Market ‘panic’: Expert shares tips on how to cash in on stock market plunge

The market has tumbled again, igniting comparisons to two of the worst periods in 40 years, but an investment expert shares tips on how to cash in.

The Australian share market spiralled more than 3 per cent lower before gradually improving this afternoon as the deadly coronavirus spreads across the planet and stifles trading prospects.

Last week’s loss of nearly 10 per cent was the market’s fourth greatest fall since 1980 and inspired worrying comparisons with two of the worst crashes over that time – the market has only lost more during the 1987 Black Monday crash and the beginning of the global financial crisis in 2008.

After the local market closed on Friday, Wall Street suffered heavy losses.

This was expected to result in a continual slide when the markets opened on Monday, compounded by the spike in coronavirus cases over the weekend and its true impact through the release of poor Chinese economic data.

The S&P/ASX200 index was down 178.3 points, or 2.77 per cent, at 6,262 at midday AEDT, while the broader All Ordinaries index plummeted 187.6 points, or 2.88 per cent, to 6,323.9.

The Australian dollar was also lower, buying 65.06 US cents, down from 65.22 US cents on Friday.

“It looks like it’s going to be another hard week for the ASX,” Burman chief investment officer Julia Lee told news.com.au.

She said the comparisons to the ’87 and ’08 crashes put the current “panic” in perspective.

“It’s more the speed at which the market’s adjusting to the economic implications of the coronavirus,” she said.

“At the moment it does look like the severity (of the deadly virus) is worse than what the market expected and its duration is unknown.”

Crunching numbers: Here are all the times the Australia market fell more than 10% in a week from 1980-2020:

1. & 2. October 1987: Stockmarket crash

3. October 2008: after Lehman’s collapse

And maybe for the 4th time.. February 2020: Covid-19 pic.twitter.com/oPBanDjwar

— Julia Lee (@JuliaLeeAU) February 28, 2020

The first deaths from the coronavirus were reported in both Australia and the US over the weekend, while Italy, Iran and South Korea revealed a spike in cases.

The escalation led to several countries expanding travel restrictions, further crippling economic activity and trading channels.

RELATED: How to get trading on the share market

RELATED: Best and worst stocks of the decade

RELATED: Wall Street closes worst week since GFC

Leading independent economist Saul Eslake said the onus was now on policymakers to contain the spread of the outbreak before lasting financial pain was inflicted.

The local market relies heavily on the second largest economy propping up commodity prices, particularly iron ore.

“In Australia’s case, it is magnified by the significance of our economic linkages to China,” Mr Eslake told news.com.au. “But also by the fact our economy wasn’t growing very rapidly anyway.

“An economy that is only crawling along is more vulnerable to shock than one that is spinning along.

“In addition to the coronavirus our economy has had to absorb the impact of the bushfires and the ongoing impact of the drought.”

INVESTMENT OPPORTUNITY

The market slide comes just weeks after the ASX200 was at all-time highs, which should present profitable options for mum and dad investors.

Ms Lee says it’s important to remember volatility is normal for stock markets.

“What we have seen in the past is it is an opportunity for longer-term investors who can keep their cool,” she told news.com.au.

“But the problem is we don’t know how long this is going to go for.

“My base case scenario is that we start to see better news flow coming through by April.

“When we see falls of more than 2 per cent in one session it can be quite scary, but it’s also quite normal.

“I went back 11 years and crunched all the times the Aussie market has fallen more than 2 per cent, and on average it’s about seven times a year.

“When I see volatility hit, my general rule of thumb is that we can expect it to generally stay about two or three months.

“About six or eight weeks after it started, my strategy is to slowly start accumulating stock.”

MARKET BREAKDOWN

The materials index was down 3.6 per cent as mining heavyweights and gold miners fell at noon.

Newcrest lost 40.5 cents, or 1.54 per cent, to $25.89 while Northern Star dived 75 cents, or 5.57 per cent, to $12.71.

Takeover target Caltex lost $1.23, or 3.76 per cent, to $31.47 after telling Britain’s EG Group it has not offered it enough money but wants to continue talks about a sale.

The big banks — NAB, Westpac, ANZ and Commonwealth Bank — were down between 3.21 per cent to 4.14 per cent at noon but there was a tiny glimmer of green in supermarkets.

Coles was up 28 cents, or 1.97 per cent, at $14.49 while Woolworths tumbled 85 cents, or 2.19 per cent, to $37.95.

– with AAP