Punters brace for tumble

Published in The Australian, December 2006 by Kevin Andrusiak

Nerves were starting to show this week with shares at record levels again, fuelling predictions of a choppy few weeks for equities as the market closes in on its fourth year of double-digit gains.

Market watchers expect stocks to go into a down-swing after a bumper October and November trading period which has pushed the All Ordinaries towards 5500.

The index closed down 46.4 points yesterday to 5415.2, a loss of 16.2 points for the five trading sessions, which were marked by swings of greater than 1 per cent on Tuesday and Wednesday.

The All Ordinaries had earlier hit a record high of 5475.9 before selling pressure ahead of the close.

The December share price index contract shed 36 points to 5429.

The leading weight on the bourse yesterday was BHP Billiton, which continues to disappoint investors despite rising metal and oil prices and bullish comments from chief executive Chip Goodyear at a shareholders meeting in Brisbane on Wednesday.

Both BHP and Rio Tinto have lagged the gain of the All Ords during October and November.

BHP closed down 19c for the week while Rio Tinto, which added 32c yesterday to $74.52, gained 10c over the five trading sessions.

Zinifex continued to fly the flag for the resources sector, up 34c yesterday to $17.37 to give a gain of 67c for the week.

While much of the market attention was on the movement of blue chips, the minnows generated good returns for their faithful. 

The Small Ordinaries index is up 24 per cent for the 11 months to the end of November against a 16 per cent gain for the All Ords and a 14 per cent gain for the top-50 stocks index.

Wealth Within chief analyst Dale Gillham said the ASX Top 20 was the only index that did not push a record high in November.

"If we study the history of bull runs on our market, it is evident that the resource sector is always the last to rise and, because of investor confidence, it is generally the more speculative resource shares that provide the best returns," Mr Gillham said.

"Given the large swings in the All Ords this week, the volatility in the market has continued rather than dissipate - as I was expecting.

"I am still expecting the market to pull back and possibly fall strongly below the low of November 20 and reach between 5200 and 5000 points."

Wise-owl.com analyst Simon Guzowski said the fall in sales for global retail giant Wal-Mart mid-week showed just how susceptible the equities market was to current Wall Street activity.

"Wal-Mart said it is expecting weaker sales growth over December than the market wanted to hear and this didn't receive a warm reception as they also reported that same-store sales dropped for the first time in more than 10 years over November," Mr Guzowski said.

"While the Dow Jones has consolidated a little recently, when you look at it on a monthly basis, it has had its longest winning streak in three years.

"Oil stocks have done really well with this and more than offset losses clocked up elsewhere. 

Stocks like ExxonMobil and Chevron are trading at all-time highs."

Oil prices gained nearly 6 per cent this week because of nerves ahead of an OPEC meeting on December 14 and colder weather in the US increasing demand for heating oil.

Woodside gained $1.36 for the week to $37.50 while Santos shed 27c to $10.16.

Qantas shares gained after it upgraded profit estimates. Qantas is a takeover target for Macquarie Bank and private equity interests, which may have to come back with an improved offer on the rumoured $5-a-share target.

Qantas gained 11c yesterday to $5.06, up 12c for the week.