The bursting of the Shanghai stock market bubble might be a real-time lesson for investors on how a bubble bursts. Many Australians, though, could be forgiven for thinking that the stock market crash has no implications for them or for Australia.
Not so, says stock market watcher Marcus Padley.
In his ‘Marcus Today’ column yesterday Padley summed up the implications for Australia, Australian property markets and iron ore.
Here’s his take:
…More interestingly for Australia is the iron ore market and the property markets in Sydney and Melbourne. There is no doubt that the price rises in these capital cities has been fuelled by overseas investors. Official figures may not show it but anecdotally it is the case. It would be interesting to know how much of the recent wealth created in the markets has found its way to an apartment block somewhere near you. So now that the market has cooled somewhat maybe we will see a similar cooling in property markets in Australia. The outright property mania seems to have gripped our media, investor base and young people convinced that the market will push higher forever. It is different this time. You know what, it never is. What goes up does come down…
The other casualty of the imploding Chinese market seems to be iron ore. Massive falls in the last week or so from over $61 to around $52 a tonne now. At this rate Andrew Forrest will have to go back to stockbroking. More of a problem though for Joe Hockey and his work of fiction called the budget. The recent falls will once again punch huge holes in his revenue forecasts and unless he can conjure up a substitute line from somewhere we will be in for some austerity of our own. This is not a positive for our economy and the ASX200 will continue to struggle under a weight of no confidence from business leaders, low growth, the transition from the mining boom taking an eon and the unedifying spectacle of Canberra.
Worth chewing on.