Shares Dumped In Heavy Selloff

Sydney Morning Herald

Tuesday December 15, 1998

By LACHLAN JOHNSTON

The sharemarket suffered its biggest fall in three months after offshore investors liquidated several industrial stocks and commodity price falls undermined the resource sector.

The All Ordinaries index fells as much as 62 points before ending down 53.5 at 2676.

The futures market also dropped sharply with December contracts down 52 to 2702, maintaining its large premium to the sharemarket.

Regional markets also slid sharply, with Japan's Nikkei falling 294 to 14,111 and Hong Kong's Hang Seng 163 to 9788.

Traders said the selling was dominated by offshore investors, with large foreign-owned brokers doing the bulk of the selling. BNP Equities was the biggest seller.

Despite the heavy selloff market analysts said the recent rally should resume.

Salomon Smith Barney strategist Mr Neill Brennan said industrial stocks still had a positive outlook, particularly in light of recent gross domestic product growth figures.

"If you go back three months consensus growth forecasts were 2 to 2.5 per cent - now they are 4 per cent and that is flowing into the industrial stocks," Mr Brennan said.

"There is real earnings potential in many of the industrials. The market is likely to reflect that over the coming period."

Only a handful of shares finished in positive territory yesterday with Lend Lease the strongest, rising 18c to $21, while Pioneer rose 8c to $3.34.

AMP's takeover bid for GIO held both stocks up, AMP gaining 14c to $21.54 and boosting GIO 1c to $5.44 on 8.1 million turnover.

Falls for most commodity prices at the end of last week, caused a strong selloff in the resources sector, led by the diversified miners. BHP shed 44c to $10.86, Rio Tinto, 40c to $17.74 and WMC 15c to $4.47.

"The coal results really surprised everyone as to how much the prices had fallen," Mr Brennan said. "There is not a lot of confidence about resources going forward, they will not improve soon."

Macquarie Investment Management head of equities Mr Greg Matthews said resource stocks were likely to fall further before a turnaround occurred.

"All the analysts still have oil prices at $15 a barrel in their forecasts, and it is trading at $10," Mr Matthews said.

"I'm surprised stocks like BHP haven't been hit harder."

News Corporation had the single largest impact on the market accounting for almost one-fifth of the fall on the All Ords.

News Corp ordinary shares fell 57c to $9.78, while the preferred class stock dropped 55c to $8.75.

The weakness follows the slide of the group's separately-listed US television and movie subsidiary, the Fox Group, which fell as low as $US20.50 last Friday, well below its $US22.50 issue price.

The Fox share price has confused analysts, who say that media stocks have generally performed strongly in the US.

Among other media stocks, Fairfax also drifted back from its highs last week, closing down 5c on $3.25, while Ten Network shed 11c to $2.15.

Telstra fell 20c to $7.43 while other telcos also slipped.

AAPT fell 9c to $3.30 and Optus 2c on $2.82 on turnover of 15.7 million shares.