Global Sentiment Lift Stocks in Australia

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
16 Jun, 2010
New York City

Resource tax on super profits will not be changed from 40% and set at different levels for different commodities, Resources Minister Martin Ferguson said, as companies sought a compromise on the tax

[R]6:00 PM Sydney, Australia – Stocks in Australia traded higher on global buoyancy. Russia says it is considering adding Australian dollar to its reserves. BHP and Rio say Australia gave no sign of changes to resource tax. Rio Tinto now reviews all projects in Australia. Amcor acquires U.S. packaging assets for $280 million.[/R]

ASX 200 index in Australia increased 1.2% or 54.00 to close at 4,559.00 and of the stocks in S&P ASX 200 index, 168 increased, 25 declined and 7 were unchanged.

The Australian dollar traded higher after a global rally in stocks and reduction in volatility boosted demand for higher yielding assets.

Contributing to this was the news that Russia is also considering adding the Australian currency to its reserves in an effort to reduce dependence on the greenback. Russia’s reserves at $458.2 billion as of May 14 had about 47% of the reserves in the U.S. dollar apart from euros, British pounds and yen.

“Adding the Australian dollar is being considered,” said Alexei Ulyukayev, the central bank’s first deputy chairman, in an interview at an event hosted by Bloomberg in Moscow.

Amcor Ltd, Australia’s biggest packaging company with most of its earnings coming out of North America, has agreed to buy the assets of Ball Plastics Packaging Americas from Ball Corp for $280 million.

“Amcor will buy the business of about $600 million with five plants in North America, using an unused credit facility at 5% interest. The purchase price represents four times EBIDTA in the last 12 months,” said Amcor in a statement.

Resource tax on super profits will not be changed from 40% and set at different levels for different commodities, Resources Minister Martin Ferguson said, as companies sought a compromise on the tax’s application threshold.

“We’re not talking about different tax rates. There will be a generous transitional arrangement for existing projects but the headline rate will be 40%,” Ferguson told Australian Broadcasting Corp today.

Australian government has said that 80 companies have agreed to join the consultation process being led by a Treasury panel, which will release a preliminary report of the discussion next month. This will be followed by a final document later this year. Legislation will be put to vote in parliament in late 2011, if the Rudd government is re-elected in April 2011.

Australia has kept its forecast of wheat production in the next harvest at the same level as this year, according to a government agency.

“Output maybe 22.1 million tons in 2010-11, slightly higher than the March estimate of 21.94 million tons and the previous season’s output of 21.66 million tons,” the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in its report.

ASX Movers

Murchison Metals Limited led gainers in the S&P ASX 200 index with a rise of 11.0% followed by Atlas Iron Limited 10.2%, Mincor Resources NL 9.8% and Ausenco Limited 8.1%.

iSOFT Group Limited led decliners in the S&P ASX 200 index with a loss of 6.7% followed by Downer EDI Limited 5.1%, Biota Holdings Limited 2.9%, Foster’s Group Limited 2.7% and Kingsgate Consolidated Limited 1.1%.

Other Movers

Amcor Limited gained 3.1% to A$6.62 after the packaging company bought a U.S. plastic packaging business for $280 million (A$326 million) as the company targets health care and food related industries for growth.

BHP Billiton plc added 2.2% to A$39.24 after the mining company said Australia’s government gave no sign at a meeting today that it will compromise on its proposed mine profit tax.

Centennial Coal Company Limited, the exporter of the fuel, gained 4.0% to A$4.64.

IOOF Holdings Limited rose 2.5% to A$6.16 after Fletcher Building Limited announced that IOOF Holdings Limited holds 30,400,783 ordinary share representing 5.009% issued share capital of the Company.

News Corporation gained 4.3% to A$18.66 after the media company said British Sky Broadcasting Group plc rejected its proposal to buy the rest of the company in a deal that valued British Sky at £12.3 billion ($19 billion) but said it would recommend a higher offer.

Premier Investments Limited rose 0.4% to A$6.15 after the owner of the Just Jeans and Peter Alexander retail chains stock was upgraded to “buy” from “neutral” by analysts at UBS AG.

Rio Tinto Limited advanced 2.7% to A$71.35 after the mining company said it is currently reviewing all its projects in Australia under the worst-case tax scenario, to assess the impact the proposed super tax would have on its future growth plans.