Asian growth shields ASX

Published in the Geelong Advertiser, October 2008

The old adage of Australia catching a cold after Wall St sneezes has rung true again.

But this time experts say the US economy is on its death bed, so what's in store for us?

The local share market lost about $55 billion of value yesterday after the S&P/ASX 200 Index bled more than 4 per cent.

Shares went into free-fall, dropping more than 200 points in the first half hour. Traders started the rally in the afternoon, but the majority of gains were lost before close.

It was the biggest one-day fall since January 22 this year, but CommSec chief equities economist Craig James said the domestic market held up better than in the US.

"We're seeing some big declines in our banks but nowhere near that seen for financial stocks around the world," Mr James said. "Our banks are much more solid."

Professional trader and analyst Dale Gillham said while Australia was not immune from the US's imminent recession, the domestic market would survive and thrive in the long term thanks to our growing reliance on an ever-growing Asia.

"Anything that happens in the US can be passed onto us, but not to the same degree," he said.

"The US market is sick and they've been putting Band-Aids on it for a while now, you can't just keep putting Band-Aids on it without an infection occurring.

"We're not going into a recession, but it will slow us down."

Yesterday's falls were triggered by US lawmakers' decision to reject an $845 billion bailout package for US Prime Minister Kevin Rudd backed the bailout plan, urging lawmakers to accept the rescue package when a revised edition resurfaced later this week.

Mr Gillham agreed with a bailout, but said it was a shame that might mean offering those at fault golden parachutes to escape the full fall-out.

"The Congress has to do something, they just have to get their politics out of the way," he said.

"But I don't agree that the fat cats should be protected for letting their companies fail.

"In a free economy those banks should just be wiped and their wealth stripped away, but for the sake of their economy that couldn't happen. They've over-borrowed and had the party for too long and now they're going to have the headache."

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