Upfront Investor Australian Share Market Report 17/12/10

Despite the steep price hikes being paid by consumers for their utility services, growth in the Utilities Sector has been sluggish in 2010, rising only around two per cent since the start of the year. I believe that part of this disparity can be attributed to uncertainty around the sale of NSW government retail energy assets that companies like AGL and Origin were vying for. This current sale is all part of a continuing trend by governments here in Australia to sell off public assets in order to pay down debt. In this instance it seems that Origin may have emerged as the victor but we have to ask was the price paid too high.

Although I believe ORG may have paid too much based on present valuations, the real point is how many opportunities would there be in future for Origin or any other utility to grow its business in the retail area? I would suggest such propositions are likely to be few and far between, as growth in utilities mainly comes from increased population. If the mining boom in Australia continues as forecast over the next couple of years, and population growth continues at the current rate, then a higher price paid now may later be seen as a risk worth taking.

So what do we expect in the market?

As mentioned in my report last week, the All Ordinaries Index did continue up on positive sentiment, buoyed by the RBA’s decision to leave rates on hold for the month of December. It was interesting to see that on Thursday the market fell away below the low of the previous day, but by day’s end it had reversed back up to create a new high for the week. While debate about when the RBA will next move to lift interest rates is a contentious one, I suspect we won’t see a further rate rise until towards the end of the first quarter in 2011, or early in the second quarter.

This view is not a signal to throw caution to the wind and dive into the market without a plan, as I always recommend a methodical approach to investing. That said, my analysis indicates that the market is likely to be bullish all the way into February 2011 to at least 5,200 points, and therefore short term risk for investors/traders is low. In saying that, if you plan for the worst and hope for the best you will have the mindset to protect your portfolio, and this way you are always prepared for when the bears return.

Dale Gillham

Chief Analyst

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au