Futures Knock Shares To Six-week Low

Sydney Morning Herald

Wednesday October 4, 1995

By JUSTINE TRUEMAN

The Australian sharemarket fell almost 30 points yesterday after offshore investors pulled out, sending the key index to its lowest level in six weeks and confirming expectations of a traditionally dismal October.

Fears about a slide in commodity prices combined with a stronger Australian dollar prompted selling by big US hedge funds in the share futures market.

This triggered unwinding of their positions by arbitragers who bought share price index futures contracts and sold the underlying stocks.

The continued selling sent the All Ordinaries into a downward spiral for most of the day before finishing just above its low of 2101 at 2103.4, or down 28.7 points. The market hit a peak of 2166 in September and has fallen 3 per cent since.

Yesterday's market volume was strong as 192.5 million shares worth $484.7 million changed hands.

Wall Street was also weaker overnight on concerns about lower third-quarter earnings from US companies, but fund managers and brokers said US funds were selling local stocks mainly on the basis of weaker expected commodity prices and a stronger Australian dollar.

The December share price index futures contract sank 25 points on the day to 2113.

"Unless the futures start to pick up again we're likely to see some short-term weakness," Mr Winston Sammut, of BZW Investment Management, said.

Mr Stephen Daly, of County Natwest, said: "Either something is going to happen on Wall Street overnight or they are moving from our market into another."

While a few stock portfolios may have been dealt with through the market, most local institutions were seen to be sitting on the sidelines.

However, some brokers believe there will be further selling by locals as those fully weighted in equities, and resources in particular, trim their portfolios.

"There's a bit of scrip paper coming on to the market from the Lihir float and possibly David Jones and that makes investment managers that are fully invested in equities need liquidity," Mr Paul Jenkins, of Armstrong Jones, said.

Most of the leading stocks were hit yesterday, including some which have had good runs.

Brambles, which had been a strong performer, lost 52c to $14.40 along with ICI, down 35c to $9.55, Lend Lease, which went ex-dividend, 60c weaker at $18.14, and Coca-Cola Amatil, 20c lower at $9.90. News Corp also lost another 13c to $7.09.

With further weakened metal prices, mining stocks were pummelled, the sector losing 1.7 per cent to 959.2.

CRA fell 34c to $20.30, Western Mining 22c to $8.57, Woodside Petroleum 12c to $6.15 and Newcrest lost some gains, down 10c to $5.75.

BHP fell below $18, finishing 16c lower at $17.98. "BHP had done very well and received a lot of foreign money, I think it got overdone," Mr Jenkins said.

Shares in Rothmans fell sharply, closing down 25c at $4.80 after the company warned it would record a loss for the six months to September.

The Nikkei index in Japan finished up 2.09 points, or 0.01 per cent, at 18,145.08 while the Hang Seng index in Hong Kong reached a 13-month high, up 134.49 points, or 1.37 per cent, to 9,939.95.