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Market barometer: Thailand offers 'finger of God' example

Friday 8th September 2000

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ASX all resources index

The proposed transtasman stock exchange merger may provide reason for foreign investors to procrastinate over buying New Zealand shares until it becomes clearer how local listings might be affected by changes to rules and competition with Australian listings.

Another reason to dally is the continued fall in the kiwi. While it slides, overseas investors will be more inclined to sell rather than buy. If the dollar stabilises, this attitude could be reversed.

The "finger of God" influence by Morgan Stanley Capital International's world share indices over small markets such as New Zealand has emerged in Thailand. It left Thailand's 0.9% weighting in the All Country World Free Index alone but cut its contribution to the Emerging Markets Free Index to 1.58% from 1.64%, knocking down the Stock Exchange of Thailand (SET) index and evicting eight major Thai firms from international fund manager attention.

Like New Zealand, Thailand is worried about slowing economic growth caused by a deadly combination of weak currency, high indebtedness, political instability and rising oil prices. Together, these threaten to cause imported inflation, loss of confidence, lower domestic production and slower export demand in trading partners.

The US sharemarket is stirring and could be building up for a year-end rally. Evidence is emerging of a long-awaited slowing of the economy, which could tempt the Federal Reserve to notch its interest rate policy down from tightening to neutral.

US sharemarkets indices are generally up at new highs. The Dow Jones industrial average has broken above 11,000 and could be aiming for January resistance at the 11,500 area. The S&P 500 has made it above 1500, with March's high of 1550 to beat. The NYSE composite has made significant breakout over previously sustained resistance at 660 and is tracking 680. The Nasdaq has picked up steam and is probing July's post-selloff peak of around 4200.

London's FTSE100 has jumped above 6600 to test 6800. Australia's ASX100 has cooled off pre-Olympics and has slipped under 2700. The transtasman markets may take a bit of a holiday while the games are on. The ASX all resources index (illustrated) reveals this sector has picked up on an improved demand outlook. NZSE indices are mixed, with the smaller companies capital index stalled at 400 support and the top-40 capital losing its footing at 2150 to slide below 2100 while re-rating Telecom tumbles toward 600cps.

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