A whopping $70 billion was wiped off the Australian share market on Monday, but for savvy investors it may not all be bad news.
For those brave enough, it could be a good time for some bargain hunting among some of Australia’s best blue-chip stocks.
As Warren Buffett, the legendary billionaire investor, says: “Be fearful when others are greedy. Be greedy when others are fearful.”
With tumbles across the board from energy to banking and healthcare shares, there are some shares ripe for the picking, says optionsXpress analyst Ben Le Brun.
“I wouldn’t wade into my neck, but certainly dipping a toe in or getting up to your ankle or knee at these levels would be pretty good,” he told AAP.
WHY THE MARKET IS DOWN AND EVERYONE IS SCARED
Recurring issues about weakness in China’s economy and its hefty stock market falls and the devaluation of the yuan have weighed on investors’ minds.
Slowing Chinese demand has also led to volatility in the commodities markets, with oil and iron ore prices plunging in recent months.
And investors remain unsettled by the Greek fiscal crisis, although a third bailout package agreement was reached last week.
HOLD YOUR NERVE
Mr Le Brun thinks now is the prime time to move in and capitalise on some beaten down blue-chips which should bounce back and hold their value over the long run.
“People are very fearful at the moment so maybe now is the time to step up with a sort of long-term horizon outlook,” he said.
SO WHAT SHOULD YOU BUY?
Choose your sectors and then choose your stock. You want to capitalise on great quality stocks at bargain prices.
To quote another Buffett adage: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
So rake your eye over some of the battered blue-chips.
Commonwealth Bank has tumbled toward $73, Telstra, a favourite among mum and dad investors, is back under $6 and at its low point for the year.
BHP Billiton is at its lowest point since late 2008 while Rio Tinto is sitting at six-year lows.
“There’s plenty of stock of there, the top echelon names in the Australian sharemarket I would say, and the closer the market gets to 5,000 points, that really does represent good value,” Mr le Brun said.
SO WHAT’S THE OUTLOOK LIKE?
CommSec chief economist Craig James believes the US and Australian economies are in good shape and that worries about Greece and China are overblown.
“At present, we would view the global sharemarket correction as a correction we had to have – a situation that will be beneficial in injecting more value into markets,” Mr James said.
“There are clearly risks, but the data indicates that US and European economies continue to recover; lower oil prices will serve to boost consumer and business spending; and Chinese authorities are trying a range a measures to maintain momentum in their economy.”
