A good old fashioned wash out

James Marlay

Livewire Markets

It was an ugly day for small caps on the ASX. Word from the sell side is that a small cap mandate was liquidated, adding selling pressure to a market coming to grips with macro concerns. Hitting the phones we weren't able to establish whether a mandate was liquidated or not. However, here is a snapshot of some of the feedback we did receive. 1) Small caps have had a great run (just look at the PEs on the chart below); 2) Fund Managers have had good gains on many of these names - so why not take some profits; 3) Large and Mid Cap managers have been shopping in smaller companies - there was good volume so these managers may well be taking advantage to exit positions. As one portfolio manager said - a pullback is healthy, stocks have had a great run and the market is feeling a 'bit spongy'. His view - this is just a good old fashioned wash out and a decent pullback would set up the market nicely for CY17.

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James Marlay
Co Founder
Livewire Markets

Livewire is Australia’s #1 website for expert investment analysis. We work with leading investment professionals to deliver curated content that helps investors make confident and informed decisions. Safe investing and thanks for reading Livewire.

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