Futures Players Cut The Ground From Under Share Prices
Sydney Morning Herald
Thursday August 5, 1999
The sharemarket reverted to recent form yesterday with its third decline in four sessions as nearly every sector headed downward, dragged down by pessimistic futures traders.
The All Ordinaries index fell 26.5 points to 3005.7, giving back nearly all the gains from Tuesday's surprisingly strong session.
The index was down more than 41 points at one stage during the morning.
Since July 20, the sharemarket has lost 121 points.
Market participants pointed to the futures market as one of the main culprits behind yesterday's weakness.
The September Share Price Index futures contract, which is taken to give an indication of the near-term direction of equities, fell 37 points to 2995.
That represents a 10-point discount to the cash market.
``The futures players continued to set the direction," said Mr Shaun Mays, chief investment officer at Westpac Financial Services.
``When volumes are thin like they were [yesterday], SPI trading can make a huge difference," he said.
Brokers also speculated that Tuesday's gains were built on the belief that Wall Street's Dow Jones was due to snap out of a recent losing streak.
It did, but not by much.
The Dow Jones industrial average rose only 31.35 points to 10,677.31.
Also, the broader market indicators were down.
``Really there was no reason why we should have been stronger on Tuesday," Mr Mays said.
`` When you look at it, over the two days the sharemarket is roughly neutral."
Investors are still preoccupied with watching for the US Federal Reserve to increase US interest rates, which would alter valuations of bonds and, in turn, flow through to both US and local share prices. ``It is one of those markets where day to day moves can be over analysed," said Mr Ken Lambden, head of equities at Schroders Investment Management.
``The fact of the matter is that there is a building expectation of another rate rise by the Fed."
Interest rate-sensitive shares were sold off, led by the banks, although they closed above the day's lows.
Westpac fell 24c to $9.86, ANZ 22c to $10.63, NAB 16c to $23.29 and CBA 23c to $24.20.
Elsewhere, the market's biggest stock, News Corp, slipped 34c to $13.14.
Telstra suffered its tenth decline in 11 sessions, dropping 8c to $8.16.
Not even resources, which have run to recent peaks, could muster much support.
BHP was down 20c to $17.45, Rio Tinto 51c to $28.20, North 9c to $3.57 and WMC 8c to $6.85. MIM beat the trend with a 3c rise to $1.33, making a two-day rise of 7c.
Goldminers, however, were a shining light, led by heavy hitters such as Lihir Gold up 5c to $1.20, Normandy 4c to $1.16 and Acacia 2c to $1.80.
There was scattered support for some leading companies, but along stock specific lines.
National Mutual rose 2c to $2.32 on its cost-cutting plans while Brambles continued to run on expectations for a strong earnings performance and also talk of a major deal for its US pallet business. The stock rose 31c to $42.51.
The sharemarket would likely lack direction until investors are sure of the outlook for US interest rates, although the local reporting season could provide a fillip, Mr Lambden said.
``But, the gloss will be taken off quickly if there is a change in interest rate policy in the US," he said.
BT Hotel Group topped volumes with nearly 91 million shares passing through the sharemarket.
It was mostly via one transaction related to a reorganisation of various funds within the BT group. BT Hotel Group rose 2c to 82c.
New listing Protel, a software company, was also strongly traded, with 6.5 million shares changing hands as the stock ended its first day on the exchange at $2.89, compared with the $2 issue price.
AD Sports Technologies re-listed yesterday after a four-month suspension. It emerged in a new guise as an internet database concern.
The former golf club shaft maker ended the day at 16c a share.
© 1999 Sydney Morning Herald