Pesky hedge-hogs
Published in The Sunday Times March 2007
Dale Gillham
People are asking why there have been large movements in the market and the answer is because of the hedge funds or institutional trading.
Another reason is over-use of leverage by many investors.
Recent falls on the Chinese and US markets provided hedge funds with a way to push the market in their favour, based on the fact that overreaction on our market would create a fall big enough to allow hedge funds to profit.
This caused traders, who were highly leveraged in shares that were falling, to sell, and the market fall further, resulting in the hedge funds profiting further.
BHP, RIO and PDN shares were all targets and large sums were lost to the big end of town, as investors tried to trade these shares.
I believe if the market fails to make a new all-time high in the next three weeks, it is likely that the present all-time high of 6024.7 on February 23 could be the yearly high and possibly the four-year high that I have been expecting.
Given the weakness on the market this week, it is likely that we may not see a new high, which means the market will probably fall below the March 6 5626.90 low.
