HILARY JOFFE: Market movements go wild, but at least the plumbing is working
Investors are fleeing from all risk and putting their money in cash
Predictably, the extreme volatility and savage losses on global and local markets over the past week have prompted calls for markets simply to be shut down until calm returns. This is never a good idea, nor a fair one, as almost anyone in the market would argue. Prices are plunging because investors are fleeing from the heightened risk they see in the world and in the shares or bonds or derivatives in which they are invested. A shutdown prevents those who haven't already got out from selling, which is unfair but also ensures the sell-off will be even sharper when markets reopen.
"Volatility in and of itself is a natural market force and open market forces should prevail," says JSE CEO Leila Fourie. Or, as Ninety One CEO Hendrik du Toit puts it: "You can't suspend reality."