Australian Stocks Fall; G20 Worries

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

Stocks in Australia traded lower on global sentiments. G-20 summit decides that banks need higher capital and agreed to cut budget deficits by half by 2013. Miners urge for speed on tax talks. Valspar agrees to acquire Wattyl Ltd. for A$142 million.

[R]6:00 PM Sydney, Australia – Stocks in Australia traded lower on global sentiments. G-20 summit decides that banks need higher capital and agreed to cut budget deficits by half by 2013. Miners urge for speed on tax talks. Valspar agrees to acquire Wattyl Ltd. for A$142 million.[/R]

Stocks in Australia traded lower on global sentiments. The ASX 200 Index closed 0.65% less or 28.50 to 4,384.50 in Sydney on the worries that early withdrawal of stimulus may lower demand for commodities.

G-20 leaders after a meeting in Toronto, Canada said banks need to have significantly higher capital while giving lenders more flexibility to implement reforms. Several countries took steps before the meeting.

China widened the trading band for the yuan, India eliminated most of fuel subsidy and the U.S. lawmakers passed financial reforms.

The leaders said they will seek a final agreement on the new standards for capital at a summit in Seoul in November, when the Basel Committee of Banking and Supervision, made up of international central bankers, will meet and propose a road map. According to the meeting consensus, all countries should adopt the new standards by the end of 2012, with a transition period when the banks will be allowed to phase in the capital increases.

Leaders at the summit have also agreed to cut national budget deficits in half by 2013. In a reversal from the unity of the past three summits, the leaders decided to adopt differentiated and tailored economic policies for each country.

“Our challenges are as diverse as our nations but together we represent some 85% of the global economy and we have forged a coordinated response to the worst global economic crisis of our time,” said U.S. President Barack Obama after the summit.

Challenger Financial Services Group Ltd, the Sydney-based financial lender is planning to lend as much as A$1 billion to commercial property owners in Australia to help pay mortgages due this year, and also profit from the deal as other lenders retreat from the market.

“The company has already provided about A$500 million of debt secured by commercial, industrial and retail buildings in the past six months, including helping some of them refinance commercial mortgage-backed bonds, Robert Sahota, head of fixed interest said in an interview in Sydney last Thursday.

The four main lending bankers in Australia are overcommitted to commercial property while some foreign banks have cut their lending, leaving a gap that the company is looking to exploit, Sahota said in the interview.

Minneapolis-based coating manufacturer Valspar Corp has made a takeover offer of A$142 million to Wattyl Ltd, the Australian paint maker.

Valspar has agreed to pay A$1.67 for each Wattyl share, which is a 113% premium to its closing price on May 24 when the company received its initial proposal for takeover and 33% more than its closing price on June 25. The Sydney-based Wattyl said in its statement filed with the Australian Stock Exchange.

ASX Movers

iSOFT Group Limited led gainers in the S&P ASX 200 index with a rise of 5.7% followed by Elders Limited 4.1%, Sigma Pharmaceuticals Limited 3.4% and Equinox Minerals Limited 2.7%.

Gunns Limited led decliners in the S&P ASX 200 index with a loss of 5.7% followed by Medusa Mining Limited 5.4%, Infigen Energy 5.3%, Ausenco Limited 5.2% and CuDeco Limited 5.1%.

Other Movers

BHP Billiton plc fell 0.8% to A$38.47 after the mining company said that the federal government has reportedly contacted global miner Rio Tinto Ltd with regard to fresh negotiations on the mining tax.

Caltex Australia Limited dropped 2.6% to A$9.40 after the oil refiner stock was downgraded to “hold” from “buy” at Deutsche Bank AG.

Lihir Gold Limited fell 0.6% to A$4.41.

Macarthur Coal Limited fell 0.9% to A$11.97 after the investment bank called for Prime Minister Julia Gillard to remove forecasted tax revenue from the government''s budget forward estimates.

Macquarie Group Limited, the investment bank, dropped 1.3% to A$39.00.

Newcrest Mining Limited, the gold producer, dropped 0.3% to A$35.87.

Wattyl Limited surged 28.1% to A$1.62 after Valspar Corporation announced today that it has agreed to acquire the paint manufacturer. Valspar will acquire all outstanding shares for approximately A$142 million and assume existing debt.

Woodside Petroleum Ltd, the oil and gas producer fell 0.5% to A$43.04.