Australian markets continued to echo the rest of the world's downward share market spiral yesterday, driven lower by resources stocks and the banks.
The S&P/ASX200 finished the day 132.4 points down, or 2 per cent, at 5653.6, while the All Ordinaries fell 132.8 points to finish the day on 5642.4.
Energy utility AGL's share price dropped 61 cents to $15 and the world's biggest miner BHP Billiton's shares closed 78 cents down at $26.34. Shares in AMP Capital finished the day down 36 cents at $9.85 and ANZ Bank shares closed 49 cents lower at $28.37.
The global correction appears to have some life in it and early predictions that last Tuesday's 9 per cent tumble on the Shanghai benchmark Composite Index was merely a buying opportunity are being tested. The Shanghai benchmark Composite Index was trading down 37.15 points or 1.31 per cent at 2794.37 when InvestorDaily went to press.
In Japan yesterday, Tokyo's benchmark Nikkei index fell 3.3 per cent, its biggest one-day fall in nine months and a new low for 2007. The sell-off pushed the benchmark share average below the 17,000 level for the first time in nearly two months.
Ausbil Dexia chief executive Paul Xiradis said investment markets across the globe were going through a shake-up that could last another week.
"The market has awoken to the importance of pricing risk accurately. Recently there has been no real differentiation between good quality debt and bad quality debt," Xiradis said.
He highlighted British investment bank HSBC's recent announcement that it might have to set aside an additional US$1.8 billion to write off sub prime loans to US home buyers with weak credit histories.
This combined with former chief of the US Federal Reserve Alan Greenspan's comments last week that the US could be headed for a recession by year end is prolonging the recent bout of share market jitters.
Xiradis, however, is optimistic. "I don't think the US is heading into a recession, but there is a risk, and the market is waking up to that fact. We are witnessing an ongoing sell-off in Asia, which is being echoed in Australia, but the fundamentals remain firm," he said.
He said earnings growth was still strong and liquidity robust. "It's a bit of a shake-up for the market, after only going one way for a while."
