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The Australian share market in freefall

Posted by Adrian on January 18, 2008

The Australian share market counties to drop significantly, according to an in the Business Age online quote, “The 10-day losing streak marks the longest in Australian sharemarket history, according to Bloomberg data.”. This drop has been a steady decline from 6,873.2 points on the 1st Nov 2007 to 6,019.79 points Jan 16th 2008.

In my opinion this would indicate an overbought market vulnerable to the credit crunch from the US and global credit jitters. It was also suggest that a lot of Australian companies are heavily leveraged with debt and are vulnerable, the banking sector is also in trouble (including the pension/superannuation industry) – from investment into collateralized mortgage and credit debt. A lot of investor’s may be dumping stocks due to the fact Australia is very connected to the US credit markets and investments.

The question now with Australia entering into a harsh period of hyperinflation, will the Reserve Bank of Australia increase interest rates. If they do decide to hold rates at 6.75% on Feb 28th, then we may see the continuation of high inflation in Australia, the decline of the Australian currency and the continuation of higher prices. Or the RBA increase rates, despite the stock market, which is overvalued and inflated anyway; and protect the AUD and it’s purchasing power.

refer to graph: All Ords

_aord.png

The All Ords is currently down 122.80 (2.10%), index value at 5,731.10 as of 18th Jan 2008.

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