Share tumble? Don’t panic!

Written By komlim puldel on Sabtu, 13 Desember 2014 | 20.01

Be alert, not alarmed ... While blue-chip stocks are taking a hammering, it is affecting on a few sectors of the market. Photographer: Liam Kidston. Source: News Limited

SCARY share price falls by some of Australia's biggest companies have reignited bad memories of the Global Financial Crisis, but mum and dad investors are being urged not to panic.

Since the start of spring, shareholders in companies such as Origin Energy and Santos have lost between one-third and one-half of the value of their investment, while corporate giants such as Woolworths, BHP Billiton and Rio Tinto have sunk more than 20 per cent since earlier this year.

Investment experts blame the falls mostly on weak global economic conditions and plunging oil and iron ore prices, and say long-term investors and super fund members should be patient and hold a range of different quality companies.

Unlike the GFC, when almost every stock was smashed, this wave of selling is mainly hitting mining and energy shares. Widely-held stocks such as Telstra and the Commonwealth Bank are holding up well.

The wave of selling is mainly hitting mining and energy shares. Picture: Ian Waldie/Bloomberg Source: Supplied

Billionaire Andrew Forrest's Fortescue Metals and oil and gas group Santos, which both ranked among Australia's biggest 20 companies until recently, have led the slide — falling 60 per cent and 52 per cent respectively from this year's highs.

Prime Value Asset Management joint chief investment officer Leanne Pan said it could be a nervous time for investors, but markets never moved in a straight line.

"Unfortunately no stock is completely immune," she said.

"Remember that even quality, well-run businesses with strong financials still suffered during the GFC. But those same stocks were able to bounce back and outperform again once conditions improved.

"Go back to basics and stick with a business you understand. Try to keep it simple and if things look too complicated, maybe avoid that."

Shares in Andrew Forrest's Fortescue Metals have slipped 60 per cent this year. Picture: News Corp Australia. Source: News Corp Australia

Prescott Securities share specialist Travis Adams said sticking to sturdy companies and holding a diverse range of stocks were secrets to surviving a share slump.

"It's best to diversify before the event," he said. "Make sure you are not too exposed to a single sector, but there's no point in being diversified into rubbish.

"Try to be patient and not get caught up in the falls. Hopefully it is only part of your portfolio. If you are patient and in the quality space, you will be OK."

Quay Equities head of trading Tristan K'Nell said serious investors were seeing some of the weakness as a buying opportunity, although there could be more falls coming.

"There's no need to panic at all," he said.

"BHP and Rio Tinto are well below valuations. In any other market you would think they were a 'buy' but at this stage maybe there's a little more downside for them." As two of the world's biggest and lowest-cost producers, BHP and Rio are among the best-placed to ride out a storm.

Mr K'Nell said countless good companies had come through share slumps before. "It's a market cycle and there's always going to be times of decline. People have to be patient."


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