(CNN) – Asian markets opened lower after the Dow dropped 268 points and the S&P hit an eighth-month low, following similar tumbles in Europe.
It doesn’t augur well for the start of what some claim is the year’s most important trading day.
Several factors have sent global markets down in the past 24 hours: weak economic data from Japan, including a rise in unemployment; softening consumer confidence in the U.S.; and a report that suggests the white-hot Chinese economy is cooling. London's FTSE and Frankfurt's Xetra Dax both closed down more than 3 percent Tuesday. The Paris CAC 40 closed down more than 4 percent.
There’s also new concern over European banks which are due to repay part of a $540 billion loan to the central bank on Thursday.
“It’s almost a butterfly effect,” Savanth Sebastian, equities economist with Commonwealth Bank, told CNN’s Colleen McEdwards. “This host of negative data is certainly taking its toll.”
It’s a tough run-up for today, June 30 – end of the first half of the year, and a day that some say presages how the market will finish the year. “Historically the way the market finishes tomorrow is the way we finish the year,” Alan Valdes of DME Securities told CNN’s Alison Kosik in New York on Tuesday. “If we finish tomorrow on the down, we could be in for a tough year ahead.”
Sebastian points out that there is double-digit growth for a lot of Asian countries; the weaker euro has improved exports out of Germany and that despite the ups and downs the United States is still in recovery.
Still, if the past is any indication, stock performance at the end of the first half will set the tone for the next six months. Markets across Asia opened down: At 10 a.m. Hong Kong time, the Tokyo’s Nikkei 225 was down 2.13 percent, Hong Kong’s Hang Seng Index down 1.27 percent, and S&P/ASX 200 index in Sydney was down 1.77 percent.
(CNN) – After a lot of finger pointing, squabbling, and teeth-sucking, the Chinese have finally loosened their grip on their currency.
Over the weekend, the government said it would allow the yuan to be more flexible. So far, no one thinks the Chinese will tolerate anything more than a small blip.
However, longer term the flexibility could bring greater purchasing power to Chinese consumers by making imported goods cheaper.
Brokerages say consumer companies globally could benefit from a new currency rate and the official push to encourage the Chinese to spend.
Internationally-branded cars and cell phones might become more affordable.
Other kinds of multinational firms like those in the construction business may also enjoy a bump in buyers. Analysts though say major retail chains could suffer a bit as some of their suppliers struggle to offset potentially unfavorable currency fluctuations.
In business, are you a Chinese currency winner or loser?
“Hectic and confused.”
That’s how trader Tsutomu Yamada at kabu.com Securities Co. describes the morning session in Tokyo. Traders were still trying to understand what exactly happened on Wall Street, explained Yamada. The confusion over Wall Street’s plunge and concerns over a weakening euro drove the Nikkei down nearly four percent, ending the morning session down 3.74%. Exporters took the hardest hits, beginning with Nintendo dropping 11 percent on news its profits would decline more than expected.
The sell off wasn’t limited to Japan: Look across the Asia Pacific region and the markets are down across the board.
Concerned, the Bank of Japan injected two trillion yen (US$20 billion) in short term lending Friday morning. A spokesperson with Japan’s central bank says “the aim is to increase a sense of security in the markets by providing ample funds.” Read here: Calm the market’s jittery nerves.
Yoshito Sengoku, Japan’s Minister in Charge of National Policy spoke to reporters Friday morning in Tokyo, saying that the Greece crisis will have a “limited impact on Asian economies.”
But Kirby Daley, senior strategist at Newedge Group in Hong Kong, believes that the market reaction to the Greece crisis is not a limited, knee-jerk reaction. “The drops will not likely be as violent as post-Lehman, but risk aversion is setting in for the long-term, as markets over-celebrated unsustainable stimulus. We may see some relief rallies, but the overall trend should now be firmly down for stocks,” said Daley.
Afternoon trading has begun again in Tokyo. Traders have had 90 minutes during the lunch break to catch their breaths here in Japan after the morning session. Fingers crossed, they say.
Brazil, Russia, India and China – the so-called BRIC countries – cover about 25% of the world's land area, and are home to about 40% of the world's population. Over the past year, their stock markets have also been outperforming those in developed nations. So where might investors want to place their bets in the year ahead?
On this week's Biz Clinic Andrew Stevens gets advice from a man who's had his eye on emerging markets for more than 40 years - Mark Mobius.
Financial experts give their resolutions for investing in the new year in this Web exclusive extended Biz Clinic.
The end of a year (or the start of a new one) is a time of reflection, a time to reassess life and your financial portfolio. Last year was tough for the global economy but a lucrative one for investors in stocks or gold.
So what about 2010? These are some of the trends to consider when investing.
1) Interest rates are bound to stay low. With governments trying to encourage economic growth, financial experts expect central banks to keep money cheap. What does that mean? "People are getting no return on their cash, no return on their bank accounts," Keith Wade, economist at Schroders, told me. "They will continue to look for yield."
2) Emerging markets will be in focus. With fund managers concerned about sluggish growth in the U.S. and Europe, many say they will hunt for higher returns in places like Asia. Asia has been recovering faster than the West. Stocks and property have run up in the past several months and brokerages like UBS believe the trend will only continue all year. Some governments have taken measures to rein in speculators, but in places like Hong Kong, their hands are tied. This city's monetary policy tracks the U.S. because its dollar is pegged to the greenback.
