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Global stock markets started the last quarter of 2023 with a bang into the red. And it’s not looking pretty.

Do you know the story? That one where Moses parted the Red Sea. I kind of wish that was the case this month. Unfortunately, only Malaysia’s stock market gained in October 2023. The major global markets of the U.S. (-2.8%), China (-4.7%) and Europe (-2.7%) all fell in line with the expectations of a global recession soon and also the conflict between Israel and Palestine.

Geopolitical conflicts have always been the wildcards for global stock markets. In early 2022, the Russia-Ukraine conflict erupted and that rattled the commodity markets, leading to higher prices for many economies around the world. This time around, both countries are not major producers of commodities, but rather a front for religious reasons. The western countries are strongly in favour of Israel, while most Muslim countries support Palestine. It is a concern that political and economic relationships between the various countries could be strained due to this.

When the Israel-Palestine conflict intensified in the 2nd and 3rd weeks, markets nose-dived. Meanwhile, in Asia, even though China unveiled a further RMB1 trillion in policy support and 3Q gross domestic product (GDP) came out stronger than expected (4.9%; projection: 4.4%), it wasn’t enough to overcome the dire economic sentiments prevalent among Chinese consumers and businesses. The latest October 2023 Purchasing Manager’s Index unexpectedly showed that manufacturing activities soured among its producers.

This sentiment spread to Southeast Asian markets where countries such as Vietnam, Thailand and the Philippines rely heavily on trade with China. Of note, Vietnam’s exports to China account for about 16.3% of its total exports, making it one of the most vulnerable to a slowdown in China. In Thailand, the expected return of Chinese tourists hasn’t been that forthcoming where a big part of its economy is reliant on tourism.

On a positive note, Malaysia’s market gained by 1.3%, making it the only market in the green. Even with crude oil prices declining, it seems like the sentiments from the Budget 2024 announcements were enough to lift markets for the month.

For you: With global stock markets declining 3 months in a row, it will be prudent to re-evaluate your investment positions. It might be time to cut losses in stocks that don’t have strong long-term fundamentals. It also means bargain-hunting could be the right strategy now.