Investors poised to hunt for bargains

THE sharemarket is expected to open slightly higher as investors look for value in stocks following more than a week of losses.

By InvestSMART · 28 Nov 2011

By InvestSMART ·
28 Nov 2011

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THE sharemarket is expected to open slightly higher as investors look for value in stocks following more than a week of losses.

On the ASX 24, the December share price index futures contract is pointing to a 5-point gain, or 0.12 per cent, to 4008 points.

"Our market is getting increasingly cheap and despite the fears about Europe, we still know that Asian economies are holding up well and that's where our fortunes lie," the Commsec economist, Craig James, said.

This is despite US stocks tumbling in the worst Thanksgiving-week loss for the S&P 500 index since 1932 as concern grew that Europe's debt crisis would spread and American policy makers failed to reach agreement on reducing the federal budget.

Congress's special debt-reduction committee failed to reach an agreement last week, setting the stage for $US1.2 trillion in automatic spending cuts and fuelling concern that economic-stimulus measures that are set to expire will not be renewed.

Worries about Europe's debt crisis flared up after Italy had to pay 7.8 per cent to borrow for two years at a debt auction, in another sign that investors are increasingly hesitant to lend to European countries.

Meanwhile, the German Chancellor, Angela Merkel, and the French President, Nicolas Sarkozy, are reported to be considering a new stability treaty that would be limited to only a few countries in the euro zone.

On the economics front, the Housing Industry Association will release new home sales figures tomorrow and the Bureau of Statistics will release October retail trade figures on Thursday.

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Frequently Asked Questions about this Article…

Why is the Australian sharemarket expected to open slightly higher today?

The article notes the sharemarket was expected to open slightly higher because ASX 24 December share price index futures were pointing to a 5‑point gain (about 0.12%) to 4,008 points, and investors were looking for value after more than a week of losses.

What does the ASX 24 futures signal (5‑point gain to 4,008) mean for everyday investors?

ASX 24 futures showing a 5‑point gain (0.12%) to 4,008 suggests a modestly positive start to trading. The article frames this as a sign investors are searching for bargains after recent falls, rather than a guarantee of a sustained rally.

How did recent US market moves affect investor sentiment here?

The article says US stocks tumbled in the worst Thanksgiving‑week loss for the S&P 500 since 1932, driven by fears the European debt crisis could spread and by US policymakers failing to reach a budget agreement. That global volatility has contributed to caution and bargain‑hunting among investors.

What are the implications of Congress failing to reach a debt‑reduction agreement?

According to the article, Congress’s special debt‑reduction committee failed to reach an agreement, setting the stage for US$1.2 trillion in automatic spending cuts and raising concerns that expiring economic‑stimulus measures may not be renewed.

Should investors be worried about the European debt crisis and Italy’s borrowing costs?

The article highlights renewed worries about Europe after Italy had to pay 7.8% to borrow for two years at an auction, a sign investors are increasingly hesitant to lend to some European countries. It also reports Merkel and Sarkozy considering a new limited stability treaty — all of which the piece cites as sources of market concern.

How does Asia’s economic performance factor into Australia’s market outlook?

CommSec economist Craig James is quoted in the article saying the market is getting increasingly cheap and that Asian economies are holding up well — and he suggests Australia’s fortunes lie with Asia. The article presents Asia’s resilience as a positive influence amid other global worries.

What economic data releases should everyday investors watch this week?

The article points to two near‑term data items: the Housing Industry Association will release new home sales figures, and the Bureau of Statistics will publish October retail trade figures. These releases can influence short‑term market sentiment.

Is now a time for investors to hunt for bargains?

The article describes investors as poised to hunt for bargains because the market looked cheaper after a run of losses and global concerns had pushed prices down. It presents bargain‑hunting as the market’s prevailing sentiment, without prescribing specific investment actions.