Australian Stocks Fall; Super Tax Debate

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
31 May, 2010
New York City

The Australian dollar which had dropped on May 28 after Fitch downgraded Spain from AAA to AA+ was little changed today, as the debt downgrading contributed to market jitters.

[R]6:00 PM Sydney, Australia – Australian dollar fluctuated but was unchanged at close after a rating agency downgraded Spain sovereign debt rating. Business gross profits grew 3.9% in the quarter ending in March. Healthscope receives more takeover offers. Gunns shares soar on takeover speculation.[/R]

ASX 200 index in Australia decreased or 27.80 or 0.62% to 4,429.70 and of the stocks in S&P ASX 200 index, 71 increased, 109 declined and 21 were unchanged.

The Australian dollar which had dropped on May 28 after Fitch downgraded Spain from AAA to AA+ was little changed today, as the debt downgrading contributed to market jitters.

However the business outlook appears to be positive in Australia as earnings of miners, bankers, and manufacturers gained in the quarter to March. Bureau of Statistics in Sydney today reported the business gross profits of Australian companies grew by 3.9% in this quarter through March compared to the previous quarter.

The gains for the first quarter were 9.2% for mining companies, 16.8% for manufacturers, and 47.3% for insurers.

The report also showed that the nation’s current account deficit narrowed in this period as higher exports led by iron outpaced a gain in imports mainly of clothing and capital goods.

Healthscope Ltd, without naming the bidders said in a statement today that the company has received two additional buyout offers at A$1.84 billion, both 11% above the company’s closing price on May 28.

Healthscope said, it will allow the new bidders to conduct a due diligence of its financial accounts.

The super profit tax proposal on resource companies has put at risk half the balance sheet of the company, according to Rio Rinto’s CEO. He said this while being interviewed by ABC on its show ‘Inside Business’ yesterday.

“The complexity of the proposal for a 40% tax on resource companies makes it very difficult to correctly assess the costs precisely, and in our case this could be more than 50%,” said Tom Albanese.

Meanwhile the government claims that mining companies have been issuing misleading claims especially on the retroactive nature of the tax.

The government will run its own campaign to counter this misinformation, Treasurer Wayne Swann said in a statement last week and noted that the proposed tax will be with effect from July 1, 2012 and will not apply to past profits.

ASX Movers

Gunns Limited led gainers in the S&P ASX 200 index with a rise of 21.5% followed by Sigma Pharmaceuticals Limited 7.0%, Virgin Blue Holdings Limited 6.4% and Healthscope Limited of 4.9%.

Ausenco Limited led decliners in the S&P ASX 200 index with a loss of 7.2% followed by Mincor Resources NL 4.6%, Avoca Resources Limited 4.1%, Eastern Star Gas Limited 4.0% and Sundance Resources Limited 3.7%.

Other Movers

BHP Billiton plc, the mining company, fell 1.8% to A$38.24.

Gunns Limited surged 21.5% to A$0.48 after the woodchip exporter continued to soar, ending the session over 20% stronger on the back of continued takeover speculation.

Healthscope Limited increased 4.9% to A$5.49 after the hospital owner says it has received two more takeover proposals, in addition to the one the company announced earlier in May. The new proposals, both at A$5.80 per share, value Healthscope at A$1.84 billion or $1.56 billion.

Ramsay Health Care Limited rose 0.4% to A$13.95.

Rio Tinto Limited fell 1.5% to A$67.14 after The head of Rio Tinto''s diamond unit in Zimbabwe said on Friday he was disappointed with the government''s ban on diamond exports and hoped to resolve the issue quickly.

Virgin Blue Holdings Limited added 6.4% to A$0.33 after the airline got “outperform” rating at Macquarie Group Ltd.