Market Carnage
The danger of reaching the exit door of the Australian Securities Exchange first is that you could get stuck there holding it open for the rest to get out first.
Investors opened the week falling over each other in a bid to sell off shares as the Australian market shed a further $35 billion in value on Monday after fears concerning the state of the global economy saw stocks tumble for a fifth consecutive day.
The benchmark S&P/ASX200 Index closed down 119.3 points, or 2.9 per cent, at 3986.1 taking it below the 4000-point level for the first time since July 16, 2009.
The broader All Ordinaries Index fell 113 points, or 2.7 per cent, to 4056.7.
Before opening today the local market has shed around $135 billion since last Tuesday.
The news hasn’t been any brighter this morning as the Australian market opened to news that global markets had suffered another shocker overnight.
Predictably Australian shares followed suit falling heavily at the opening of the market this morning, losing almost $50 billion in value in the opening minutes of trade, as investor fears showed little sign of easing.
The All Ordinaries Index surged below the 4000-point mark, losing 157.2 points, or 3.9 per cent, to 3899.4 points, while the ASX200 dropped a similar amount, losing 148.9 points, or 3.7 per cent, to 3837.2 points.
Falls were across the board with all main sectors of the market down.
Minerals were down 3.7 per cent, with energy stocks off 5.1 per cent, and banks losing 3.3 per cent.
Goldminers managed to avoid the carnage by holding steady after reaching fresh US-dollar highs overnight.
However, the strong run of the Australian dollar has also hit a roadblock, falling back towards parity with the US dollar.
The local unit dropped to as low as 100.76 US cents, ringing up a 10-day loss of 10 US cents.
The Aussie was also buying 78.8 yen, 71.6 euro cents and 62.2 UK pence.
Looking for a bright side to the unfolding drama Perth-based The BPF Group Morgan Stanley Smith Barney highlighted the following good points for market watchers to consider.
– Globally credit markets are in good condition
– Corporate Balance sheets are in great shape (unlike 2008)
– Our market has factored in a 15 -20% fall in industrial earnings while our forecasts are for a 15- 20% rise in earnings.(Our reporting period gains momentum this week -watch CBA tomorrow)
– Falls of this nature allow bad news (ie risks that may not eventuate) to be factored into prices
– Markets are cheap – it is fear not fundamentals that are driving this market in the short term
– With panic and forced liquidity there is opportunity- if buying in this market be attracted to companies with strong balance sheets and sustainable dividends (fall in love with franking if you haven’t already)
– If in doubt “Lie back and think of England” and be glad you don’t live there.