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Market holding up for now, but next week is another test with the Chinese coming back from holidays07.10.2011

The Australian All Ordinaries Index has rallied over 3 per cent this week after falling 4 per cent last week.

The upward trajectory kicked off after Greece came out and said enough money to last till November; soon after the dislosure that its budget deficit was €2 billion bigger than first thought. There have also been rumours flying about that the European Union has a rescue plan for all of its members.

Things might look a little rosier, but when I bumped in to a friend who is an institutional dealer with a big investment bank, he pointed out that there has been less selling than usual this week.

Some of his big clients are Hong Kong and Beijing based hedge funds that have been agressively shorting the Aussie market, but have been absent this week - it's Golden Week in China, which means they are on holiday.

When you look at the indexes around the world, it is the Aussie market that's getting hammered the most (probably because it rose the most): In the six months to early October, the UK’s FTSE Index has fallen 18 per cent, in the US, the S&P 500 Index has declined 15 per cent, while domestically the All Ordinaries Index has dropped a whopping 22 per cent.

Under the Radar Report doesn't look at Aussie small caps in isolation. Of course we take macro economic developments seriously (how could you not).

This investment newsletter knows that if you pick good little companies, their progress is less likely to be impeded by these macro influences than companies that have global operations or whose earnings rely heavily on exports. Small companies are vulnerable to domestic economic conditions, but they also have more opportunities to grow there business by taking market share, and by a successful niche.

Of course, we're waving the banner, but the companies we advocate buying are ones that we think have the management capability to do take market share in industries that are growing.

About the Author

Caroline Mark

Caroline is the publisher of Under the Radar Report. She has a diverse background, from producing financial publications, to fundraising and marketing.

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