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Stocks Warning Sounded By Aussie Exchange Head

The chairman of the Australian Stock Exchange is warning that narrow trade on soaring global markets is a sign they could "implode" soon. John Howard reports.

ASX chairman, Maurice Newman, has told an Australia-Israel Chamber of Commerce audience, that the overheated US markets are like the other boom and busts on the sharemarkets in the past.

"All of us in Australia have got a sense of deja vu, we've had a few of these cycles over the past 50 years," Mr Newman said.

"The breadth of the market is getting narrower and narrower. It's really only a handful of companies driving the Dow Jones, S&P and Nasdaq and ultimately that sort of narrowness implodes on its own weight," Mr Newman told the Chamber.

"All markets regress to the norm and the norm is nowhere near where it should be in the US markets."

He said US company evaluations had been "stretched" with Australian companies overvalued to a lesser extent.

The all ordinaries revisited its June 20 record high during trading on Monday, recording its second highest close at 3133 under the influence of the top five stocks in the index.

Looking to Asia's economic recovery, Mr Newman said the "jury was still out on the Asia crisis" while Japan poured money into failing banks and "one off" projects.

"I'm also concerned that they're trying to sterlise the money supply by keeping it at a level the market can't support," Mr Newman concluded.

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