Share Market Wrap 23rd Feb 07

Origin Energy announced today that it was rejecting AGL’s proposal for a nil premium merger, which in my opinion is a very sound decision by the board as the merger tended to favour AGL much more than Origin. Based on my research Origin has very good growth potential over the coming year whilst AGL is unlikely to grow as strong, therefore it is likely that AGL was attempting to acquire Origin with the intention of achieving stronger growth.

I suspect that Origin will continue talks with AGL as the merger makes sense and both companies believe it will be a good thing in the long run; therefore, if you own these shares, I suggest you hold tight with a wait and see attitude.

So what’s happening on the market?

I was fairly confident that the market would trade down this week; however, following a mix of up and down days, the market rose strongly yesterday to rise above its previous all time high set a few days earlier. The market has continued its upward move today to break above 6000 points for the first time in history.

Over the past month I have indicated that I am expecting the market to find resistance around mid-February and fall away. While we have seen some resistance over the last week the market is yet to pull back. It is still highly likely that the market will fall for 1 to 2 weeks, which could happen any time now. If the market does not have a minor correction soon, this will increase the probability of a much larger pull back in April or May.

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