The Australian sharemarket staged a remarkable recovery this afternoon following its biggest one-day plunge since April 2000 as nervous investors abandoned the market in their droves.
The Australian sharemarket staged a remarkable recovery this afternoon following its biggest one-day plunge since April 2000 as nervous investors abandoned the market in their droves.
The benchmark S&P-ASX 200 fell 304.7 points, or 5.2 per cent to 5483.3 before buyers returned to the fray after lunchtime, picking up blue chip stocks that had been hammered hard in the morning's trade as concern about the impact of a credit crunch intensified following the US sub-prime mortgage crisis.
At the close the S&P-ASX 200 was 76.5 points lower, or 1.3 per cent, at 5711.5 while the all-ordinaries index fell 89.3 points, or 1.5 per cent, to 5712.2.
The comeback was described as "remarkable" by one senior dealer while another said there was speculation that a big fund was selling out a massive $1 billion portfolio, which sparked the rapid descent.
Other traders put the sharp plunge down to a decision by the Australian Securities Exchange to halt trading on the futures exchange from 10.45am to midday and left brokers with nowhere to hedge risk selling physical stocks instead.
A spokesperson for the ASX said trading was halted "for the installation of new hardware" and was unrelated to trading volumes.
The Australian stockmarket has plunged 11 per cent since its peak of 6422.3 on July 24 and many stockbrokers remain nervous about the impact of a credit crunch following the fall-out from the US sub-prime mortgage market.
Today's recovery was largely in the blue chip sector with many small cap stocks nursing big loses.
Murchison Metals plunged 9.3 per cent, or 34 cents to $3.31 after hitting $2.95 and has almost halved since hitting a peak of $6.24 on June 22.
Explorer Mineral Sands which listed on May 25 after issuing shares at 20 cents each plunged 10.3 per cent, or 1.5 cents to 13 cents.
Iron ore hopefuls were belted. Midwest Corporation plunged 18.1 per cent, or 42 cents, to $1.90 and has sunk 56 per cent since hitting a peak of $4.33 on June 22.
Gindalbie Metals fell 13 cents, or 11.8 per cent, to 97 cents. It has slumped 45 per cent since hitting $1.75 on July 24.
Several stockbrokers said while value had emerged at the big end of town the junior sector was down and out.
Hartleys director Ian Parker said the speculative market had crashed.
"The speculative end is history and people are deluding themselves if they think it will recover, he said.
Bell Potter Securities head of wealth management Heather Zampatti said while the market had not crashed it was no time to speculate on stocks.
"We don't think this is a crash but you want to stick to your core holdings," Ms Zampatti said.
"This is not a time to speculate. When you can find value in the top 100 or 200 companies that is where the money will go."
Sentinel Stockbroking chief executive Norman Robinson said he was stunned by today's early fall but equally stunned by the remarkable recovery.
He said he expected volatility to remain the market with the fear created from the credit crunch in the US unlikely to go away quickly.
"The US market could have a small rally at some point but I think their problems are very deep seated and the credit crunch won't blow away quickly."
According to E*Trade 2,124 stocks recorded losses with just 395 stocks closing in positive territory.
Among the better performing blue chips were AMP which closed unchanged at $9.51 after earlier hitting $9. BHP Billiton closed 20 cents lower at $33 after sinking to $31.02 and Rio Tinto was 43 cents lower at $82.57, coming back from a day-low of $79.35.
Perhaps the most spectacular fall of the day was Rams Home Loans, which listed at $2.50 three weeks ago but warned investors earlier this week its profits would be impacted by the US credit squeeze. Today it revealed it was unable to rollover $6 billion of liabilities and its stock more than halved from $1.29 to 55.5 cents. Rams ended the day 48.5 cents lower, or 36 per cent, at 86.5 cents.
