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Australia Caught in the Headlights
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Author Australia Caught in the Headlights
rffrydr
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PostPosted: Fri Aug 10, 2007 6:13 am    Post subject: Australia Caught in the Headlights Reply with quote
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Aussie punters are as ignorant of bear markets as the first explorers were of monotremes. All local equities do is go up. This has created an investment environment as unique as the platypus, the country's famous egg-laying mammal. But the All Ordinaries index is now suffering the same panic selling that has gripped markets round the world, and is 7 per cent off its July high. Last week's news that two Macquarie Bank funds faced significant subprime-related losses has not helped. How might Australia's bullish investors cope with a more prolonged slump?

Things could turn ugly. Much of the market's recent strength is due to an expansion of valuation multiples - earnings growth has lagged annual index gains by about 10 percentage points over the past four years. Some of the demand has been created by Australia's compulsory pension scheme that pours an additional ADollars 20bn-ADollars 30bn into domestic equities every year. These assets now account for two-thirds of the market's ADollars 1,590bn capitalisation. But new and existing funds could quickly shift to bonds or even cash. And a global downturn would hit financial and resource stocks hard. These two sectors account for 60 per cent of the index.

Falling share prices might eventually lead to a wider range of popular investment products. Unlike continental Europe, few structured funds are offered in Australia. Most investors would laugh at the idea of paying for capital protection. The same goes for hedge funds. Why pay expensive management fees when cheap index trackers return more than 20 per cent per year? The demand for diversification will also increase if the domestic market continues to struggle. Institutional fund managers are already building up their international teams in anticipation of higher overseas weightings.

But it is Australia's real economy that could be hit hardest. With the broadest equity ownership in the world, consumption is as linked to shares as it is to house prices.

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Post new topic   Reply to topic    MarketThoughts.com Forum Index -> The Asia and Australasia Board
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diesel
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PostPosted: Thu Aug 16, 2007 6:11 pm    Post subject: Reply with quote
Australian Margin Calls Hit Record

http://www.theaustralian.news.com.au/story/0,25197,22258768-5013404,00.html

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The new figures from the Reserve Bank emerged on the same day that the Australian market plummeted and the nation's largest margin lender announced a record number of margin calls.

Commonwealth Securities has made more than 1200 margin calls in the past two days to investors to cover their loans for blue-chip stock that have been sliding backwards on fears over the US housing sector and associated credit crunch. Customers face margin calls when the value of their share portfolio falls below pre-agreed levels, forcing them to pay extra cash or to sell shares.

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diesel
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PostPosted: Wed Aug 15, 2007 9:50 pm    Post subject: Reply with quote
ASX down over 5% so far today. Goodfella you got to be a happy man at the moment!
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lion hunter
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PostPosted: Wed Aug 15, 2007 4:53 pm    Post subject: Reply with quote
The speculative end on the Australian exchange has been absolutely decimated this week. Haven't seen anything like it before.
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rffrydr
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PostPosted: Wed Aug 15, 2007 7:31 am    Post subject: Reply with quote
Someone stopped me yesterday to see if I could bring up a quote: "It's on the Australia exchange," he said. "BHP?" I said. "How did you know?"



This is for you Goodfella:

http://futuresource.quote.com/charts/charts.jsp?s=AUDJPY%20A0-FX
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diesel
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PostPosted: Sun Aug 12, 2007 1:47 am    Post subject: Reply with quote
He is spread over quite a few of the resource and common stocks at the moment. Hes down 15% at the moment but is still bullish, thinks the correction is over.
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lion hunter
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PostPosted: Sat Aug 11, 2007 11:36 pm    Post subject: Reply with quote
Head in the sand syndrome in Oz.
Cant see how your mate is suffering from his exposure to ZFX. Wasnt he buying around current prices $17.00.
I for one bought ZFX @ 3.00 and took a whopping 10% out of that trade. LOL.
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diesel
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PostPosted: Fri Aug 10, 2007 6:29 am    Post subject: Reply with quote
My Aussie friend I have talked about before is hurting. Hurting a lot! Rolling Eyes

I guess using full leverage with your life savings does that to you. Cant say I didnt warn him. Crying or Very sad
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