Financial advisers will need to help clients pick equities even more carefully as over half of the companies listed on the Australian Securities Exchange (ASX) have diminishing financial health, new research has revealed.
Around 61 per cent of the 2209 companies listed on the local bourse for the six-months to December 2007 have been under "marginal" or "distressed" financial pressure.
That figure is up from 58 per cent in the first-half of 2007.
The study was compiled by research firm Lincoln Indicators in its semi-annual Health of the Market report.
The research defined marginally pressured companies as those that may have trouble funding future growth and distressed firms as ones showing signs of failing.
Many of the small firms within the energy, materials and information technology sector fell within marginal or distressed pressure categories.
This has been partly caused by the global credit crunch stemming from the US sub-prime collapse which has caused financial institutions worldwide to post $335 billion in losses and write-downs.
Melbourne-housed Lincoln based its findings on fundamental analysis of companies' latest financial statements.
"The old adage is that when the United States sneezes, Australia catches a cold," Lincoln managing director Tim Lincoln said.
"However, the good news is that Lincoln's fundamental analysis also shows many ASX-listed companies were equipped to absorb the recent shocks, in turn delivering relatively strong buying opportunities to long-term investors."
Lincoln's report said that 31 per cent of listed companies for the six-months to December 2007 are rated as "strong" or "satisfactory".
This figure is down from 36 per cent in the first-half of 2007.
The research defined a strong or satisfactory company as one with a robust cash flow and business model capable of absorbing economic shocks and bear markets.
Many retail, insurance and banking stocks fell within that category.
