Recent volatility in global financial markets shows how rapidly risks can spill over from one economy to the next, says IMF managing director Christina Lagarde. David Pollard looks at whether market volatility may become the new norm.
He looks calm enough as he trades, but 85-year-old Shi is at the centre of a storm. Wave after wave of recent losses on China's stock market leaving him and fellow investors - most of them amateurs - reaching for their lifebelts. (SOUNDBITE) (Mandarin) A 85-YEAR-OLD INVESTOR, SURNAMED SHI, SAYING: "Our market doesn't rise when foreign stock markets rise. Our market falls after foreign stock markets drop, sometimes even ahead of them. How can I invest?" It's deep water for policymakers too - like Christine Lagarde. The IMF chief was in Jakarta, where she told an audience that the last few weeks had demonstrated just how much disruptions in one market in Asia could spill over into the rest of world. (SOUNDBITE) (English) INTERNATIONAL MONETARY FUND (IMF) MANAGING DIRECTOR, CHRISTINE LAGARDE, SAYING: "What has been demonstrated in the last few weeks is also how much Asia is at the core of global economy, and how much disruptions occurring in one market in Asia can actually spill over to the rest of the world." China stocks opened down again on Wednesday. But it's the scale of stock market moves elsewhere that have shocked. Tuesday saw Japan's Nikkei lose 3.8 per cent. European and US stocks too taking massive losses. Worries over China's growth are gaining traction, says Rabobank strategist Jane Foley - and are now joint top of the bill of traders' anxieties along with the prospect of a US Fed rate hike. SOUNDBITE (English) JANE FOLEY SENIOR FX STRATEGIST, RABOBANK, SAYING: ''This story with respect to China's growth has certainly been a slow burn. It's something which many people, economists etcetera, have been very concerned about for quite a long time. Now you put together these two large events and certainly it seems that volatility will be the norm for quite some time yet.'' And that could, she adds, mean central banks rethinking any intentions of tightening. Markets far from ruling out policy easings not just from the ECB, but also the Bank of England - and even the Fed itself.