ASX CLOSE: Market retreats; materials and financials lower

Monday 21st September 2009

With Japan and Singapore on holiday today, trade across Asia was mostly lower this Monday as miners and financials retreated on light volumes. The Shanghai Composite is still trading, down 0.9% while in Korea, the Kospi finished 0.3% weaker. The Hang Seng is currently up 0.2%.

In Australia, the ASX 200 closed 0.3% lower at 4678.7 on low volumes due to Japan being on holiday. We saw a bit of follow through selling after Friday's profit taking and FTSE re-weighting, mainly across the financials and materials space. The miners detracted the most points.

Today's follow-through selling after Friday's losses is completely healthy. The pullback we have witnessed over the last two days has been both shallow and orderly, and on low volumes, suggesting this upward trend is still very much intact. Prices seem to be falling under their own weight, rather than overwhelming amounts of selling.

Those investors that had pre-empted a seasonal retreat in equities this month are undoubtedly in the red and are probably better advised to remember the mantra "the trend is your friend" and react to any definitive break to the downside, as opposed to pre-empting it and hoping they are proven correct.

I know it sounds simple, but price is the one thing you can believe in in this market, and any market for that matter. It will tell you when it's time to sell. At the moment, it's telling us its going higher. Stay long until proven wrong.

The materials sector was the biggest percentage faller today, down 1.3% as the likes of Lihir Gold (-3.6%), Amcor (-2.7%), Newcrest Mining (-2.8%) and BHP Billiton (-1.6%) all detracted. The leads for the sector were not great as base metals all closed lower on the London Metals Exchange. Nickel fell 0.2%, Aluminium 1.5%, Zinc 0.7% and Copper 3.3%. Also, both Rio Tinto and BHP Billiton were softer in London, down 0.1% and 0.9%, respectively.

Citigroup said this morning that BHP Billiton was its preferred diversified miner as it offers superior production growth, commodity exposure and balance sheet strength. It believes the outlook for the mining sector remains positive, saying "the mining sector should continue to benefit from ongoing improvements in demand and restocking in the developed world, supportive fiscal and monetary policy, a weak US dollar and upward earnings revisions".

Also, there's speculation that BHP Billiton may be set to use some of its cash pile for acquisitions. Chief Operating Officer Alberto Calderon said it has identified "four or five opportunities". They are all tier one mining or oil and gas companies or assets and he expects BHP Billiton to make a move within the next 12 months.

Australia's major gold miners sold off back today as gold pulled back to just below the $1000 level. This retreat should not be over analysed. Gold's chart is still very much in an uptrend with the weakness seen over the past two sessions likely attributable to news that the IMF will be undertaking limited gold sales from its reserves and certainly not at a magnitude that will cause a major disruption to prices.

The property trust sector was weaker as a whole today, down 0.5%. Mirvac Group, GPT Group, Macquarie Office Trust and Westfield Group were all down between 1.1% and 3.2%, with Mirvac Group the biggest faller.

The other major decliner and second biggest detractor in terms of points was the financials space, down 0.4%. Bendigo Bank was the biggest percentage decliner, finishing 2.4% lower while insurers Insurance Australia Group and Suncorp-Metway lost 2.1% and 1.5%, respectively. The big four banks were all down between 0.1% and 1.1%, with National Australia Bank the worst.

On the upside, the industrials sector was the best performing, rising 0.9% as the likes of Macquarie Infrastructure Group, Brambles and Macquarie Airports all rose between 1.5% and 5.6%, with Macquarie Infrastructure Group the top performer.

Prices are in AUD unless otherwise stated.
IG Markets Ltd, Australian Financial Service Licence No. 220440. ABN 84 099 019 851.
This information is provided for information purposes and should not be regarded as financial product advice. This information does not take into account your specific objectives, financial situation or needs. Therefore you should consider the information in light of your specific objectives, situation or needs before making any trading or investment decision. IG Markets recommends you take independent financial advice before any decision whether to trade with IG Markets in the products we offer.

Comments from our readers

No comments yet