Australian shares lower midsession in erratic trade as credit fears prevail

Australian shares lower midsession in erratic trade as credit fears prevail

	Published : Fri, 17 Aug 2007 05:19 By : Agencies Print this Story

SYDNEY (Thomson Financial) - Australian shares remained in negative territory in erratic trading early afternoon Friday in line with global markets as credit fears continued to unnerve investors.

Comments from Reserve Bank of Australia governor Glenn Stevens, which were seen as market-supportive with the central bank head more concerned about inflation risks than risks to growth, still failed to perk up sentiment.

At 1.50 pm, the S&P/ASX 200 was down 31.9 points or 0.6 percent at 5,679.6. The benchmark index has now fallen nearly 12 percent off its July 24 all-time high of 6,422.3.

The All Ordinaries index was down 34.8 points or 0.6 percent at 5,677.4.

The S&P/ASX 200 September futures contract was down 171.0 points at 5,509.0.

Fears of a credit squeeze in the wake of the US subprime woes have seen a series of liquidity injections by key central banks around the world over the past week, including the Reserve Bank of Australia, and earlier today the RBA added more funds than usual into the banking system via its regular money market operations.

The RBA's Stevens told a parliamentary committee that while markets have been skittish in the wake of the subprime problem and there appears to have been a major reassessment of risk and scramble for liquidity, the global economy remains sound, supported by solid profits at core financial institutions in most countries.

'I don't think there's any change (to the overall view) that equities represent excellent value. What needs to change is the attitude to risk,' Bell Potter Securities private client advisor Stuart Smith said.

At the same time, the potential for margin calls in the face of the recent volatility could see further market losses in the near term, he said.

Analysts expect global markets to continue to be turbulent in the near term as investors find their footing amid the uncertainty of more subprime fallout.

CommSec equities analyst Juliette Saly said the market today was being supported by gains by the financial sector, mirroring renewed support for the US financial sector in late trading in the US.

Saly said index leader BHP Billiton was also finding renewed support after being sold off over the past week.

'The fact that BHP Billiton is a big stock is really helping the overall market,' she said.

But other miners were weaker following falls in metal prices overnight, with Newcrest a notable decliner after it announced a downgrade to the gold resource estimate at its key Telfer gold/copper mine in north Western Australia.

Australia's biggest independent gold miner, Newcrest Mining fell 52 cents to 24.00 Australian dollars and Rio Tinto dropped 70 cents to 81.87 dollars. BHP Billiton rose six cents to 33.06 dollars.

Financial stocks returned to positive territory after heavy losses recently, with Commonwealth Bank up 45 cents at 52.92 dollars, ANZ up 44 cents at 27.49 dollars, and Westpac up 54 cents at 25.29 dollars. National Australia Bank was down six cents at 37.89 dollars.

(1 US dollar = 1.26 Australian dollars)

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