Paul McIntyre: Savaging for stocks and broadband

Markets took a chainsaw to Australia's darling resource stocks this week, led by hedge funds which have suddenly turned melancholic on the sector, triggering a downturn in the benchmark S&P/ASX 200 Index not seen since the September 11 terrorist attacks in the United States.

Defying an upbeat lead from Wall Street on Thursday, the ASX dropped below 5000 for the first time in two months, delivering more sobering news to investors who have seen a 7 per cent slump in their shares in the past 10 days.

It was also a busy week for investors tracking all manner of company announcements and plenty of inter-company sledging.

Woolworths announced its new boss, who will take over from current chief executive and Reserve Bank board director Roger Corbett in October. Michael Luscombe, a 28-year company veteran and the current head of its powering supermarkets division, got the gig.

And James Packer was in the spotlight with news his Publishing & Broadcasting Ltd is set for a possible US$1 billion partial float in the US of its casino joint venture with Hong Kong billionaire Lawrence Ho, son of Macau's casino tycoon, Stanley Ho.

But Packer's gambling play came to light mid-week. He kicked the week off on Monday putting the boot into Telstra and Australia's "embarrassing" broadband speeds.

At a packed industry summit staged by his online joint venture with Microsoft, ninemsn, Packer gave politicians and regulators a slap about the woeful shortcomings of broadband infrastructure in Australia. With him was a leading US internet analyst who was up for some biffo, proclaiming Rupert Murdoch's A$700 million splurge on US teenage community portal MySpace would be a bad move.

Packer told a crowd of 600 on Monday that Australian media companies urgently needed faster broadband speeds to meet surging consumer demand for internet-delivered video downloads of news and entertainment, including current episodes of TV shows. Broadband internet take-up has fuelled a surging online ad market in Australia which is forecast to top A$1 billion in ad revenues this year - ninemsn is the leading online portal in Australia. But Packer is very unhappy with current broadband speeds, pricing plans and download restrictions, essentially dictated by Telstra.

"Australia's position in this area is embarrassing," he said. "Our [media] services are totally dependent on this. We need faster broadband speeds in order to stay competitive to the rest of the world. Most Australians are not only on slow [broadband] plans but also plans that have download caps. This is very unusual compared to other countries all over the world.

"Australia needs government policy and regulatory certainty to encourage the provision of un-metered fast broadband by the [telecommunications] incumbent [Telstra] and other providers."

And just to ensure policymakers got the hint, Packer revealed his Nine Network last week launched an Australian first, offering current episodes of its hit Australian drama McLeod's Daughters to internet users for A$1.95. More TV shows were to come shortly, he said.

Packer also claimed ninemsn's biggest ever single day of video downloads occurred on May 9 when nearly 400,000 users downloaded news video clips of the Beaconsfield miners emerging from their two-week underground ordeal in Tasmania.

And as Packer looked on, Rupert Murdoch came in for a spray from Dr Jeff Cole, the director of the World Internet Project and head of the Centre for the Digital Future at the University of Southern California.

"Longer term News Corp is going to have problems with MySpace," Cole said of the online investment by News which has grabbed global headlines with surging teen user growth in the past 18 months topping 30 million.

"It's going to be hard for News Corp to hang on to those people. If it doesn't happen in a year, it will happen in four years. The more News Corp tries to monetise MySpace, the more I think they will get resistance. You have to walk a very fine line with [online] communities."

But by Friday, the attention had swung sharply around to the savaging of Australian stocks, led by the slump in the resources sector.

"What a dog," proclaimed Sean Conlan, senior adviser at Macquarie Equities. "The hedge funds seem to have gone from long [on] resources over the last six months or so to an about-face and now are heavily short."

However, Conlan also argued the current drive could provide some of the best share buying for the year. "The China story is not going away," he said. " If you can get through this period of uncertainty now, I think you'll see those shares a lot higher towards the end of the year."

There's a lot of people touching wood on that prediction.