Friday, October 17, 2008

Australian Stock Market News - Week Ending 17/10/2008

Well it was another turbulent week on the Australian stock market. The all ordinaries index was up and down like a yo-yo. The all ordinaries opened the week at 3,966, reached a high of 4,404, a low of 3,937 and finally closed at 3,945. This is a far cry from the high of over 6,800 reached by the all ords mid last year. The chart below shows the movement in the all ordinaries during this week.

Australian Sharemarket Chart

I can't believe how volatile the Australian sharemarket has been over the past month or so. Share prices collapse one day, rally the next only only to slump again. There are probably some very important lessons to be learned about human behavior and market psychology from all of this. As a long term value investor, I can't believe that the underlying value of some of these companies can vary so much from day to day.

You can understand why some people see shares as such a risky investment. I wouldn't like to be trying to learn about the stock market right now as I think the fear pervading financial markets would make it very hard on a beginner just starting out.

Surely this will be a great time for value investors. I noticed that renowned value investor Maple-Brown Abbott has been busy in the last week picking up shares in Paperlinx, Boart Longyear and Emeco. Another fund manager I keep my eye on is Lazard. They were buying shares in Specialty Fashion Group this week.

While I'm on the topic of fund managers, I noticed that Platinum Capital has announced a 1 for 4 rights issue. Kerr Neilson is a pretty canny investor so I was initially surprised to see him raising capital with the share price so low. But I guess that he must see lots of opportunities right now and will be able to put the new funds to good use.

The last thing I want to mention today is that it is now October. The significance of this escaped me until today. For those that don't remember, the crash in 1987 occurred in October and since that time October has been a regular period of weakness in the Australian stock market. Even more to learn about market psychology...

1 comments:

Mason said...

I completely agree that is is very strange to see Platinum with a rights issue. Gives the feeling that Kerr may be slightly bearish on the next 6 months?

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