Despite all the predictions of “horror sessions” (Sydney Morning Herald ) and a “maelstrom” (The Australian ), the local stock market opened, fell and then bounced back a bit in the first two hours of trading today, proving the doomsayers wrong. No bloodbath, investors kept their windows closed and didn’t look at that ledge.

Compared to the very sharp and painful falls late last week, especially on Friday, the opening today was fairly sedate. By noon, the All Ordinaries index was off about 1%, or just over 40 points, after being down by almost 60 points at one stage. Still the peak of 4,256 on 21 March is looking a distant memory with the All Ords falling to a low of almost 3,930 in early trade today.

The doom and gloom predictions were based on the very sharp fall on Wall Street Friday night (191 points in the Dow), but with commodities steadying Friday after some big falls in the middle of last week, there was a bit more support around today from investors.

The drop of around 1% in the first two hours today takes the fall from the peak this year to more than 7%, and means that very few if any fund managers have made money for the clients. The first quarter ended March 31 saw a rise of just over one per cent for the quarter and figures to be released shortly from the measurement groups will show that many managers did worse than that.

With the weakness continuing into April and then accelerating last week the factor to look for is any sign of an outflow from the big fund managers such as Colonial First State, MLC, BT, ING, Perpetual, Macquarie Bank and 452 Capital. If the current fall becomes prolonged then fund managers could be in for a repeat of the miserable months in 2002-2003 which saw billions flow out of their funds and investors still charged to have their money managed to lose money!

For the major banks and others who have invested heavily in fund managers, it will not be nice: a downturn in stock market returns at a time higher interest rates and falling demand put a crimp on the easy money from the home lending and investor property businesses.

In the interests of full disclosure, Stephen Mayne bought the following shares before 10.30am this morning:

Macquarie Bank: 12 shares at about $43.72
Caltex: 40 shares at $13.41
CSR: 220 shares at $2.37
APN: 115 shares at $4.55

All up it’s another pitifall investment of about $2200 following Friday’s toe in the water effort. All these companies have AGMs coming up in the next few weeks and months so we’ll endeavour to take part in the action.