Dividend slash threat mining industry propaganda- Dale Gillham market report
There have been a lot of scare campaigns around the Mineral Resource Rent Tax that was passed into legislation this week. Many vested interests in the mining sector have pushed their personal barrow through the media in an attempt to muster public support, with some issues raised being completely misleading. In these sorts of ‘media campaigns’ it is quite sad that the public rarely get to see the pros and cons laid out simply and at the same time.
One example I read just this week was a report claiming that the MRRT will cause mining companies to slash dividends, which frankly is a bit of a joke in my opinion given that many mining companies either don’t pay dividends or pay very low dividends. Investors looking for dividend income would not hold a lot of mining stocks in their portfolio, as these stocks are typically used to generate capital growth and not income. Unfortunately, itwill be some time before Australians will really get to understand the real benefits that this tax will bring to us as a nation rather than trumped up speculation. The main thing is that now every Australian will reap more of the benefits from our resources and not just a select few.
So what do we expect in the market?
Last year our analysis indicated that the All Ords would be trading up at around 4500 points in the first half of 2012, and although it has not achieved this level yet we still have plenty of time to go. Investors that have been around the market for some time know that March and April can be a little volatile as conditions settle down post the quarterlyreporting period. Given this, right now is a time not to prejudge the market, as whilst it has not been overly bullish in this first quarter, it has also not confirmed that an alternate bearish scenario is unfolding.
Around this time of year it is not uncommon to see nice gains one week followed by a sell off the very next week, and this is what has occurred over the past fortnight as the negative talk about China took the wind out of the sails, and in doing so slowed the rise. This negative talk about China saw the Australian share market pull back towards 4330 points before it found support to rebound. The positive news is that where it is trading now is well above what I would call the ‘danger zone’, that could spark a sell off, and so my expectations is that we will see the All Ordinaries Index move up again and through the 4,400 point level.
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