Tuesday June 30, 10:29 AM
Australian investors cheer end of terrible year
By Neil Sands
MELBOURNE (AFP) - Australian investors have welcomed the end of a troubled 12 months and hoped for better times ahead as the domestic share market rounded off its worst performance in 27 years.
The benchmark ASX/S&P200 plummeted more than 24 percent over the Australian financial year from July 1 to June 30, eclipsing the 17 percent fall recorded in 2007-08.
"We are seeing the close of a year, we can say good riddance I would have thought," said ABN Amro Morgans Ipswich manager Tony Russell.
The market ended the year on 3,954.9 points, slipping 1,260.4 or 24.2 percent in its the weakest showing since a 32 percent tumble during the 1981-82 recession.
While it has recovered strongly from the lows of early March, economists said the best investors could hope for was a slow, steady improvement in prices rather than a robust bounce-back.
"It's going to be a slow grind higher, rather than a continuation of the recent surge," said Colonial First State fund manager Stephen Halmarick.
"The financial system is still fragile and the flow of credit in the real economy is still significantly less than it was 18 months ago."
Analysts said share prices began falling steeply in September, when the scale of the global financial crisis became apparent with the collapse of US investment banking giant Lehman Brothers (NYSE: LEH - news) .
"We seemingly fell off a cliff over the second half of last year and the early part of this year," Commsec chief economist Craig James told the Australian Broadcasting Corporation.
The market was at its lowest in March, when figures that showed Australia's economy contracted for the first time in eight years during the final months of 2008 sparked fears a recession was imminent.
That saw the benchmark index close at 3,145.5 points on March 6, off 40 percent from the start of the year.
Since then, however, official data has showed the economy staging a surprise growth surge in the first quarter of 2009, allowing Australia to dodge a technical recession.
AMP Capital Investors chief economist Shane Oliver said investors no longer feared they were facing a "doomsday scenario," setting the stage for a share market rise in the coming year.
Oliver said that while more bad news in areas such as unemployment was likely, there were signs buyers were moving back into the market.
"After two terrible financial years, shares are likely to rise over the financial year ahead -- they're attractive relative to low-yielding cash and bonds," he said.
"An economic recovery from later this year is likely to underpin an eventual improvement in profits which should help drive further gains in shares.
"Most investors are still underweight shares so there is a lot of cash sitting on the sidelines that can come into the market."
Bell Direct equities analyst Julia Lee said information technology, a tiny part of the Australian market, was the only sector to post a gain over the year, just scraping in with a one percent rise.
The property sector led the losers, falling 45 percent, followed by materials and industrials, down 35 percent.
Lee said the year had claimed some high-profile casualties, including Babcock & Brown, once Australia's second largest investment bank, and Allco Finance, which only three years ago was bidding to takeover airline Qantas.
Both collapsed under the burden of massive debts as credit markets dried up, as did ABC Learning, the world's largest listed childcare centre operator.
"It's certainly been a turbulent year," Lee told Sky News.
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