Sign of the times: ASX volatility a ‘great buying opportunity’

By Grace Ormsby

October 04 2019
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Despite two days of tumbling markets, ASX shareholders should expect a stronger market again today following the lead of the US overnight, according to an Australian portfolio manager.

Red flags began to appear on Wednesday, 2 October, when the ASX 200 closed 102.9 point lower than it started the day, finishing on 6,639.0 – a loss of 1.5 per cent.

The figures were even worse yesterday, with the ASX 200 closing at 6,493.0, down 146.9 points or 2.3 per cent on the day’s opening figures.

It managed a slight recovery by the day’s end, having dropped by up to 2.4 per cent during the day’s trading.

Overall, it was a 3.7 per cent plunge across Wednesday and Thursday.

Jun Bei Liu, the lead portfolio manager at Tribeca Investment Partners, has attributed the losses over the past couple of days to a lack of news flow combined with weaker growth than was expected.

“A lot of investors went into that risk offload [mode] because the market has been very strong,” she explained, noting the drop as reflecting “a bit of correction”.

But she indicated an expectation for the markets to rebound, following “positive news” coming out of the US.

And while the losses have been troubling for some, Ms Liu said “investors certainly should take advantage of some of those corrections”.

Noting that there has been a lot of high-quality companies “underperforming” in the last month, Ms Liu called the present time “a great buying opportunity to be honest”.

“Today we think the market will be a bit stronger, so you’ll see some of those names rallying away.”

The presence of volatility and corrections in the market will become an increasing occurrence, according to Ms Liu, which can either be ignored by long-term investors, or considered as opportunities.

“Don’t get swayed by sentiment, because equity markets tend to magnify fear and greed and all of that,” she advised.

“If your time horizon’s very long, you certainly can ignore the short-term volatility,” she said.

But, even when acting long-term, Ms Liu lauded the ability of market volatility to create buying opportunities.

“If you really love a company and you’ve done your homework, you don’t have to rush out and buy them in today’s market – because you will have that volatility [again].”

She said it’s worth waiting until you have one or two days of correction where you can buy them cheaply: “Your entry into a stock could be a lot cheaper.”

At the same time, “be very mindful of running a balanced portfolio and not to chase a lot of ‘hot’ stock at the time”.

“Focus on the fundamental,” Ms Liu urged.

She said investors must consider the actual real earnings power of a company rather than what the sentiment is driving.

“It’s about what a company can deliver in growth, in its earnings, and whether it’s going to beat analytic expectations. If they can do that, the share price will always go higher,” the portfolio manager explained.

“The share price always follows earnings.”

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

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