Australian Market

Another day, another 40pt off as the week leads from overseas fed through to the Australian market. Defensives again outperformed with #TLS# continuing the rise towards $4.20.whilst banks wallowed in nowhere land neither cheap enough to buy or expensive enough to sell. Resources once again were the focus of the selling pressure despite higher commodity prices. The market tried to rally on profit taking but succumbed to apathy and remained range bound most of the day.

The market does appear oversold but remains hostage to overseas moves but we would expect to see a brief short covering rally in the next few sessions as we close the week out. Most of the damage has been done today by the banks #ANZ#,#CBA#,NAB# and #CBA# combined with #BHP# and #RIO#.

However second line resource stocks have also been hit hard in recent days as confidence has evaporated ,stocks like #RXM#,#PAN# and #OZL# have all suffered.

Despite our market holding up relatively well in the face of the serious post US Election down draft, it is hard to see us recovering until overseas news is much better. When it does the knee jerk traders will buy the oversold and the high yield stocks aggressively, was it ever different. Volume was better again today  at $4.2bn which may indicate that we are seeing some exhaustive selling after a torrid week.

In the news today:

#MYR# led the way higher for consumer stocks after posting better than expected figures which benefitted from the better weather. #DJS# also pushed higher on their coats tails and news yesterday that consumer sentiment improved finally leaked into the sector. There were also media speculation that the retail stocks are starting to at least fight back in the internet retailing wars.

#NCM# took a dive today as other large gold stock gave up some of their gains again today.#SBM# fell as did #EVN# and #KCN#.Seems that the fizz is rapidly dissipating from the Gold market and we desperately need some action in the Gold Price to justify the current levels.

In BBY House stocks today, #MSB# were extremely volatile with reports that Teva was unable to fund ongoing trials, which were subsequently hosed down by the company forcing a big rally off their lows of $4.22.In media stocks #SWM# shrugged off the negative market sentiment and pushed higher following the comments from Don Voelte at the recent AGM.#LYC came back on today but again were on the nose following the placement at 75c.Stale bulls seems to be dumping the stock and taking their medicine as moves to refer the operating licence seem to have moved up the judicial chain to the high court.. #IXR# continued their strength up again today following BBY ‘s recommendation a few days ago.

#GNC# rejected the advances of their US suitor today and reported better numbers but remain susceptible to profit taking as there appears to be no bidding war on the horizon. Our BBY analyst remains in the take profits camp as the current bid looks relatively fully valued given the time it will take to get approved. There may well be some upside to the current bid to save face but this looks like game over unless we get a late counter offer.

Following yesterday’s slightly better result from #CSR# the stock continues to believe the optimists on housing activity due to ongoing rate cuts, however JHX did not feel the same love from their results and tried hard to play up a US recovery but failed to enthuse falling today.

In the kennel today were #PDN# #SGM# and #AGG# on dimming outlook for them. On a positive note that was hard to find in this environment, #QAN improved on the announcement of a buyback and some capital management issues. Showing confidence in the future of its international business was paramount and it is backing itself that it is on track to turn this business around.

#GBG# popped the champagne corks today as the company reported its first magnetite production from its First Karara project.

If there was any more reasons to like #TLS#, Australia’s digital economy grew significantly in 2011/12 with online shopping, social networking sites and a near doubling of smart phone ownership helping drive the boom.

Online shopping activities grew 27 per cent in the 12 months to July 12, according to a new report by the Australian Communications and Media Authority (ACMA).

Advertisement There are now 11.36 million Facebook users in Australia, 9.67 million YouTube users and, in the 12 months to July 2012, 12.27 million people accessed online news sites, which is all good news to the Telco’s as we remain more and more addicted to data and our smart phones.

In local economic news the Reserve Bank accumulated $457 million worth of foreign currency in October, the third month of $400-million-plus increases, compared with a monthly average rise of roughly $90 million since the start of 2010.This is being interpreted as a growing frustration that the Aussie dollar is too high. Something which industry has been saying for so long now. The problem for the RBA is that as a AAA rated economy in relatively good shape with higher interest rates  than most ,the economy is still sucking in overseas dollars and hurting our export markets. Of course the positive is that it is helping contain inflationary pressures.

In news just in China has appointed its new leader for the next decade in Xi Jinping. Having glanced at the pictures of the new politburo I suspect that they have bought a job lot of Grecian 2000 and are following in Ronnie Reagan’s footsteps with their hair dressing contract.

News out today from the High Court that insider trading does not even have to be true to get you into trouble ,will send a few shivers down the broking community.

 

It has not been a good week so far but there is a potential rally due, as oversold stocks are hunted by the braver and more sane investors out there.\

 

Clarence

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