By Greg Roberts, The Age- April 16, 2013
Australian investors were left confused after $7 billion was wiped off the value of the sharemarket, taking the losses in two days to more than $22 billion.
The price of gold, normally considered a save-haven investment, is bucking normal behaviour by tumbling at record levels as sharemarkets also fall.
Events in the world’s two largest economies, the US and China, were cited as being responsible for the ASX’s woes.
US markets plunged by two per cent overnight amid worries about an end to monetary stimulus being discussed, along with the fatal bombing at the Boston Marathon.
Australia’s 0.46 per fall wasn’t as bad but that followed a 0.91 per cent hit on Monday.
Australia’s largest trading partner, China, reported weaker than hoped for economic growth so far this year.
Investors believed the US economy will suffer if it stops pumping money into the economy and are “pricing that future” now, according to CMC Markets chief market strategist Michael McCarthy.
Their worries then affect the price of commodities used in growing economies, such as oil and copper, which cause steep falls in mining and energy stocks.
“All of the growth in oil markets is coming from essentially emerging nations in Asia, I think that’s why those two groups of commodities have been hit very hard over the last 24 hours,” Mr McCarthy told AAP.
He said the current falls might not be a bad thing because they would stave off a nastier correction later.
The big gains made on the ASX in the first two months of the year were too great, with share price rises far outstripping profit gains, he said.
Australian shares are expensive, trading at above 20 times their earnings per share, compared to only 14-15 for US and German companies.
CommSec market analyst Steve Daghlian said the sharemarket had posted 9.5 per cent growth in the first two months of 2013 and expecting that to continue would have meant a “ridiculous” 60 per cent jump for the year.
Gold stocks continued to be hammered on the back of the falling gold price, which plunged by nearly $US76 in Sydney to $US1,377 a fine ounce.
The Australian dollar is trading lower, as expected when global uncertainty pushes investors to the US currency, but at a relatively strong 103.72 US cents.
