Big players wary

Published in the Sunday Times, September 2009 by Karina Barrymore

Mum and dad investors continued to plunge back in to the share market this week, helping boost share prices by$23.5 billion.

Despite a 0.5 per cent dip yesterday, the share market remained strong for yet another week. Since the March trough, share prices have risen more than 45 per cent.

But the telltale sign of more uncertainty to come continues to show up in trading volumes that remain low.

Professional and institutional investors still appear wary of buying large volumes because they are unwilling to commit to present price levels. Smaller investors, however, are making up for lost time.

"The big players like the institutions aren't really in the market, it's more the retail investor not wanting to miss out on the bullish run," Wealth Within founder Dale Gillham said yesterday.

"They've seen prices increase lately and they want to get back in. However, most of the professionals are still holding back because we expect a pullback again soon.

"Over the next few months, the market will move sideways and down, rather than remain bullish."It's that old saying again - the amateurs buy at the top and the professionals buy at the bottom.

"Right now there are a lot of amateurs buying and that's what's keeping the market rising." Small investors need to take a leaf out of the institutional's book and ease up on buying at current prices.

Mr Gillham said he expected prices to fall by up to 15 per cent by November. "They could be doing harm buying at this peak," he said.

"Their portfolios will suffer by buying just before the market rolls over. "Better to be buying after it has fallen over and on the way again after this next trough.

"There really can't be very much upside at the moment in most shares and there won't be for the next few weeks.

"I believe there's going to be a bigger percentage on the downside very soon so you will soon be able to buy the same shares at a cheaper price in a couple of months time."

However, there will be sectors and specific stocks that will perform well despite any general market downturn.

Wise-owl.com analyst Josh Terlich expects listed property trusts to finally show some comeback.

"Plagued by astronomical debt levels and suffering at the hands of the collapse in property markets, the listed property sector is in the midst of a re-rating. The realisation is hitting that these companies will now survive," Mr Terlichb said yesterday.

The resources sector also holds some highlights.

"With gold trading at more than $US90 an ounce recently, both producing and non-producing companies have been benefiting. Profit margins have never been higher," Mr Terlich said.

"Despite any short to midterm volatility, we expect our miners to continue their road to recovery."

Information technology was another sector which shows some promise. Many IT companies were "punished" during the global financial crisis, however, the analyst said they were now expecting a re-rating.

"Telstra is the only stock I would call a dog," he said. "I can't understand why anyone owns it.

It's gone down 62 per cent in the past 10 years and only had one run up, the rest of the time it’s just down."