Eurozone, which is clearly in a very sensitive condition.
US interest rate hikes
15 out of 17 board members consider that an increase in interest rates is prudent yet the IMF has been suggesting the US not to increase rates given the global economic conditions.
After 6 years of near 0 interest rates and 3 quantitative easing rounds it's still hard to assess whether the correction momentum in the markets is sustainable or just an artificial recovery due to fiscal stimulation.
Unique market conditions. Global demand is expected to double during 2016 to 2020 for which the price is expected to double. 50% cheaper than oil and coal. Lower mining supply and higher demand is driving prices. The Fukushima reactor situation caused prices to decline.
When the price of the underlying commodity doubles in price stocks can appreciate 4 to 8 times in value.
17% return p.a. over a 10 year period, depending on the class, complex grading scale. Investment can take place via super funds under specific conditions. https://goo.gl/9bbmbV
Sites worth noting
Openshed where you can rent your household goods
This information does not take into account your personal circumstances and objectives and is for general information only. Before making any investment decision, we recommend you seek professional advice that factors into account your particular investment objectives, financial situation and individual needs. While due care has been provided while drafting this summary, before relying on any material contained on this site, users should independently verify its accuracy, currency, completeness and relevance for their purposes.
We look forward to surf the next investment wave with you.