'Amber light’ soon?

Press, 22 October 1980, Page 25

' Amber light’ soon?

PA London The Libera 1-Country Party’s election success did little to attract buying interest in Australian shares on the London Stock Exchange yesterday, according to dealers.

Despite reports in London evening newspapers of a "rush” for Australian stocks, investors were more interested in selling than buying.

"If there was any scramble, it was a scramble to get out,” a spokesman for Potter Partners told NZPA.“People here feel that prices in Australia went over the top, No one in London really thought that Labour would win. "The fact that the share market was only three per cent below the all-time high last Friday didn’t indicate that this was the case. “There has been very little buying interest today and London prices have tended to be below Sydney. That was the case right from the opening this morning.” Most Australian shares were marked up this morning in line with closing levels in Sydney, where the all-ordinaries index jumped more than 57 points .to a record 1025.29. But there had been a falloff through the day in London, the spokesman said. The general feeling here was that Australian prices would eventually drop back to the level of before the

election campaign, although there was a certain amount of relief that Mr Fraser’s majority had been as comfortable as it was.

The “Financial Times” commentator on Australian share markets, (Richard Lambert) said yesterday that apart from the initial “knee jerk” reaction to the election result, the news gave no cause for unqualified bullishness.

In his “Lex” column, Lambert wrote that the result

“does not represent a vote of confidence in the economic policies or Mr Fraser’s coalition. “With another election coming up in 1983, the political will of the Government is going to be tested during the next year or two — a period when some crucial, and possibly painful, economic decisions will have to be made.”

Lambert noted that international investors had had a major impact on Australia’s relatively small securities market during the past few months.

“On one (estimate, foreigners have accounted for roughly a quarter of equity market activity recently. “Australia’s energy wealth and continuing political stability will still be a powerful magnet for them. “But the amber lights could start flashing soon.” The financial column in “The Times” said that the election would underpin Australian shares, and described the Sydney market as "one of the best performing equity markets in the world over the past year.” Polities aside, the column continued, however, “there have been growing signs that Australian shares, supported by the strength of natural resource and particularly oil stocks and the rediscovery of the market by overseas investors, were due for a breather.

“There has been a growing feeling that the mineral and energy stocks that led the boom may have become over-valued. The key here, of course, is mineral prices, gold included, which apart from oil have disappointed in the second half of the year as world trade and industrial production have slackened. “There have also been

doubts, voiced both internally and by outsiders like the 0.E.C.D., as to whether the economy can sustain the pace, and that seemed to be underlined by a cautious August , budget which kept a tight rein on monetary policy. “The Times” continued: “On a technical level, too, the yield gap between equities and bonds has become wide enough for many institutional investors to become more cautious.

“Despite the bouts of selling in recent weeks most of that seems to have stemmed from small investors -rather than domestic and foreign institutions, whose faith in Australia’s political stability', the comparative under-devel-opment of resources, and the generally so'und economic prospects of the Pacific Basin remain undimmed.”