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Facebook’s news ban feared to have implications for the sharemarket

  • February 19 2021
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Facebook’s news ban feared to have implications for the sharemarket

By Maja Garaca Djurdjevic
February 19 2021

Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for another round of talks with CEO Mark Zuckerberg on Friday.

Facebook news ban feared to have implications for the sharemarket

Facebook’s news ban feared to have implications for the sharemarket

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  • February 19 2021
  • Share

Facebook’s move to restrict the sharing and viewing of news in Australia could have huge implications for the sharemarket, an expert has said, as Treasurer Josh Frydenberg readies himself for another round of talks with CEO Mark Zuckerberg on Friday.

Facebook news ban feared to have implications for the sharemarket

As part of Facebook’s ban, which is the social media giant’s answer to Australia’s proposed new media bargaining law, Aussies can no longer view anything deemed news on Facebook.

This, according to RMIT University professor Dr Angel Zhong, could send shockwaves through the stock market.

“Finance research finds that news and media attention improve stock market efficiency and promote stock market liquidity,” Dr Zhong said.

But, in the absence of news, Dr Zhong expressed concern that market reactions will be delayed.

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“A lot of retail investors are in the habit of using Facebook to view news. While they can still view news from other sources, it means it may take longer for retail investors to look for and read news.

“This may lead to a delayed reaction to sharemarket news, which in turn is detrimental to stock market efficiency and liquidity. For example, you read business news on Facebook each day on the way to work, which informs your portfolio adjustment decision,” said Ms Zhong.

According to recent statistics, one in three users in Australia turns to social media to gather their news and information.

She explained that the impact of news and media attention is also found to be more pronounced among small companies that attract a smaller investor base.

“Small companies with a relatively smaller investor base usually benefit more from wider news coverage and media attention,” Ms Zhong said.

Facebook confirmed that it was moving to restrict “publishers and people in Australia from sharing or viewing” news on Wednesday evening. 

Facebook’s director for Australia and New Zealand, Willian Easton, said Australia’s proposed new media bargaining law misunderstands the platforms relationship with publishers who use it to share news content.

“It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia.

“With a heavy heart, we are choosing the latter,” said Mr Easton.

Facebook’s news ban feared to have implications for the sharemarket
Facebook news ban feared to have implications for the sharemarket
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About the author

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Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

About the author

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at [email protected]

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