Business

Markets overreacting, says Nasdaq boss

Nasdaq logo Image copyright Getty Images

The recent stock market turmoil is an overreaction, according to the head of the Nasdaq exchange, Bob Greifeld, but it will probably mean a slowdown in the number of listings on the stock market.

Sharp falls on Wednesday saw billions wiped off stock markets, with some indexes 20% down from their 2015 peak.

"Once the emotion has left the market, you're left with businesses doing reasonably well," said Mr Greifeld.

"How did the low oil price turn into bad news?" he added.

"Better to have it at $26 per barrel than $126. And China's 6.9% growth may be disappointing, but it's still growing."

Concern over the falling oil price and China's slowdown are seen as the main factors behind the market falls.

The price of crude oil has dropped from more than $110 a barrel in mid-2014 to about $28 a barrel. And on Tuesday, China's latest figures showed growth expanding by 6.9%, the slowest in 25 years.

"There's always a psychology about [the markets], you can't underestimate where the animal spirits are… and if people want to believe in a certain direction they will," said Mr Greifeld at the World Economic Forum (WEF) in Switzerland, where these topics are being actively discussed.

In terms of listings on the stock market, he said: "We've had a very good three-year long run, but after seeing the markets over the last week, I would think listings could be down this year."

Chinese growth 'on steroids'

Yichen Zhang, chairman and chief executive of Citic Capital, a China-focused investment fund, is also attending the WEF event in the alpine village of Davos. He agreed that the market sell-off may have been overdone.

He predicted that the slowdown in China would hit bottom this year or next, but argued that it was no bad thing.

"[Chinese] economic growth was on steroids," said Mr Zhang, and needed to reach more normal levels.

"Since the financial crisis, it has contributed the most growth to the global economy, about 30-40% of growth [comes from China]."

He added that there was a fundamental misunderstanding in the West about how the economy works.

"People don't understand how much control it has over economy. A large part of it is state-owned, the entire banking system is still controlled by government."

That means that the country should manage to avoid a crisis and that the slowdown will be a gradual and controlled process, said Mr Zhang.

However, he questioned whether now was the right time to deregulate its markets. He said it would have been better to introduce this during the boom years when "China could do no wrong".

The government was criticised for its lack of management on the stock markets when they slumped earlier this year. A newly introduced "circuit-breaker", aimed at making the markets more stable, was axed after it proved ineffective.