Australian Investors can still hold on
Investors won’t have to raise the white flag of surrender. However, only white knuckles have to be raised as a signal of holding on.
Yesterday, the Australian markets plunged by $1 billion every minute from the beginning of trading; thus, the term “black Tuesday”.
With the ASX200 share index going down a whopping 15 per cent for the month, a “black August” was feared. The 15 per cent drop overrun the 10 per cent and 13 per cent falls experienced in 2008 during the collapse of the US investment bank Lehman Brothers.
Today, Australia has recovered as the market’s mood is cheery. The ASX200 is now open at 3 per cent which is about $36 billion additional.
“Whilst we will start off stronger, it will be interesting to see whether all of the gains can be sustained throughout the day. In reality, the problems that caused the selloff still exist and we wonder if this will weigh on sentiment heading into the close,” said Arab Bank Australia treasury dealer David Scutt. ”
Heavy weights
US recovery will be supported as US Federal Reserve promises to keep its interest rates low until mid 2013. However, reports from Britain are not helpful as the UK economy slumps from the riots in Britain.
Australia’s economy, on the other hand, is also susceptible to this gloom as exhibited by the Westpac/Melbourne Institute’s update of consumer confidence gauge. It has revealed a not-so-good figures that point to a fourth consecutive month of decline.
‘‘Wealth plays a role in consumer sentiment so if you are invested in the stock-market and you see a decrease in your own personal wealth from a decline in the stock-market, it impacts your outlook,’’ says Dr Edda Claus, a research fellow at the Melbourne Institute of Applied Economic and Social Research.
‘‘I would have thought the volatility in the stock market plays to uncertainty and if there is more uncertainty in the stock market and the economy as a whole then people would be less confident,” she added.
With all these turmoil, it is seen that Australia has a bigger chance of recovery compared to other rich nations with its 6 per cent of annual output and ties to Asia countries with fast-growing economies.
George Boubouras, local head of investment strategy at UBS, says that another bumper profit result by the country’s biggest bank is a reason to hold on to Australia’s chance of recovery.
Commonwealth Bank has a 12 per cent increase in full year cash profit. It has recorded a $6.84 billion dividend of $1.88 million per share.
A third quarter profit of $1.4 billion was reported by National Australia Bank yesterday.
“The fundamentals have been persistently ignored by markets over the past couple of months. The fundamentals have been parked to the side, and discounted given the many obvious global headwinds,” said Mr Boubouras. ”
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Source: SMH.COM.AU
