The Australian stock exchange - down more than 2% following the Australian elections - remained subdued yesterday as politicians wrangled over its hung parliament.
The was a glimmer in the markets from the mining sector, which appears assured the proposed super-mining tax will not go ahead in its entirety, but weak overnight commodity prices wiped out most of the more than 1% gains of the major miners, such as Rio Tinto and BHP Billiton.
There are also lingering concerns about the effects of Australia's joining the carbon emissions trading scheme.
Since the elections last weekend, which left Labor and the Liberal-National coalition tied and now horse-trading for alliances with independents and the Green Party, the ASX has slid more than 2% in value as investors await the outcome of negotiations to form a government.
Although more than 50% of New Zealand's investors have holdings in listed Australian companies, it appears Australian investors are the most likely to be concerned and sitting tight.
Craigs Investment Partners broker Chris Timms said the state of the global economy overshadowed the lack of outcome in the Australian election, but the issues had combined to leave the markets wallowing "like a ship at sea".
"The ASX will remain choppy.
It's reacting on a daily basis because there's no catalyst for any clear direction for ASX investors," he said; predicting the malaise would continue through next week as well.
Mr Timms said whichever party formed a government, political independents from regional areas were likely to have increased power, which could mean an increase in rural infrastructure projects, potentially benefiting contractors and the building materials and steel sectors.
The Australian reporting season was 50% of the way through, with June-half profits broadly in line with expectations, Mr Timms said, but company downgrades continued for 2011 due to conservative earnings guidance.
"Taking into account both the result and the implications for forecast earnings, disappointments have outnumbered positive results by a decent margin, of 27 companies versus 21," he said.
June-half profits came in lower than expected, down 2% for the market and 5% for the resources sector, following pre-announcements from the general insurers and mixed results elsewhere.
"Despite the improved tone of results over the past week, analysts have continued to downgrade full-year 2011 earnings for companies at a -3% clip," Mr Timms said.
Overall, the June-half profits are estimated to be up strongly on the same period last year; about 23% for after-tax profit and 14% on earnings per share, but it had to remembered that during the same period last year results were "particularly weak", he said.
Mr Timms said the downgrades and conservatism were understandable given softness in commercial building and housing; delays in infrastructure and resource projects and lingering concerns about retail spending, plus weak demand offshore.
He cautioned the forecast could turn out better than expected, as while Government stimulus had done little to help listed companies, there was an expectation private spending would pick up towards the end of the year.
