Professor pushes calm in ever-shifting market
One Australian expert has warned mum and dad investors to brace for an extended stretch of uncertainty in global markets, as volatility becomes 'the new normal'.
But Deakin University finance Associate Professor Victor Fang has just one tip for jittery property and share owners: don't panic.
As a former banker, Associate Professor Fang was on the financial frontlines when world markets collapsed during the Global Financial Crisis of 2007-08.
He said Australian investors today are caught in a similar cycle of overreaction and panic.
"The perfect storm of Greece defaulting on its international obligations and a rapid meltdown of China's share market has knocked the confidence of Australian investors in a way not seen since the Global Financial Crisis," Associate Professor Fang said.
"People say 'but Australia isn't paying Greece's bills' and 'I don't invest in China's share market' but the interconnectedness of global financial markets means we're still impacted by what's happening overseas.
"The uncertainty in Greece and China means investors are pulling out of equity markets and flocking to the relative safe haven of government bonds.
"As long as uncertainty and fear rule, the rollercoaster ride will continue for Australian investors."
Associate Professor Fang said ongoing volatility in China would have a longer-lasting effect on Australian markets than the turmoil in Greece.
"Both are bad news for Australian investors, but China is our biggest trading partner and its growth is closely tied to our commodity prospects – so it's the one to watch," he said.
Associate Professor Fang is currently researching the term structure of interest rates, and volatility.
He said his trading experience, which began at banking giant HSBC in Malaysia in the late 1980s, greatly informed his research work and teaching methods.
"My professional experience means I can translate textbook theory into real-world examples, for both my research and my students," he said.
"Bringing the theory to life with case studies ensures a better grasp and understanding."