Major overseas market falls sharply, should we sell our shares?

Question: When a major overseas market falls sharply, should we sell our shares (in panic)?

The crux of the issue is to always bear in mind that generally each stock market has its own trend. The problems and environment defer from country to country.

Thus, the peculiarity of the stock market may not necessarily affect the other.

Instead, the rise or fall of a stock market tends to depend on how investors perceive the particular situation say, in 6 months to 1 year. That is the future prospect of the country.


However, some may argue that the above view is erroneous.

Take for example, the October 1987 Wall Street Crash which rocked the stock markets of the world. To this, one needs to understand that the Oct 1987 crisis was due to a fear of a worldwide recession due to the insurmountable trade deficit in the US.

On the contrary, the even that caused the Hong Kong Hang Seng to plunge 633.85 points in 3 days on 11.3.93, 12.3.93 and 15.3.93 was attributed to the political issue between Hong Kong and China over the handling over of Hong Kong to China in 1997. Despite the drastic fall of the Hong Kong Hang Seng Index, the ST Industrial Index of Singapore remained firm. Therefore, if you had panicked and sold off your stocks, you would stand to lose out.


Each country has its own problems, economic or political.
Therefore, each country's stock market trend defers one from the other.
EXCEPTION: Worldwide fear could have a down effect.


Ref: Making Mistakes in the Stock Market by Wong Yee

Comments:
What about the present crisis?
How will this play out?
My opinion is the financial markets are not decoupled.
But what of the individual economies? Likewise too.
But let us not despair.
History has shown that after each crisis, the world rebounded back to higher levels of growth.
It is only a matter of when this crisis will be over.
You should have invested in a manner to be in a position to take advantage of the crisis.
For others, surviving the crisis unscathed maybe challenging.

Ref: Consequences must dominate Probabilities