China's Economic Crisis: Are We Overreacting?

The fall in prices in the Chinese stock market has caused an element of chaos around the world, but perhaps doing nothing may be the best course of action for investors…

Markets across the world have become volatile, however the response to the China share price fall may be an overreaction. China’s move to devalue its currency by 4% prompted a lot of institutions to sell, but it may be wise to stay patient.

Global Effects

Large markets such as the US, UK, Europe and Japan suffered large percentage losses as a result of Black Monday, but now we are beginning to see relative stability returning. The slowing of the Chinese economy has caused nervousness, and proposed interest rates rises, specifically in the US and UK, may be put on hold if the Federal Reserve and the Bank of England do not believe their economies can withstand it.

Buy or Sell?

Buying now may be an unattractive prospect, however selling could be too hasty. Many are actually looking to top up in models that have excess cash. The speed at which markets will move in the near future is great, so making big decisions may not be appropriate just yet; we haven’t seen the end of this volatility in the market.