3) The U.S. dollar will likely stay weak but be prepared for a few surprises. Richard Duncan, author of "The Dollar Crisis," argues the U.S. economy is structurally flawed and too burdened with debt, which hurts the prospects for the dollar. He says with the U.S. government borrowing so much to finance its massive spending programs plus two wars, the outlook for the dollar will only worsen. However, with so many financial experts down on the dollar, some are starting to wonder if the greenback might swing in the other direction at least for a short while in 2010. One theory is that the dollar makes a comeback as investors flee to dollars to shelter themselves from market volatility.
And given the lingering fears of another Dubai debt crisis or a double dip recession, there will be no shortage of market jitters.
My wife invested a tidy sum more than a decade ago in five Chinese companies – and then forgot about it. When going through some paperwork, she rediscovered her investments and learned they had grown five-fold in value by November, 2007.
Our awareness of the investment, however, weighed on us during the calamitous events of 2008 as we watched, month-after-month, the value of the stock slide until we couldn’t take it anymore – in January this year, with the value just 20 percent up from her original investment, we cashed out.
From my previous reporting on behavioral finance, I knew that in the long run the smarter move would be to keep the cash in the market. But an surprise pregnancy and the unplanned expenses (to counter the unplanned joy) made it a straightforward decision for us. At least, we were getting out while we were ahead.
And then I’ve watched the Chinese stock market roar back to life, with year-to-date gains on the Shanghai index alone reaching 90 percent in August.
What can I say – we’re human. And as humans we have a nagging propensity to sell low and buy high.
According to behavioral economist, our natural “fight or flight” impulses that kept us alive in the jungle often make our investment portfolios dead meat.
A buy and sell of a stock on a single day is a virtual coin toss: investors have a 50.2 percent chance of making money, investment counselor Philippa Huckle once told me. The longer investors hold, however, the chances of profit expand exponentially: there is a 70 percent likelihood of earning a profit holding for 18 months. Hold for five years, odds increase to a 95 percent probability of positive return, she said.
Yet despite this knowledge, our patience for investment is slipping: from 1984 to 2000 the average stock buy was held for two years and seven months; by 2004, the average slid to two years and two months.
According to Dalbar Inc., a financial research company, a $10,000 mutual fund investment in 1985 left to sit without withdrawal would be worth $95,000 in 20 years, despite losses suffered during the 1987 market crash, the 1997-98 Asian currency crisis and the technology implosion of 2000.
One interesting fact from behavioral finance research helps explain why we dropped that forgotten Chinese stock once we became aware of it – loss aversion. Research shows that investors “feel” the loss twice as much as a similar gain: In other words, the experience to lose $1 ,000 twice as intense as the pleasure of a $1000 gain.
Watching the stock drop month-after-month became too much to take, and we – like a lot of other investors – wanted that pain to go away. And it cost us.
Now I’m trying to forget that, too.
How do you find the right financial advice? First find the right financial adviser. CNN's Andrew Steven's reports.
In an special Web exclusive, an extended chat with John Gannon of the Financial Industry Regulatory Authority on sussing out the best financial adviser.
We've all heard financial experts talk about "shorting" the market, and the role that "short-selling" arguably played in the global financial collapse. But is it really such an awful financial tool? And are U.S. regulators correct in cracking down on the industry?
And in a Web exclusive, Stephen Figlewski of New York University take a long look at the world of short-selling.
Sometimes I think if you want to be a serious investor, you shouldn't become a business journalist. Sure, you learn a lot about various industries and get insightful advice from experts at the top of their game. On the other hand, you know all too well how everything can go terribly awry.
Jim Rogers, the famed commodities investor and author of new book "A Gift to My Children: A Father's Lessons for Life and Investing," admitted to me that he is a horrible short-term investor. However, he says you don't need to be a good trader to make money.
Here are his tips for anyone looking to invest in the current economic crisis:
1) Buy what you know. "You should only buy things that you yourself know a lot about - whether it's cars, sports, hairdressing, fashion, or whatever it is," he told me. "Do some research, do some homework, and if you see something really dramatic changing that is cheap, buy it. You are going to know about it long before I am, long before a broker on Wall Street is, and that is how you are going to make a lot of money. "
2) Don't be cocky. "Being overactive is usually a mistake," Rogers mused. "It always leads to problems. People don't like it. They want to jump around all the time. That's not the way to succeed as an investor."
3) Buy low, sell high. "It's as simple as that," he said. "Nobody likes to hear it. Now that is so simple and so easy, but you cannot believe how difficult it is to buy low and sell high. That is the hard part."
So what is Rogers doing with his money?
He wouldn't buy stocks today - not even in emerging markets. He is selling the U.S. dollar because "it's a flawed currency." Today, he would put new investments into commodities or what he thinks are "sound" currencies such as the Canadian dollar and the Japanese yen. And one of his favorites - farmland. With food prices rising, he believes farmland "may be one of the best investments a person can make in 2010." But get to know the farmer and the industry first, he reminded me.
In other words, be sure to do your homework.
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