Market Commentary

by Chris Limberg on Jun 15, 2010

It's been a long, albeit, slow recovery with the ASX All Ordinaries October quarter closing up 6% at 4852. While it's definitely a step in the right direction, the recovery isn't matching the levels experienced back in March this year.

Six months ago Australia was in a strong trade position. Exports were healthy and our growth was looking good compared to the rest of the world which was suffering the GFC.

Fast forward six months and how things have changed...

The soaring Australian dollar and a two stream economy. Resources in the booming mining states are performing strongly while the eastern states seem to be bumbling along.

We've seen an upsurge over the past few months of small resource stocks coming to the market to raise funds. Almost all the fund rising has been opportunistic with few companies providing solid investment opportunities.

Travel eastwards and it's a different story. NSW's rollercoaster economy is struggling from one crisis to the next. Further north and the Queenslanders are floating QR National – the state's rail freight business. We reckon the stock's overpriced so we're not participating in the share offer.

Overseas the repercussions of the GFC are still being felt and various governments are trying hard to kick start the engine rooms of their economies.

In the United States the Federal Reserve Board is aggressively pursuing a monetary policy to inflate the economy. It's been triggered by disappointing growth expectations and weak consumer demand. It's not unexpected given the deleveraging by US households and the continuing foreclosure on mortgages by banks.

Over in Europe and Britain governments are introducing austerity measures to try and reduce their debt, balance their budgets, and restore their shaken economies. It's creating civil unrest and uncertainly in many countries particularly France and Greece.

China continues to be the powerhouse economy. It is putting a brake on its already overheated economy by raising its interest rates, though will still experience growth levels of 8 or 9%. Of course China needs to continue to develop if it's going to maintain any sense of social stability.

Back at Limberg, we're steadfast in our thinking. We believe we need to continue to maintain high cash levels as well as review options to maximise short term interest gains. As always we will be waiting patiently for the opportunities to arise for our so we can maximise our clients' returns.

Should you have any queries or want to discuss the above or your portfolios please do not hesitate to contact us.