Australia resilient amid market turmoil

Australia is showing remarkable resilience despite being caught up in the global financial markets’ reaction to the US Congress’ decision to reject the Emergency Economic Rescue Act, according to both local and international analysts.

Research from Datamonitor noted that the “New York Stock Exchange plunged into a tailspin, wiping a billion dollars off the value of its companies”, while “Asian markets reacted negatively too, adding to days of mounting bad news”.

Closer to home, MLC investment strategist Brian Parker commented that Australia’s financial stocks (excluding property trusts) also took a hit, but fell “no where near as far as their US counterparts”.

Metal stocks suffered the most damage yesterday, according to Parker, falling 5.4 per cent as fears about global economic growth impacted metal prices.

On a more positive note, Parker pointed out that while Australia’s banking system was clearly not immune to the global crisis, it was holding up better than others.

“Market movements appear to reflect this — our bank stocks have tended to outperform their global counterparts for much of 2008,” Parker said.

On the global front, Parker said the UK and Europe looked as though they were close to joining the US economy in its recession, adding that Japanese growth had also slowed significantly.

Meanwhile, he has confidence in the strength of the economic fundamentals of the emerging market countries.

“China and the rest of the emerging markets are not immune to what is going on in the developed world,” he said.

“However, the economic fundamentals in those economies are much stronger than they were during, for example, the crisis that occurred in 1997 and 1998.

“Most notably, banking systems in Asia now look really quite healthy compared to the woes of their US counterparts.”