Chinese Stock Declines To Impact Australian Stocks

Chinese Stock Declines To Impact Australian Stocks

Over the last few weeks, one of the biggest stories in the financial markets has been the massive declines that have been seen in Chinese economic data.  This has placed a good deal of turmoil in most of the world’s stock markets.  But when we view this information in terms of the Australian economy, there are much more pressing factors that could influence stock prices in the months ahead.

As most of us know, Australia is one of the world’s best exporter markets in terms of the availability of raw materials.  These raw materials have been used to construct most of the city and rural development in emerging Asian markets.  So if we start to see declines in these regions, it will likely have a negative impact on Australian stocks.

Focusing on the Commodities Space

Of course, not all market sectors will be influence in the same fashion.  The commodities space, in particular, would likely be the market sector that sees the largest negative impact.  If we want to get even more specific than that, we can look at the copper sector as this is the most commonly required metal for industrial purposes in China.  Recent market reports from FiboGroup have shown that trading volumes have started to rise as the negative Chinese stories have surfaced.  So this means that it is not likely that we are finished seeing declines in global stocks as long as the prevailing climate of uncertainty continues.

So if you are looking for opportunities in stocks that are better positioned to withstand these events, it makes a good deal of sense to avoid companies with large copper holdings and, if possible, the commodities space as a whole.  This makes consumer staple companies a much better outlet for new buy positions to be placed in the market.  Australian stocks have had an excellent run over the last five years, so it should always be remembered that the majority of the market direction is still centered in the positive direction.

In all, these are some of the most important factors that should be considered before entering into new position in stock markets.  At the moment, it would appear that external factors would actually have a larger impact than many of the domestic factors that typically dictate price trends.  China continues to be an area for potential concern.