DAN HIMBRECHTS

Aussie retirement funds hit by China market crash

THE Chinese stock market crash and the reverberations it set off across the globe have hit Australian retirement funds hard.

On current trends a $100,000 investment portfolio has lost $5000 while $10,000 has been wiped from the value of a $200,000 portfolio.

Stockbrokers and financial advisers yesterday urged investors not to panic and to seek expert advice.

Brought on by China's devaluing of its currency on August 11, the fall out has wiped billions of dollars in value from markets in Europe, Asia and the US.

The UK's FTSE 100 index lost $85 billion in just three hours of trading and globally $5 trillion worth of value has been wiped from equities.

Here retirement savings have been hurt because about 50% of most super funds are invested in shares.

Poole Group financial adviser Kirk Jarrott said now was the time to hold a steady ship. He said Chinese earning forecasts had assumed growth would keep on going resulting in high debt levels in financial markets.

"It was going up to unrealistic levels," Mr Jarrott said.

"Effectively there was a bubble. There has been volatility since the GFC. There's been no optimism and a lot of uncertainty."

He said just as you would not sell your house for $200,000 to the first offer, investors should not accept low prices for shares returning good dividends.

Macquarie Private Wealth division director Martin Lakos said it was important for investors to avoid panic and to seek advice.

"The market fall has been overdone relative to where global growth sits," he said.

"Growth won't contract dramatically.''

Mr Lakos thinks the Chinese economy is bottoming at the moment but would see modest improvement in the second half of this year particularly in manufacturing.

He said to date Australian share market highs had been backed by earnings' results.

"The Australian market has been at the top of its valuation,'' Mr Lakos said.

"It's coming back to fair value and in instances, good value. Don't make hasty decisions. Value is emerging (in the market) and we are finding our clients are looking for that value.''

Investors should look at their shares and ask if they provide sustainable dividends as did the banks and Telstra. The value of shares may have diminished, but Mr Lakos said investors should remain comfortable if they have blue chip shares.


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