Australian market could ease
By Jeff Turnbull
09oct05
THE Australian share market, bruised and battered after last week's $40 billion rout, could slip a little farther over the next few days but remains well supported, according to analysts.
In a stampede of profit taking, the losses are now being described as "the correction we had to have" and not the beginnings of a bear market.
CommSec chief equities economist Craig James said the companies that suffered the most last week were the same ones that rode the market to the top.
"These companies are the key casualties of recent profit-taking but fundamentally the sharemarket is well supported," Mr James said.
He said domestic and global economies continue to expand while the main risk to profits is rising costs.
"Consumers have become more conservative about spending and borrowing decisions in response to higher petrol prices and the flattening in house prices," Mr James said.
"But consumers are well supported by a strong job market, rising wages and tax cuts."
He said the sharemarket correction was prompted by fears of higher inflation and interest rates in the US.
"But the jitters over the inflation in the US have just proved to be a good excuse for domestic investors to engage on some healthy profit-taking."
AMP Capital chief economist Dr Shane Oliver said although the correction had a little steam left in it he still expected the market to hit record heights by the end of the year.
"The recent slump in Australian shares should be seen as a correction rather than the start of an extended fall," Dr Oliver said.
"Although the correction may still have a little further to run, we expect the market to be making new highs by the end of the year and into next years and, as such, should be seen as a good buying opportunity."
In the week ahead, the market will be paying close attention to a speech to be given by Reserve Bank of Australia deputy governor Glenn Stevens in Hobart on Tuesday.
"While Glenn Stevens might express some concern about inflation, our assessment is that with housing still slowing and households under pressure from high petrol prices the message will be one of rates remaining on hold for now," Dr Oliver said.
The S&P/ASX200 index will open tomorrow at 4440.6 after slipping 6.7 points last Friday and the all ordinaries commences trading at 4400.1 after firming 1.72 points at last week's close.
The market will take some encouragement from the upward direction in the US where the Dow Jones industrial average added 5.1 points to 10,292.31 last Friday and the Standard & Poor's 500 Index improved 4.41 points to 1195.90.
The Nasdaq Composite Index advanced 6.27 points to 2090.35.
Source:
http://www.theadvertiser.news.com.au/common/story_page/0,5936,16867304%5E1702,00.html