The Market Wrap Friday 29-May-2009

By Jason Fittler

Waiting for a sign?

May was a relatively flat month with the market closing slightly up from where it started.

June will be another interesting month, as it is the end of financial year and we have a budget to be passed.

There is no doubt that the market remains a more positive place but as companies start preparing their end of financial year figures we should start seeing how they have performed and if there will be any further write downs coming from the banks and property sectors.

There are still a number of economic issues the largest being unemployment.

What we have not seen yet are residential property prices fall or banks start to write down their home loans. This has happened in the US and is expected to happen here. I expect to see this more once unemployment moves higher to around 8.5%.

The other issue is interest rates. I expect them to stay this low or drop by another 0.5%, but they will start to move up in 2010.

We are however seeing a lot of capital raising in the market place, which to my reckoning indicates that companies are expecting to announce poor results and as such are looking to raise capital now and strengthen their balance sheet before the bad news. Don’t get me wrong I fully recommend that you look to participate in the quality capital risings. Just don’t be surprised if you see some bad results come out in August, even good companies have bad years.

Regardless what June brings, good quality companies are going cheap right now.

Buy quality on weakness with a long-term view and you will do very well for yourself.