Investor flight follows collapse

SHOCKED by the double whammy of the destruction in New York and that of Australian icon, Ansett, in the past week, fund managers and investors have been quick to respond.

The result has been a drop of 10 per cent in the local stock market and a drop of 7 per cent in the first day of trading on Wall Street.

But is the “flight to safety” necessary?

Australian Financial Services fin-ancial adviser Terry Lee said that what an individual chose to do depended very much on how much risk he/she was willing to take. Seeking security in cash or property in the short term may be the best for some investors, he said.

“Cash is king because at least your capital is preserved. But you don’t want to leave it (your investments) in cash for too long because of the low return,” Mr Lee said.

“If you are looking long term there is no need to panic. If you look at past experiences, such as Pearl Harbour, you will see that things generally recover within a few months.”

The best thing to do was seek financial advice before making any rushed decisions. But opportunities still existed for companies providing security and defence services or products, he said.

While many are taking their money out of the stock market, plenty of opportunities still exist.

“Security firms will be doing well. A lot of our airport security needs to be upgraded. New scanners will need to be bought and more manpower will be needed,” Mr Lee said.

“Those to suffer will be largely in the tourism and insurance industries.”

He said that, even if Ansett had not collapsed, the effect of the terrorist attack alone would have hit the tourism industry.

Travel agents, together with the airlines, gift shops, restaurants and tour buses operators will all suffer,” Mr Lee said.

Stockbroker D&D Tolhurst advises that investors should concentrate on those companies in the non-cyclical sector, such as in food, alcohol, retailing and healthcare. The company ideally also should have low debt, an attractive yield and substantial cash flows.

Companies that may have been oversold in the past week, including Burswood, could be discounted, with DJ Charmichael tipping it to still be a good buy.

Alternatively, Perth ship builder Austal could provide a good opportunity, given the increased awareness to defend Australia.

“An increased emphasis on defending Australia’s national borders following the turmoil off Australia’s shores and in the US during September is likely to reflect positively on Austal,” the stock-broker said in its weekly brief.

D&D Tolhurst tips Woodside Petroleum to be another beneficiary if oil prices continue to increase.

Others advocate investing directly in property or through Property Trusts as the way to go in the short to medium term.

Property Investment Research analyst Danny Housepeters said property trusts performed well in times of uncertainty because of the security. Increasing concerns over the past year already had been reflected by the Property Trust sector outperforming the general market.

Investors Club of Australia president Kevin Young said that, during the past year, 650,000 small Australian investors had moved from shares, with many deciding to purchase “bricks and mortar”.

“This trend is likely to become a stampede in the coming weeks following the downward spiral in the value of the stock market,” he said.

“During times of economic uncert-ainty investors gravitate towards secure investments, and this is why the real estate market will boom in the coming months.”

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