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THE ROYAL BANK of Scotland has delivered a new, doomsday scenario for the world’s financial markets.
Analysts at the UK lender, which was briefly the world’s largest bank before its value collapsed in the last financial crisis, have warned China’s woes will snowball and that investors should abandon everywhere except the safest places to park their cash.
The lender raised the panic meter several notches in a note to clients, who it advised to “sell everything except high quality bonds”, according to the UK Telegraph.
“This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said.
Several of the world’s major stock indexes have already suffered their worst-ever starts to the year following ongoing shocks in China.
The Shanghai markets have dropped about 15% since the start of the year, while the country’s government has repeatedly cut the value of its currency after a string of weak signals out of the world’s second-largest economy.
RBS credit chief Andrew Roberts said the combination of slowing global trade and loans and already record debts levels worldwide was a disastrous cocktail for companies, the Telegraph reported.
China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the ‘Goldlocks love-in’ of the last two years.
Roberts predicted both US and and European stocks would fall up to 20% while shares in top UK-listed companies were even more at risk due to the concentration of firms dealing in energy and commodities – the two industries most exposed to the Chinese slowdown.
A sell-off in Chinese stocks last week first sent shock waves through international trading floors despite government attempts in the Asian country to stem the bleeding.
“Everyone rational wants to sell, while everyone official has been told to buy,” Michael Every, Hong Kong-based head of financial markets research at Rabobank Group, told Bloomberg news.
“By throwing good money after bad, it just delays the inevitable.”
With AFP
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“Prepare for the end… the end of low prices!”
You exploited peoples deepest beliefs just to sell your cheesy wares… Well we are outraged!
welcome to China
The FTSE is up a 100 points today ironically ???
This is the result of years of communist state interference in the capitalist market place. The Chinese have been rigging the market and their currency for decades.
Yeah nothing to do with the markets which seem to tank on queue every 7 years or so…. Has to be those (fake) commies
China will be grand, they have full control of the means of production and have big levers to pull , that said, they had better pull the correct lever…
for example they could close their steel industry overnight and start and replace it with something else , and they wont be concerned about jobs etc
I wonder how the 83 billionaires (yes, billion) in chinas parliament, settle the concept of their wealth with their communist ideals.
Production is one half of battle, you have to have a market to sell your products too, which has traditionally been the US, Eur, Aus. China has struggled for years to kickstart t’s domestic consumer economy and get the Chinese market to buy it’s own products.
A way to do it would be Henry Ford’s traditional, Everyone who makes these model-T’s should be be able to afford to buy one. However if they did that it would raise the cost of production and no one in their right mind domestic Chinese or overseas market would buy a ‘made in china’ product when it cost the same as a made in America/Europe.
Ahhhh good old RBS… Telling you what Morgan Stanley and Goldman Sach’s told their clients a month ago, but with more doomsday drama.
Except things have moved on. Chinese banks have been told to suspend buying US dollars and debt for at least a month.
AND>….
All major cargo vessels and oil tankers are in port all over the world. There isn’t a single registered cargo vessel or oil tanker crossing the Atlantic for the first time since before the Industrial Revolution.
We very well may be on course for the doomsday scenario Chinaman. And since FG, despite 5 years of Govt, have still left us hopelessly exposed to such international conditions, which many for years have stated will happen, we Irish could be rightly screwed!
It’s all FG and Labours fault.
Surely the church must take some blame here ??
Which one?
Every celeb economist during our bust and the euro crisis told us flog everything ya got, trade your cash stash for gold n silver coz the currency is gonna turn to paper. Sure, gold had its run but the rest never played out. Be a regular joe, don’t dabble the markets , they’ll bend ya over an poke ya dry.
Don’t listen to the noise like this. Invest regular amounts over a long time period in a diversified portfolio and you will build wealth. It’s a get rich slow scheme. Financial literacy in Ireland is appalling.
I’m in the sell camp. I agree a lot with RBS on this, but don’t think the crash will be as severe. We are already in the 3rd longest bull run in history and if we get to end of April and things are still good it will be the 2nd longest.
QE has driven asset prices absolutely crazy, it just cannot last much longer, has to be a correction at some point.
David Mc Williams, along with other sensible economists predicted this a few years ago.
Predicted what? Nothing has actually happened bar a bit of a stock market contraction. If you’re talking about China showing down then the dog on the street could have told you. It’s impossible for a country to have infinite 10% growth.
what – “at some point in the future, the markets will crash…some people will make losses”.
it’s cyclical – there’s always going to be crashes, winners and losers. The trick is figuring out how to insulate yourself.
The risk of a global depressive event is c. 30-35% at present. High but by no means inevitable.
Ireland is coming from a low base and so even if there is an event it may have less of an actual impact on Ireland than ppl think.
I’d be more worried if I was on the Mercedes factory floor than the Pfizer one.
RBS, a great bunch of lads, with a fabulous track record!
I know nothing about stocks. If for example a guy pumps a few grand into some of the falling stock now, would that not be a good investment because the will pick up again eventually. Would companies not be better holding onto what they can and sell when it picks up.
In a very very simple theoretical way yes but most of these stocks are either held by hedge funds or investment banks.
They probably bought when they stock was low and will want to take a profit they can before things get bad. They will want to get out now. Put there money is a safe place and go at it again in a few months time.
Of course there are many other factors and reasons at play but that would be the main one.
In other words Fiachra they are gamblers.
Ask anyone that had Anglo Irish shares of its a good idea to hold on to them
I would imagine that if China tanks, we are in for another fun time, once the Chinese stop servicing their debts around the globe and or call in the money the US owes them.
There is no such thing as ” calling in” debt. China can choose to sell its treasury bonds on the market or hold. There is no call in option.
The China worries are overdone. People are just getting used to the shock that a country can’t have 10% growth indefinitely. Who would have thought! Once they get over that we’ll be on another bull run. I’ve been piling in over the last few days. Euro markets up over 2% today.
Absolutelyson…Have you ever considered buying on margin?
Just swipe the deed to your house right here.
The elephant in the room is that if the Chinese economy goes down and they then decide to call in US debt. then what? Any experts here care to answer that one?
We will just give it value.. problem solved happy days
Isn’t it inevitable that there will to too few resources for too many people. Something has to give!
Another classic market shake out, to frighten off the small investors, drive down share & pension valuations, & consolidate wealth for the “City” manipulators. Quite normal practice.
Which all means what exactly for the average Joe Soap – namely me. Should I start buying seeds and a shotgun or get ready for another fun filled round of serious austerity and possible job loss?
have your say