Huge rise in exchange-traded funds and misunderstanding of the Chinese market driving volatility, says financial adviser to Aussie expats

Huge rise in exchange-traded funds and misunderstanding of the Chinese market driving volatility, says financial adviser to Aussie expats
Stock Market

 

ABC News Radio26/08/2015 – The article below is a re-post from ABC NewsRadio after they interviewed our Managing Director, Brett Evans, this morning. To listen to the interview click on this link (https://www.abc.net.au/newsradio/content/s4300209.htm) and then press the play button at the top left hand corner of the article.

European stock markets have bounced back overnight – after China moved to calm the recent turmoil by cutting interest rates.

The People’s Bank of China reduced its key lending rate by a quarter of a percent – following another big fall of more than seven per cent on the Shanghai index.

Bargain hunters in Europe helped claw back some of the losses overnight, but it was a see-saw ride again on Wall Street with the market soaring and then dropping sharply minutes before the close.

So what’s driving all this volatility?

Brett Evans is the Managing Director of Atlas Wealth Management, which specialises in financial advice to Australian expats. And he has some interesting perspectives as to what’s causing the wild swings on global markets.

Brett Evans speaks to ABC NewsRadio’s Sandy Aloisi.

He says a huge rise in exchange-traded funds (ETF) in the last decade have impacted the way the market behaves.

“With the rise and popularity of exchange-traded funds, what we often see is people take blanket opinions on certain indexes or commodities,” he says.

“What this means is when we do start to see a sell off like we have seen recently, they don’t tend to pick sectors that they’re comfortable with and maintain exposure, they just sell the ETF across the board, which causes in turn the volatility in the index.”

He also says many traders do not have a good understanding of the Chinese stock market, which has been primarily driven by mum and dad retail investors.

“What we often see is a herd mentality when it comes to their invest thesis or how they pick and buy shares and what that does tend to do is exacerbate the volatility,” he says.

“The Chinese stock market is not a very good bellwether as to how the Chinese economy is going,” he says.

 

Brett Evans is the Managing Director and a Financial Planner with Atlas Wealth Management which is the first financial services firm in Australia to specialise in providing financial advice to Australian expatriates. With over 20 years of experience in the finance and investments industry, Brett has worked for blue chip companies which include the Australian Stock Exchange (ASX), HSBC, Suncorp and Citi Smith Barney.

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