Miners bear the brunt of investor disquiet

Q: What did commentators mean when they said the market was "looking very toppy"?

Market strategists used toppy to describe markets that had run up sharply — for example, US markets were at four‑year highs — prompting investor scepticism about how much higher prices could go. In plain terms, toppy signals caution: valuations and recent gains may be making some investors nervous.

THE sharemarket closed lower yesterday, with mining stocks suffering heavy falls as investors fretted over fresh signs of a slowing Chinese economy.

By InvestSMART · 22 Mar 2012

By InvestSMART ·
22 Mar 2012

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THE sharemarket closed lower yesterday, with mining stocks suffering heavy falls as investors fretted over fresh signs of a slowing Chinese economy.

The benchmark S&P/ASX 200 Index closed down 20.7 points, or 0.48 per cent, at 4254.3.

The market followed overseas markets down and also lost ground after base metals prices and the dollar fell in overnight trading.

BHP Billiton earlier this week warned that Chinese demand for iron ore was flattening, sending a shiver through world markets.

IG Markets market strategist Stan Shamu said he believed traders in Asia were seeing the situation in a slightly more rational light.

He said BHP Billiton, Rio Tinto and Fortescue Metals were still spending vast sums to increase production of iron ore by hundreds of millions of tonnes a year.

"The market's looking very toppy at the moment, at the stage where investors think, 'How much longer can we keep this run going?"' Mr Shamu said. "US markets are at four-year highs. That's a big run-up considering we're only three months into the year. Investors were bound to get sceptical at these levels."

Gold, materials and metals and minerals stocks were the worst performers. BHP Billiton closed 61?, or 1.7 per cent, down at $34.70 while Rio Tinto sagged 27? to $65.34.

Negative sentiment was heightened by a poor first-half financial result from department store operator David Jones. That had instilled fears for investors that the sector was going to be in trouble for a long time if giants such as David Jones needed to make drastic changes in strategy, Mr Shamu said.

David Jones shares fell 30?, or 11 per cent, to $2.43 after warning that its full-year profit would drop by up to 40 per cent. Myer Holdings dipped 2? to $2.24. Outdoor equipment and clothing retailer Kathmandu slumped 24?, or 16.1 per cent, to $1.25 after posting a 43 per cent slump in first-half profit. Oroton Group fell 32? to $8.70 despite increasing its first-half profit by 4 per cent.

Packaging company Amcor rose 6? to $7.03 after it paid $19.8 million to acquire flexible packaging business Uniglobe of India.

Sigma Pharmaceuticals was among the best on the ASX 200, rising 3?, or 5 per cent, to 61.5? before its full-year earnings result this week.

National Australia Bank was 10? lower at $24.10, ANZ shed 11? to $22.42, Westpac eased 15? to $21.05 and Commonwealth Bank offloaded 27? to $48.63.

Market turnover reached 1.94 billion shares, worth $4.28 billion, with 442 stocks up, 545 down and 401 steady.

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Frequently Asked Questions about this Article…

Why did ASX mining stocks fall and what role did China play?

Mining stocks fell because investors worried about fresh signs of a slowing Chinese economy. BHP Billiton warned that Chinese demand for iron ore was flattening, and base metals prices fell in overnight trading — both factors that hit miners on the ASX.

How did the S&P/ASX 200 perform on the day miners slid?

The S&P/ASX 200 closed lower, down 20.7 points (0.48%) at 4,254.3, as the market followed weaker overseas markets and falls in commodity prices.

What happened to BHP Billiton and Rio Tinto shares and why does that matter for investors?

BHP Billiton closed down at $34.70 (about 1.7% lower) and Rio Tinto sagged to $65.34. Those declines matter because both companies are major iron‑ore producers, so weakness in their share prices reflects broader concerns about iron‑ore demand and the health of the resources sector.

How did recent retail results affect investor sentiment on the ASX?

Poor retail results intensified negative sentiment. David Jones warned that full‑year profit could fall by up to 40%, sending its shares down to $2.43. Kathmandu reported a 43% slump in first‑half profit and its shares slumped to $1.25. Those results raised fears the retail sector could be troubled for an extended period.

Which stocks bucked the downtrend and why?

Amcor rose to $7.03 after paying $19.8 million to acquire Uniglobe of India. Sigma Pharmaceuticals was among the better performers on the ASX 200, rising ahead of its full‑year earnings result. These moves show how company‑specific news — acquisitions or upcoming earnings — can lift individual stocks even on weak market days.

How did the big Australian banks fare during the market fall?

The major banks fell on the day: National Australia Bank was lower at $24.10, ANZ at $22.42, Westpac at $21.05 and Commonwealth Bank at $48.63. The article reports broad selling pressure across bank shares alongside the wider market weakness.

What were the market breadth and turnover figures that day?

Market turnover reached 1.94 billion shares worth $4.28 billion. On the session, 442 stocks rose, 545 fell and 401 were steady, indicating more decliners than advancers.

What did commentators mean when they said the market was "looking very toppy"?

Market strategists used "toppy" to describe markets that had run up sharply — for example, US markets were at four‑year highs — prompting investor scepticism about how much higher prices could go. In plain terms, "toppy" signals caution: valuations and recent gains may be making some investors nervous.