Gold Sector Cushions Negative Sentiment

Sydney Morning Herald

Monday April 3, 1995

By MATTHEW KIDMAN

A traumatic day on the Japanese stockmarket and a weak performance by BHP combined to knock the Australian market lower yesterday despite rising commodity prices on the weekend.

The domestic market opened down and trailed off further during the day but held up well in light of the Japanese troubles and the general selloff throughout the Asian region.

By the close of trading, the All Ordinaries index had been cut back 7.1 points to 1899.5.

A powerful display by the gold sector, which saw the index up 3.7 per cent after a leap in the bullion price during the weekend, prevented a much larger decline.

In local trading yesterday, gold bullion closed steady at $US392.15 an ounce.

Much of yesterday's fall by the main index could be explained by BHP, which lost 24c to $17.66 on strong volume of 2.3 million shares traded.

Analysts said the drop in price was directly related to the company's third-quarter profit result of $322 million, which fell below most predictions.

While the turmoil surrounding the Japanese sharemarket and the US dollar is unlikely to abate in the next few days, pundits are confident the local market will be controlled by domestic issues. These include macro-economic policy and the strength of the Australian currency.

"I suppose that if other markets get the wobbles it will be hard for the local market to run ahead, but I think you have to say it looks reasonably cheap," said Ord Minnett director Mr Eric Gale.

Mr Greg Matthews of Mercantile Mutual said he was confident the All Ords could hold its ground, but would only kick upwards when the Australian dollar stabilised and offshore investors re-entered the Australian market in force. He added this might not take place until after the Federal Budget in May.

Most of yesterday's action was centred upon the resources sector. Ampolex rose 7c to $3.55 on almost five million shares traded. Broking house County NatWest handled two separate large lines totalling four million shares, both at $3.50 each.

MIM, which has struggled in the past 6 months, jumped 17c to $1.92 and Western Mining gained 16c to close at $6.88. Brokers said the firmness in these stocks was the result of a sharp upturn in precious and base metals in recent days. However, there were very few willing to predict that commodity prices would continue to increase given the uncertain nature of global markets.