A late rally has seen the Australian share market recover about half of yesterday’s steep losses, but the benchmark index still lost 4.3 per cent this month.
After having slumped 3.8 per cent yesterday, the benchmark ASX 200 only managed to bounce 0.8 per cent at the open.
The index of Australia’s biggest stocks picked up some steam as trading continued, and a strong late rally saw it rise 2.1 per cent back to 5,022.
IG market analyst Angus Nicholson said, even after the late surge, Australia’s benchmark index has racked up its worst quarter in four years, shedding 8.8 per cent.
“After the dramatic selloff seen in the region yesterday, markets were primed for a bit of a bounce today,” he observed.
“Even poor data out of Australia and Japan couldn’t quite take the steam out of them, although most markets were far away from recovering yesterday’s losses.”
The poor data in Australia was a bigger-than-expected fall in building approvals last month.
The broader All Ordinaries index also managed to haul itself back above the 5,000-point mark, which it breached for the first time in more than two years yesterday, closing at 5,059.
The most likely scenario is more downward/sideways market action.
BetaShares chief economist David Bassanese
However, there are doubts about whether this rally can be maintained or whether there are more falls ahead.
BetaShares chief economist David Bassanese said Australian share markets are still overvalued given weak corporate profit growth outlooks, and could still fall another 5-10 per cent from yesterday’s lows.
He said shares are currently trading around 14.5 times expected annual earnings, down from 16.2 in February, but still above a recent average of 13.5.
“Valuations on this measure, therefore, are still at a little above their long-run average … and above previous valuations lows of 9 and 10.5 times forward earnings in early 2009 and mid-2012 respectively,” Mr Bassanese wrote in a note.
“In my view, the most likely scenario is more downward/sideways market action ? either until such time as either Reserve Bank signals deeper interest rates cuts and/or the Australian dollar falls a lot further ? either of which could help lift business confidence and earnings expectations.”
Miners, banks recover, Santos slumps further
Australian commodity firms generally bounced back on today’s better sentiment, but there were some notable exceptions.
BHP Billiton hauled itself back above $22 – a level it breached for the first time since the 2008 financial crisis when it slumped almost 7 per cent yesterday, but its 2.8 per cent gain today was well under half that loss.
Rio Tinto did not fall as far yesterday, and also posted a stronger gain today, climbing 4.5 per cent.
Woodside Petroleum also managed a solid rebound to recover about half of yesterday’s slump, rising 2.7 per cent to $28.93.
However, woes continued for Santos, which fell another 7 per cent today to breach $4 for the first time since early 2000, backing up an even steeper fall yesterday.
The Adelaide-based company was no doubt hurt by rival Origin’s move to raise $2.5 billion in fresh capital from shareholders, amid concerns that Santos will need to do the same.
Origin shares were on a trading halt today, having been the biggest loser on the ASX 200 yesterday with a 10 per cent slump.
The major banks fared better.
Having all fallen more than 3.5 per cent yesterday, the Commonwealth Bank regained its losses rising 3.7 per cent, with the other majors posting gains of between 2-2.7 per cent.
Telstra also recovered about half its losses, rising 2.1 per cent to $5.61, with Woolworths up 2.5 per cent and Wesfarmers 2.4 per cent to $39.22.
The Australian dollar also hauled itself back above 70 US cents for most of the day, before a late fall took it to 69.9 US cents by 4:53pm (AEST).
Source: ABC News
