Advisers have been telling their clients not to panic as the crisis caused by China’s economic slowdown continued to rock global stock markets, wiping £44bn off the FTSE 100 in one day.
With more volatility expected, advisers are suggesting that their clients either stay put or even increase their holdings to make the most of the crisis.
Dean Aitchison, investment manager at Essex-based KMD Private Wealth Management, said: “We have not had any clients call us up about this, but we have been cautious about China for a while.
“We would not advise selling now. Generally, corrections are around the 10 per cent mark – maybe a bit more as these corrections can be good buying opportunities.”
Jason Butler, of London-based Bloomsbury Wealth, also said his clients had not been getting in touch, adding: “This is just a normal rebalancing. If you are a net accumulator it is a great time to invest, and if you are a decumulator this demonstrates why it is important to have an adequate cash reserve.”
The crisis was sparked two weeks ago when the People’s Bank of China devalued the yuan following weak economic data.
The FTSE 100 fell from 6187.65 on Friday 21 August to 5898.87 on Monday 24 August, amid investor concern about the state of the world’s second largest economy, before recovering slightly to past the 6000 mark by Wednesday 26 August.
Jason Hollands, managing director for business development and communications at Tilney Bestinvest, said there were alternatives for anxious investors.
He said: “I would look at more domestic stocks and more mid-cap firms. The eurozone and Japan would be favoured developed markets because they have supportive monetary policy in place.
“We have been underweight China for some time.”
Mr Hollands added that the current volatility could postpone an interest rate hike in both the US and the UK. Federal Reserve chairman Janet Yellen is due to make a decision whether to increase US rates on 17 September, while Bank of England governor Mark Carney had predicted a rise at the turn of the year.
Industry view
Pension funds could also be affected by the crisis, but the National Assocation of Pension Funds said there was no need to panic.
Kathryn Mortimer, press officer at NAPF, said: “The important thing to remember is that pension schemes are long-term investors.
“While immediate fluctuations may be alarming, the nature of being a long-term investor allows time for an investment to recover any value lost in the short-to-medium term and recoup more value over the longer term.”
