Austalian Budget; CBA Net Up 30%

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
12 May, 2010
New York City

The Australian dollar and stocks fell after the government proposed to return to a budget surplus in three years. Mortgage lending shrinks 1.4% in March. Transurban rejects A$7.2 billion offer. Commonwealth Bank fiscal first quarter earnings increase 30%.

[R]3:00 AM New York, 7:00 PM Sydney – The Australian dollar and stocks fell after the government proposed to return to a budget surplus in three years. Mortgage lending shrinks 1.4% in March. Transurban rejects A$7.2 billion offer. Commonwealth Bank fiscal first quarter earnings increase 30%.[/R]

The Australian stock market index rose marginally and financial and resource stocks led gainers after Treasurer Swann forecasted budget surplus in three years and increase the bond issuance.

Treasurer Wayne Swann forecast yesterday that the budget deficit will start to narrow and then return to surplus in three years, earlier than planned. This should ease pressure on the interest rates and maximize opportunities that come with return to growth, said the Treasurer. He was speaking today on Nine Network Television, after releasing the annual budget yesterday.

“There is a very big fear campaign out there by the mining industry against the proposed mining tax,” Swann told the National Press Club in Canberra today.

The nation’s outstanding bonds is expected to rise by about 30% to A$163 billion in the year to June 30, 2011, compared to an estimated 60% increase to A$125 billion in the current fiscal year according to the Australian Office of Financial Management.

Transurban Group rejected a revised offer for A$7.2 billion made by Australian fund manager CP2 Ltd, The Canadian Pension Plan Investment Board and The Ontario Teacher’s Pension Plan, saying the offer undervalued the company.

The three funds together hold 42.4% of the company’s shares now and the offer is based on a condition that Transurban Group do not issue more shares.

Mesoblast Ltd, an Australian biotechnology company, developing stem-cell therapies, said it will buy the remaining shares of Angioblast Systems Inc, it doesn’t already own to gain full control and its regenerative medicine technology.

The enlarged group will have market capitalization of about A$455 million, Mesoblast said in Melbourne today in a statement.

Gold prices rose 1% to $1,232 per ounce.

In Sydney trading ASX 200 Index edged up 0.6% or 25 to 4,573.00.

Of the ASX 200 index stocks 140 gained, 46 fell, and 14 were unchanged. St Barbara Ltd. led gainers in the index shares with a rise of 14.8% followed by Eldorado Gold-CDI soaring 11.1%.

The Australian dollar also fell 0.4 to 89.15 U.S. cents.

Housing Finance Falls 1.4% in March

Australian Bureau of Statistics reported today that the total value of dwelling finance commitments, excluding alterations and additions, fell 1.4% to A$20.2 billion in March from a month ago.

Owner occupied housing finance decreased 3.4% to A$13.5 billion, but investment housing-fixed loans advanced 3% to A$6.6 billion.

The number of dwelling commitments for owner occupied housing decreased 3.4% to 48,260 units and construction of dwellings fell 7.3% to 5,848 units.

In addition, purchase of new dwellings tumbled 3.2% to 2,095 units and purchase of established dwellings plunged 2.9% to 40,317 units.

Transurban Rejects A$7.2 billion Offer

Transurban Group announced that the proposal received today from CP2 ltd, The Canada Pension Plan Investment Board and Ontario Teacher’s Pension Plan Board for the acquisition of all the issued securities not held by bidders for A$5.57 cash per security is inadequate.

The report notes that the price represents a premium of only 21% to the underwritten issue price for the group''s securities in the current capital raising and a premium of only 14% to the ex-rights price after the offering.

The buyout proposal requires the company to cancel the capital raising exercise that was announced on May 10.

However, Transurban maintains that the capital raising will go ahead in order to support the Lane Cove Tunnel acquisition as well as to provide funding certainty for Transurban''s M2 and M5 upgrade projects.

“Given there is no certainty of a change of control transaction under the proposal, the Board remains of the view that the capital raising is in the best interests of all Transurban security holders and is proceeding as planned,” said the company in a statement.

CBA Q1 Profit Rises 30%

Commonwealth Bank of Australia reported today that its un-audited cash earnings for the three months ended March 31 rose 30% to A$1.5 billion.

Impairment charges in the period eased to A$500 million.

In the retail business, Bankwest continued to achieve “good volume growth” as retail customers exceeded one million in the quarter.

In the wealth management and insurance business, funds under administration and management fell marginally on outflows from short term wholesale cash mandates.

According to CBA chief executive Ralph Norris, while the economic outlook is improving, short terms risks and uncertainties such as those of the European debt crisis remain.

ASX 200 Index Movers

St Barbara Ltd. led gainers in the ASX 200 index shares with a rise of 14.8% followed by Eldorado Gold-CDI 11.1%, Isoft Group 8.2%, Infigen Energy 7.6%, and Kingsgate Consolidated 6.7%.

Sigma Pharmaceuticals led decliners in the ASX 200 index shares with a fall of 6.4% followed by Energy World Corp 4.5%, Nufarm Ltd 3.7%, Awe Ltd 3.4% , and Boart Longyear Group 2.9%.

Other Movers

Resource stocks increased as gold prices rose 1% to $1,232 per ounce.

Extract Resources jumped 5% to A$7.40 and Avoca Resources increased 4.7% to A$2.24.