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Investors pump up Australian market

THE All Ordinaries index, Australia's equivalent of the Dow Jones Industrial Average, is booming.

The index is up 6 percent from its Jan. 1 level of 2,173. It hit a record high of 2,327 on Tuesday, closing at 2,312 on Wednesday. More than $1 billion (Australian; US$710 million) in shares has changed hands, split evenly between domestic and foreign investors.

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What's fueling the surge? Brokers see the fundamentals as positive: low inflation, low interest rates, and a strong rise in company profits. The Australian dollar is gaining strength against other currencies and commodity prices are rising.

The 5.9 percent growth rate in the United States for the last quarter also bodes well for Australia, whose recovery hangs on US coattails. It was also buoyed by the promise of an economic stimulus package in Japan, which pushed the Nikkei 225-stock index up 8 percent.

Some foreign investors are veering away from the volatile Asian markets and are turning to Australia, attracted by the rise in the Australian dollar as well as the expectation of continued low inflation. The bank share index rose 86 points to close at 3,221.6 Monday, signaling that overseas investors feel that the bad property loan era of the 1980s is over.

``After two or three years of doom, people are looking for a bit of light at the end of the tunnel and they're embracing this recovery with a bit of enthusiasm,'' says David Perry, director of research at Austock Brokers, a brokerage house.

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