Market Wrap Friday 20-05-11

By Jason Fittler

Federal Reserve to keep interest rates low for as long as it takes.

Our markets do not know what to do at present. Our big blue chip companies are reporting profits in line with expectations. Australian companies have rebuilt their balance sheets and for them it is business as usual.

On the other hand the political situation is at best uncertain.  The Government is working against the Reserve Bank and as such interest rates are looking to rise, carbon tax and mining resources tax are causing an uncertain environment for the large mining companies.

On the plus side we saw a company called Linkedin float in the USA; this is the business equivalent of Face Book. The price doubled on listing to give it a market value of $9 Billion, this company had a profit last year of $3.5 million and has forecast a loss for this year.

This sort of price action takes me back to the Dot Com boom - It is all about eye balls.

My interest is however in the market’s reaction to this IPO. What is clear is that the Bulls are back and happy to take positions in very high risk companies. Although this sort of IPO action has not filtered through to Australia yet, our market will recover as the US rebuilds.

I still have a fair value for our market of 5200, however I expect that the market will stay in the 4800 – 4500 trading range until the rest of the world catches up to the Australian recovery.

For more information please call me on (07) 4771 4577.