The Australian stock market has been through a wild start to the week, surprisingly rebounding strongly after what some were calling ‘Bloody Monday’.
Fuelled mostly by fears about the Chinese economy and its possible slowdown, the ASX lost an astonishing $60 billion of its value, the worst day since the global financial crisis.
Investors would have gone to bed after the bloodbath expecting more pain on Tuesday, but it seems a strong flow of bargain hunters has seen the share market rally.
Some major Australian blue chip companies, which copped a hammering yesterday, surged Tuesday morning as the bargain hunters swooped in to take advantage of cheap stocks.
The sell-off yesterday hit most sectors but the big banks were especially hit hard.
To give an indication of the rollercoaster ride, Westpac shares slumped more than 6 per cent yesterday and were up today 4.5 per cent to sit at $30.77 a share.
IG’s chief market strategist Chris Weston believed only the bravest of investors would be dipping their toe in the stock market today, but he may have underestimated.
“The moves are so aggressive and so extreme, that the idea of buying fear is only for the bravest of souls,” he wrote in a note.
Mr Weston said investors were noticing that the vast majority of companies were trading below their 50-day average share price and had decided to act on that this morning.
“There seems to be a belief now that the banks have offered that value, we’ve seen a note from UBS as well upgrading CBA to a buy,” he said.
“The banks are absolutely flying, we need to remember as well that they have been heavily, heavily beaten up. The market itself was grossly oversold.”
The Chinese central bank injected 150 billion yuan into the interbank this morning to try and stem their losses, but little headway was made from similar injections last week and little seems to have been made today as their stock market continues to struggle.
The Australian dollar also copped a hiding yesterday, but like the share market rallied this morning, bouncing back to 72.25 US cents today after falling as low as 70.37 US cents at the height of the drama yesterday.