Boom year predictions run into trouble

Press, 12 January 1981, Page 18

Boom year predictions run into trouble

Rising local interest rates, a sharp drop in world gold prices and a heavy shakeout on Wall Street saw the widely predicted 1981 Australian sharemarket boom run into early trouble last week. Heavy selling on the mining and oil boards on the last two days of the week slashed market capitalisation by about $l.l billion and pushed the Australian all ordinaries index back to its pre New Year levels, after a promising start. The rot set in on Thursday after a “sell everything” by the controversial U.S. tipster, Joe Granville, resulted in record amounts of scrip being dumped on the New York market.

The Wall St rout, combined with a $26 fall in gold] prices, was enough to un-l settle Australian markets,] which had been drifting quietly upward in anticipation of an influx of overseas cash.

A 0.25 per cent lift in short-term Government bond rates and 0.5 per cent rise in semi-Government rates also tended to inject a bearish note.

However, industrial issues continued to hold up under the pressure and Friday’s news that the Arbitration Commission had granted the nation’s award workers a 3.7 per cent wage rise was largely anticipated. Oil stocks were in the limelight most of the week, first because of their sharp rises and then as a result of their sharp falls. In the first three days of the week the oil sector appreciated 5.0 per cent in value, compared with the over-all market’s rise of I.S per cent. But heavy selling on Thursday and Friday saw oils drop 5.0 per cent while the all ordinaries eased 2.2

per cent. Strata Oil, which reported oil shows at its Woodada No. 3 well in' the Perth Basin, proved one of the few oils to finish on..a stronger

note with a net rise of 30c on the week.. Elsewhere, Woodside dropped 10c to 310 c, Santos (was 80c lower at $17.20 and BHP fell 25c to $16.15. In other trading, Peko was 40c down at $lO, Pancontinental slipped 20c to $11.60, MIM eased 10c to 450 c, Bougainville was 15c lighter at 185 c, CSR was 4c weaker at 734 c, and the ANZ bank was 8c stronger at 540 c.

Reports of a bumper Christmas for retailers helped lift several stocks in the sector, including Grace Bros, up 17c at 207 c, Myer, up 13c to 169 c and Coles, up 10c to 240 c.

Action on the takeover front heated up when North BH came through with a widely-predicted increase in its takeover offer for the Dunlop-Olympic tyre group.' The new bid, which superceded a straight one-for-three share swap for 70 per cent of the company offered Dunlop shareholders four North shares and 36c for every nine Dunlop units and dropped the control target to 45 per cent. . The offer valued each bunlop share at 182 c, based on North’s price of 400 c at the time and Dunlop directors recommended acceptance.