Share Market Wrap 21 Aug 06

To sell or not to sell, that is the question the government has been struggling with for some time in regard to Telstra and they are not alone in this decision as many thousands of private investors are struggling with whether to hold or sell their shares and get out with what cash they have left. This decision is made even harder for those who bought shares in the T2 float, as they have lost over 50% of their cash.

Before deregulation, Telstra had a monopoly on the market and absolute protection from the government, but since the tide has changed their market share has eroded considerably which has impacted significantly on their bottom line. There are many examples of companies who have struggled to adapt to the changes that deregulation brings, usually because they are too big, too slow and not used to competition. Let’s face it, Telstra has not done a very good job in transitioning and I see no reason why this will change in the short term; therefore I believe investors would be better off investing their capital elsewhere.  

After a longer than expected wait, the market is finally rising, although yesterday (Thursday 24 August) it pulled back slightly more than I expected, which indicates there is still some indecision in the market. So, where to from here? I believe the All Ordinaries Index will rise over the next week to break above the high of 5070 achieved on Wednesday of this week. I also believe the market will rise above the high of 5104.90 achieved on 9 Jul 06 in the next few weeks. Based on this and the fact that the reporting season is ending, we should see more consistency and less volatility in the market.