We all know by now what the causation ' Triggers ' are for any further falls in Global Markets , but will it be enough to precipitate a ' contagion ' which results in a complete meltdown as various times of history has suggested.
So we can see the cascading effect that the pending default of Evergrande has had on the IO prices which have been no doubt further exacerbated by China's more general view of its declining trade ties with Australia . So no doubt this would be a significant blow to the global economic backdrop should the Chinese build-out of its economy be halted in part off the back of any collapse of an entity which result in a default on the interest components of its overall US$300 billion in debt.
But I guess the question here is is the World Prepared to deal with a GFC mach deux emanating from China or could it be further managed and seen to be more of a more stabilizing or equalizing hand brake which may even act as a handbrake on the obvious increasing global tension concerning China. ie if they have to deal with their own economic crisis , this may defuse tension to a degree if other World powers have to act further to offset by further financial and more broader stimulus.
So in my opinion its a good thing that the FED is almost coincidentally having it's meeting to impart talk about its own budgetary debt ceilings etc...etc.. at almost exactly the time this China crisis is unfolding.
But how would it translate into a full blown ' Contagion ' .Well in my mind , the fallout or impact would have to be so far wide ranging that the Chinese would have to begin ' repatriating ' the US denominated stock and bond Investments or at worst make a play for Taiwan who has the one of the Top 10 International currency reserves and which sits in 6th position only behind Japan , Switzerland , Russia and the Saudi's who are ALL behind China in No. 1 spot. So I doubt any of these sorts of moves would even be required in this situation.
So what has history shown us of the ' Triggers ' and worst precipitating drops from previous stock market crisis's which I might add have mostly ALL been in the September month where most might have expected it to be October. Nevertheless , 2 months back to back of the worst historical months is never going to end well should an actual contagion end up being precipitated from this single event.
So what did we see from these past events. Well for starters , the single BIGGEST one day crash is still held by the infamous black Monday from back in 1987 crash with the 22% lost in just that one day on 19th October 1987. But that was mostly on account anomalies from the infancy in programmed trading so I would image those sorts of issue although we saw them at play in the GFC as well have been largely eliminated or mitigated by various stock market legislation and automatic halts in trading.
After that in 2001 at the beginning of the Tech selloff the DOW ( not the Nasdaq) lost 1.78% in the period from around 27th July 2001 to 17th August and then a further 6 odd percent from there to the 7th September 2001. So that's around 8% across 6 weeks but less than 2% in the first 3 weeks.
During the 911 terror attacks , the Markets were obviously halted for a good period of time and when they resumed on the FIRST day of trading , the DOW lost 684 points or 7.1% in that single day.
In the GFC , the DOW had its single BIGGEST points drop on Monday March 9th to that time in history of 2,013.7 or 7.79% after being down as much as 3,000 points and ended 7.87% down while the S&P finished down 7.6% while the Nasdaq ended up down 7.29%. On that day alone , Financial Stocks were down 10% while Oil Stocks were down more than 20% ........just in a single day. Now that's a real Global Economic Crisis right . Interesting though that it didn't have the same effects on China at that time nor did it impact Australia as a result of the China economic backdrop.
O.K so when the COVID -19 pandemic hit , the history books of single day consecutive crashes was completely re-written with a drop of 2,014 points or 7.79% on MONDAY March 9th , 2,352 points ( or 9.99% ) on March 12th and 3,000 point or 12.9% on March 16th .....also a MONDAY. And it was interesting that some analyst were speaking of the COVID crisis as the World's worst crisis and resulting economic outlook since the 1930's and the Great Depression. In fact at it's lowest point in the Markets on MONDAY March 23rd , $26 TRILLION had been wiped off of global equity markets. And all in less than 3 weeks. Of course we ALL know now that the markets recovered BOTH quickly and strongly off the back of a concerted global stimulus effort which was NOT even led by America's seemingly delayed Us$2 trillion dollar package. It was countries like Australia and the U.K , Canada and others who responded first.
Even back in late 2019 and early 2020 there was the infamous pending collapse of the Australian Billionaire Lex Greensill's Greensill Bank and Capital Capital whos collapse was spoken in the same context of potentially being a trigger to a second Global Financial Crisis ........and which of course never eventuated.
So where does this then leave us with this not quite a third of a trillion US dollar potential Chinese property developer collapse given their foreign currency reserves sit somewhere's around the $US 3.4 trillion mark.
Now I could be wrong , but with the DOW opening again on a MONDAY with a potential financial crisis looming from China , and where it won't actually be known of any Chinese remedy or mitigating actions until AFTER the US FED meets for its 2 day discussions , I'm just not seeing the same sort of precipitating expectation one would expect from a potential significant emerging financial ' Contagion'. And you have to remember that China has a lot to prove to not just its own people ....but the rest of the World as well in so far as being able to manage its own financial affairs.
So as I said , I could be wrong , but with the DOW closing down less than 2% on what would otherwise be interpreted of the FIRST day of a precipitating CRASH brought on by a ' Contagious ' crisis , I'm just not seeing the magnitude of anything near as bad as the COVID -19 crash or even the GFC , and certainly not significant enough that the US FED or the rest of the world wouldn't be able to handle it. Especially given the fact that the DOW failed to breach the psychological 1,000 point drop and instead bounced before this level to close where it did. Nothing to see here in my opinion and I certainly wouldn't sell anything into any missguided perceived weakness that the market tries to deliver to unsuspecting or inexperienced Investors who haven't lived and / or traded through these other historical ciris's.
Of course there are a number of other things happening around the world like the elections in both Canada and Germany.
But just looking at the Lithium related industry , we can see that the Canadian listed Sigma Lithium was down at one point 15.3% before closing down only 3.92%. Even the heavyweights like Albemarle were down 7.5% but finished only 5.01% down. Livent was actually trading up 1% in after hours trading before plateauing to roughly where it ended at 6.4&% down.
Even with our own SYAXF where we closed 7.46% down on what looks to be roughly double the recent traded volumes is really only 4.76% down when you factor the favorable exchange rate movement off the back of the strengthening USD , and which lands us pretty much back at and Aussie traded price of 19 cents.
So if anything , there may be a little reservedness until we find out more as Split said in regards the FEDs meeting .....but also as the Canadian elections results start to trickle in over the next couple of days.
But I still really do see the response from the share price performance of Sigma Lithium as being the most significant bellwether indicator of Sayona's future performance and valuation and which has stood up very well in overnight trade. In fact it did the opposite and bounced significantly . How much of this has had to do with the anticipated Canadian Elections and how much is to do with emerging global financial events will obviously remain to be seen over the coming days.
However, given the strength to strength performance of NOVONIX and its relationship to the Canadian energy transformation and battery industries , I wouldn't even consider being a seller in Sayona at this particular time. Especially knowing that the Australian Markets will no doubt over- react to these events as they always do. And if it does react in this fashion , I'll be buying whatever I like today as i always keep some powder dry for these occasion's . But don't be surprised if by the end of the day it is a non event.
(20min delay)