Finance

Why small businesses should be concerned but not spooked by big falls on the ASX and international markets

Broede Carmody /

 

The Australian Securities Exchange has had a rough start to the year with almost $80 billion already wiped of the share market, with no sign of a recovery this morning.

The ASX200 closed down 2.25% yesterday, falling by 112.8 points to 5010.3.

The poor performance by local markets follows in the footsteps of overseas counterparts, with the Dow Jones falling by 392.41 points on Thursday.

Wall Street has suffered its worst start to the year in more than a century, according to the Sydney Morning Herald.

European markets have also experienced a turbulent 24 hours of trade.

China has been at the centre of many investors’ concerns after the world’s second largest economy suspended trading for the second time this week.

While the suspension has since been lifted, China is currently experiencing the biggest devaluation of the yuan in five months, according to Reuters.

 

Should small businesses be worried?

 

Stephen Koukoulas, managing director of Market Economics, told SmartCompany the volatility in international markets has been “quite remarkable”.

“It’s pretty ugly,” Koukoulas says.

“The market falls that started in China you could say have spread through to Europe, spread through to the US. There’s that huge volatility and I’d call it violent moves in markets. It looks calm for a short while and then something happens and you get big swings.”

“That’s a sign of no calm at all – in fact, on the contrary, it’s a highly volatile situation.”

Koukoulas says the Australian small business community should be “a little bit concerned” about the volatility but not “spooked”.

“I’ve learnt in the past not to be too spooked by market swings because they can very quickly abate,” he says.

“In two weeks’ time we might be looking back and saying, ‘wow, wasn’t that crazy and now look at how things are calm’.

“But you’ve got to be at least a little bit concerned because these swings are now getting rather serious.”

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Broede Carmody

Broede Carmody is a former senior SmartCompany reporter. Before this, he was a co-editor of RMIT University's student magazine Catalyst.

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