Australian market falls a little

Press, 9 May 1983, Page 26

Australian market falls a little

The Australian bull rally of the previous four weeks stalled last week, as Australian sharemarkets fell back slightly. Over the week the Australian All Ordinaries Index lost 3.7 points to close at 588.5, primarily because of declines in the resource sector.

This was reflected in the all-resources index, which fell 7.9 points to 464.0, while the All Industrials marker posted a nominal gain, closing at 743.1, up 1.6. The initial cause of the downturn was the sharp

drop on Wall Street early last week, prompted by a report from Wall Street brokers Morgan Stanley, predicting that the prolonged bull rally on the American market had peaked in early May. It further predicted a drop of 100 to 200 points in the Dow during the next several weeks.

Wall Street’s subsequent resilience in spite of that report is largely responsible for the stability of Australian share prices during the past - week, as a second factor has begun to undermine the enthusiasm and confidence of investors. That factor is concern about the ability of Australian sharemarkets to absorb any more on-market fundraising schemes. In the past three weeks, a number of companies have already moved to take advantage of the buoyant market trend by raising or by announcing plans to raise a total of sAusts7o million through rights issues or share placements.. The largest issue, by CRA, is a forthcoming one-for-eight cash issue to raise 5206 million. CRA’s largest shareholder, the British-

based Rio Tinto Zinc PLC, has already announced it will take up only some of its entitlement while selling the rest to other CRA shareholders, with the result that Australian investors will be asked to put up $lBO million. Other on-market funding schemes already announced include Pioneer Concrete’s $93 million rights issue, GJ Coles $B3 million rights issue, Bridge Oil’s $6l million rights issue, CSR’s $4O million share placement, Repco’s $34 million share placement, James Hardie’s $3l million share placement, Australian Paper Manufacturers’ $26 million share placement, Peko Wallsend’s $l3 million placement, and ICI Australia’s $l2 million debenture placement. Although many local analysts agree that the market can accommodate those schemes already announced, there is growing concern about its ability to absorb any further programmes.

the downtrend last week was widely attributed to concern that several more leading resource companies may be considering announcing making a rights issue or a large placement.