Australian, China Trade Deals; Telstra Settles

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

Stocks gained in Australia after China eased it yuan peg. Telstra surrenders copper fixed lines to government in A$11 billion deal. Government signs ten trade pacts with China. Sigma Pharmaceuticals Ltd and shareholders are likely to settle class action lawsuits.

[R]6:00 PM Sydney, Australia – Stocks gained in Australia after China eased it yuan peg. Telstra surrenders copper fixed lines to government in A$11 billion deal. Government signs ten trade pacts with China. Sigma Pharmaceuticals Ltd and shareholders are likely to settle class action lawsuits.[/R]

The stocks in Australia gained after partial floating of yuan peg lifted investors’ sentiment. The ASX 200 Index gained 1.33% or 66.70 to close at 4,612.60. Of the stocks in the index, 111 increased, 68 declined and 21 were unchanged.

In a pact signaling easing of tensions, Australia’s Prime Minister Kevin Rudd struck an A$11 billion deal with Telstra Corp, so that state-owned NBN Co will get access to the infrastructure for the proposed national broadband network. The deal will help Telstra avoid sanctions by surrendering its nation-wide copper fixed-line business to the government.

“The agreement paves the way for a faster, cheaper and more efficient roll out of the network,” Rudd told reporters in a news conference in Canberra on June 20, also attended by Telstra’s CEO David Thodey and Chairman Catherine Livingstone. Telstra’s voice and broadband customers will switch to NBN Co, if the agreement is completed.

The agreement subject to shareholder approvals will avoid penalties for the company including a ban on acquisition of new airwaves for next generation mobile services and forced sale of its pay television holdings. Telstra will gradually shut down its copper-wire network as customers are shifted to the NBN fiber project over the eight years as the government builds its fiber network.

Australia and China signed agreements worth more than A$10 billion for expansion of their resources trade and energy ties, during the six-day visit by Vice President Xi Jinping to Australia recently.

“Seven of the 10 agreements relate to resources and energy,” Rudd said in a statement today as he held talks with Xi in Canberra.

Aquila Resources Ltd has signed an initial agreement with China Development Corp to develop its iron ore and coal projects in Western Australia.

“As Aquila’s projects are predominantly for steel making raw materials, they are clearly seen as important for China’s rapidly growing steel industry. China Development Bank will actively support Aquila in both Australia and China,” the Perth-based company said in a statement.

ASX Movers

Rio Tinto Limited led gainers in the S&P ASX 200 index with a rise of 2.2% followed by Newcrest Mining Limited 1.6%, Fleetwood Corporation Limited 0.5% and Origin Energy Limited 0.5%.

David Jones Limited led decliners in the S&P ASX 200 index with a loss of 0.6% followed by WorleyParsons Limited 0.6%, Leighton Holdings Limited 0.5%, Caltex Australia Limited 1.3% and Alesco Corporation Ltd 3.1%.

Other Movers

BHP Billiton plc advanced 2.2% to A$39.99.

David Jones Limited fell 0.4% to A$4.47 and its CEO recently resigned.

Rio Tinto Limited rose 2.1% to A$72.36 after the mining company said it plans to spend $469 million developing the Kennecott Eagle nickel and copper mine in Michigan''s Upper Peninsula, with construction starting this summer.

Sigma Pharmaceuticals Limited decreased 5.7% to A$0.49 after the drug maker said lawyers representing the shareholders of the company hope to meet with the company’s new management early next month to negotiate a settlement.

Telstra Corporation Limited added 4.0% to A$3.36 after the completion of a deal with NBN Co to clear the way for the rollout of the National Broadband Network in Australia.