Talk Turns To Market Bottom As Conviction Selling Eases

The Sunday Age

Sunday March 30, 2008

Peter Weekes

EVEN as more news emerges showing the world's biggest economy is probably in a recession, many local economists and brokers are starting to think the Australian sharemarket may have hit bottom.

Of course, there is the qualification that it is too early to make a definitive call, but the indications are positive, they say.

"I think we have passed the low point and now we are just bouncing along," says Austock Securities senior client adviser Michael Heffernan.

Shane Oliver, chief economist of AMP Capital Investors, is not sure whether we are having a bear rally or if it is the start of a new bull run, but he reckons the market may rally over the next couple of months. "There is evidence out there that the market is trying to put in some sort of bottom both in Australia and, more importantly, in the US, but that's yet to be proved."

Still, "it's positive that the fall in sharemarkets over the last few days, both in the US and Australia, has come on lower volumes, suggesting that selling pressure now has less conviction behind it".

With the Futures Index pointing to a 40-point fall on Monday's opening bell following an 86-point fall on Wall Street, both Dr Oliver and Mr Heffernan discount any widespread fall-out from the Opes Prime collapse.

Melbourne-based Opes Prime, a significant provider of margin loans for share investors, was put into voluntary administration and receivership on Friday and is under investigation by the ASIC for potentially fraudulent transactions.

Both ANZ and Merrill Lynch have exposure to the broker.

"The immediate impact of Opes Prime was felt on Friday. I don't think the market is going to react to that event again," Mr Heffernan said.

Dr Oliver said the spectacular implosion of the broker "is not going to have a major impact - most people haven't even heard of it - but the fact banks are exposed to it will worry the sharemarket."