As Crowd Basks In The Ladies Day Sun, Investors Retreat At A Gallop
The Age
Friday November 9, 2007
? Keep track of your investment universe using a portfolio tracker and other analytical tools at theage.com.au/businessday SUSPECTING the worst, investors took the market to its biggest fall in almost three months as more subprime angst overtook Wall Street.
The S&P/ASX 200 Index sank 170.8 points, or 2.6 per cent, to 6521.6. Markets in Hong Kong, Japan and China also tumbled. But as the US banks and investment houses were wilting, falls were less severe in Europe where France's biggest bank revealed solid annual results. BNP Paribas said third-quarter net income was more than EUR2 billion, up 21 per cent compared with a year earlier. In August, the bank set off a credit scare in Europe when it froze three funds that were exposed to high-risk US mortgages. But it didn't take long to reopen the funds. Last night BNP Paribas said the credit crisis had shaved EUR186 million from revenue or EUR301 million including the cost of risk. "Thanks to a strict collateralisation policy the group did not record any credit losses on hedge funds," it said, adding the corporate and investment banking division had negligible exposure to US subprime risk. "BNP as a whole has thus reaped the benefits of a stringent risk policy applied across all its core businesses," the bank said. Australian banks have been saying similar things, but they too were pruned yesterday, with ANZ falling $1.38, or 4.6 per cent, to $28.49. However, the bank was also trading without the right to a 74? dividend. Analyst downgrades saw debt collection company Credit Corp sink to a 19-month low of $5.58. The stock went into free fall, losing $5.01, or 47 per cent of its value. "Like the lobster in the saucepan full of cold water, we haven't realised it's heating up," said ABN Amro Morgans private client adviser Bill Bishop. Mr Bishop said investors had become more tolerant of market volatility, which at the close of US trading yesterday morning was at a two-month high of 26.49 on the Chicago Board Options Exchange's volatility index, the VIX. His advice was to "hasten slowly" and buy stocks in small parcels when the market was low. "Volatility is a fact of life and it's probably going to continue," he said. Commodities were down across the board, with the standout exceptions of gold and oil. The biggest falls among the top 200 companies were experienced by rare earth minerals miner Lynas Corporation and natural gas distributor Envestra. Lynas fell 11.5?, or 9.7 per cent, to $1.07 and Envestra was down 9.5?, or 8.6 per cent, at $1.015. Fortescue Metals slipped $3.99, or 8.2 per cent, to $44.51. Rio Tinto was one of the few miners to gain, up $1.18 at $113.40. At one point Rio was down $3.61 but talk of a BHP Billiton takeover offer turned things around late in the day. After securing a "yes" vote for its Coles takeover, Wesfarmers fell $3.10, or 7.2 per cent, to $39.81. But it was also trading without the right to a $1.40 dividend. But David Jones couldn't buck the market volatility, falling 6? to $4.80 even though it said first-quarter sales had risen 9.7 per cent (see graph below). The dollar reached a new high of US94?, and last night was buying a little over US92.5?. Oil futures for December peaked at $US98.62 a barrel, before settling around $US96 a barrel. Tolhurst strategist Tony Farnham said some of oil's strength was due to speculation and and some to a flight to safety.
© 2007 The Age
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