Wealth Within - Market Report 8 December 2009
The hot topic in recent weeks has been the debate about what concessions should be given to industry under the Emissions Trading Scheme (ETS). What is frustrating with this is the lack of transparency about the cost to the consumer and the affect an ETS will have on the standard of living for Australians in one, two or even ten years from now.
The previous government introduced the GST and was held to account for every dollar that would come out of our wallets before it was finally passed, so why is the ETS being treated differently? Just because the ETS is about the environment does not mean it should be subjected to less scrutiny, as we all need to understand how it will impact the broader community. Therefore I believe that the Liberal party was right to reject the government’s proposal last week.
Even industry are not sure about the true impact an ETS will have on them, however, one thing is certain, if taxes are increased industry will inevitably pass these costs onto consumers which will potentially result in job losses. Whilst I agree we all need to be accountable for the resources we consume and the pollution we generate, I believe a hold should be placed on this bill until the government comes clean on this matter.
So what can we expect in the market?
Two weeks ago the market fell heavily due to uncertainty about the decision on the ETS, and the news that emerged about the Dubai government being unable to meet its obligations to make debt repayments. This news sent shock waves around the globe about another possible credit crunch unfolding, which would undoubtedly affect the banks around the world once again. The strong move down proved to be an over-reaction as buyers returned to the market early last week which saw it claw back almost all of what it gave away. This rise continued over most of the week as the market moved towards the previous high achieved on 15 October of 4897.50 points; however, the market fell away on Friday to slightly dampen what was essentially a good week.
This strong rise on the market was a very positive sign which could indicate that a further rise through the 15 October high is now likely over the coming weeks. That said we have to acknowledge the market has merely been trading sideways since September, therefore we need to be patient and wait for price to move up through the October high to confirm that the next rise is actually underway.
The ETS is now out of the way for the time being, and further interest rate rises look unlikely until at least February 2010, both of which are positive signs that could support the argument for further rises on our market. Further to this, the information about the true debt situation in Dubai is unlikely to resurface until later in January, therefore I believe our market is likely to continue up through the festive season as I have previously indicated with my target for the rise still being between 5000 and 5200 points. Given this, everyone should have a very Merry Christmas.
As this is my last report for the year. My team and I wish you all the best for the festive season and we look forward to continuing to support you in 2010.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst