Fear Grips Investors As Wall St Trembles

Sun Herald

Sunday April 17, 2005

By RICHARD WEBB

PREPARE for a sharemarket bloodbath tomorrow, with experts predicting that a further $15 billion will be wiped from Australian share values.

Another big fall on Wall Street on Friday night will be the trigger, and will add to the selling pressure that has been mounting in Australia since Wednesday.

Brokers said small investors had begun to panic by Friday, when the All Ordinaries fell below 4000 for the first time since December. They expect another 60-point drop on the index.

Most stock watchers still believe shares are experiencing a healthy correction, but a few are advising their clients to sell and move to cash.

Friday's 190-point fall in the Dow Jones is the third straight 100-point plus daily fall on Wall Street. But most observers, such as AMP Capital Investors head of investment strategy Shane Oliver, said little had changed in the bigger picture and advised investors to hang on.

"We've seen some soft US data and sentiment has taken a bit of a whack, while the resource stocks have had such a good run that it has triggered some profit-taking," he said.

"The oil price has come off, and that's a positive for shares, and bond yields are lower; this correction is starting to get a bit overdone now."

Intersuisse head of research Peter Russell said a surprising aspect of the sharp about-turn for the sharemarket was that investors had got to the panic stage so quickly.

Mr Russell said shares could fall another 150 points or so before the correction was over.

Treasurer Peter Costello yesterday dismissed Friday's fall as a "breather".

"The Australian market over recent weeks has been at all-time highs," he said. "You have seen a bit of a correction, it was always bound to happen."

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