ASX CLOSE: Fear of missing out saw markets pile on the gains

Wednesday 16th September 2009

Across Asia, markets were mainly higher this Wednesday as mining and electronics stocks rose on confidence gained from the better-than-expected US retail sales and manufacturing data. The Kospi was the best performer, up 1.8% while the Nikkei 225 closed 0.5% higher. Both Hong Kong and China are still trading, up 1.7% and down 1.3%, respectively.

The ASX 200 had a massive day, rising 2.4% to finish at 4650.4, just 0.8 points off the session high. The buying was broad based today as the combined affect of short-covering and the continual fear of missing out saw markets pile on the gains.

BHP Billiton and the big fours banks accounted for approximately 44% of total point gains today. Volume was strong too, easily accounting for Monday's trade and higher than yesterday.

Ben Bernanke's comments overnight that the US is basically out of recession boosted confidence significantly. Investors are starting to believe the recovery is real with once sceptical cash from the sidelines making its way into the market.

Markets had almost convinced themselves we had to have a pullback over the September/October period, because that is how the scrip usually reads. What investors and markets alike seem to have overlooked is that we are not entering this period under normal circumstances. While we have a had a decent rally since mid-march the preceding 6 months were horrific where many investors were burned badly and went heavily underweight equities. That new money is now coming back into the market as the economic recovery story gains traction should be no real surprise.

It seems more and more traders are becoming convinced that we can rally all the way through to levels such as 1250 on the S&P (20% above current levels) before having a meaningful pullback.

The telecommunications (3.7%), financials (2.8%), energy (2.7%) and materials (2.4%) sectors were the biggest gainers.

Telstra shares rebounded today, closing up 4.2% and recovering a large percentage of yesterday's falls as many brokers suggested yesterday's plunge was overblown. Royal Bank of Scotland, UBS, Goldman Sachs JBWere and Merrill Lynch have all maintained their ‘buy' ratings on the stock, noting it looks attractive at current levels.

Despite mixed leads from the US financials sector, Australian financials fully participated in today's rally closing up 2.8%. All four major banks were higher by between 3.1% and 4.1%, with Commonwealth Bank of Australia the standout. Also, Macquarie Bank outperformed, settling 4% higher.

The materials sector enjoyed a good session thanks to strong leads from US materials names and broadly higher base metals prices. BHP Billiton, which finished higher by 2%, was the second biggest contributor to the index adding 11.1 points. Also, Rio Tinto rose 2%. Thanks to gold adding another US$5 oz overnight gold names continued their stellar run with Newcrest Mining and Lihir Gold higher by 4.7% and 4.5% respectively.

Among energy names, Woodside Petroleum (4.8%), WorleyParsons (2.6%) and Santos (1.9%) were the standout performers as Crude Oil prices continued to move higher in Asian trade. It is currently trading at $70.88. Woodside Petroleum received a boost late in the day with reports it was party to a new oil frontier off the west coast of Africa doing the rounds.

Prices are in AUD unless otherwise stated.
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