Matt Goodson: Salt Funds Management expert on global markets stabilising after this morning's announcement

The Japanese market is clawing its way back, after an epic tumble overnight.

Its Nikkei had a historic one-day drop - the first in a volatile chain of global financial markets.

It's now starting to stabilise, sitting about nine percent up on yesterday.

Matt Goodson from Salt Funds Management says Japan's weakness began a couple of days ago, when the central bank hiked up cash rates.

"The Japanese market had been pretty strong all year, the yen had been really weak - and that just turned everything around, the market fell hard, the yen really strengthened."

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Episode Transcript

Speaker 1 (00:00):
It looks like share markets around the world have stabilized
after making those big losses over the last couple of
days or so. Over the last few hours, the nick
has bounced back. It's sitting almost ten percent higher than yesterday. Currently,
Australia and South Korean markets are also up. The INSIDEX
had dropped early in trading since has since climbed back.
Matt Goodson is managing director at Salt Funds Management and
with us Now Hoy.

Speaker 2 (00:19):
Matt Afternoon Heat.

Speaker 1 (00:21):
What's prompted the recovery?

Speaker 2 (00:23):
Look, I think yesterday's sharp move, especially in Japan, really
felt like force selling from funds that had too much exposure,
and we're just forced to do risk and so we've
just seen a bit of a natural rebound from that.
But the real weakness in Japan started a few days
ago when the central Bank finally hiked after years of
zero rates, moving up to a quarter of a point

(00:47):
in cash right and making some pretty hawkish comments about
the future. And that really a Japanese market had been
pretty strong all year of a yeen have been really weak,
and that just turned everything around. Market fell hard and
the yen really strengthened.

Speaker 1 (01:02):
Do you think this is the end of the jesses
or do we potentially have more to come.

Speaker 2 (01:07):
Look, there's several different things going on at the moment,
so I think it's too early to say it's the end.
The biggest impact from Japan is actually the implications for
global markets. There's been a multi trillion dollar trade going
on for years, known as the carry trade, where people
have borrowed at zero in Japan, geared that up a

(01:29):
few times and invested in much higher yielding assets overseas.
I think American banks, Australian banks, those sorts of things.
Now all of a sudden they have to pay a
bit more to borrow that money, and more importantly, they
have to pay it back and much more expensive yen.
So all of a sudden, a lot of those carry
trades have been unwound. And that's why we saw well
one of the reasons why we saw US and Australian

(01:51):
market's been really hard hur yesterday.

Speaker 1 (01:53):
Matt, it's very good to talk to you. Thank you
so much for that, Matt Goods and Salt Funds Management
Managing Director.

Speaker 2 (01:59):
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