RBA Holds Rate; Australian Surplus Widens

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
06 Jul, 2010
New York City

Reserve Bank of Australia left the key interest rate unchanged. Trade surplus widened in May. Aspen''s Sigma bid faces uncertain future. QBE Insurance Group acquires NAU Country Insurance. Australian dollar climbs on optimistic economic view from the Reserve Bank.

[R]6:00 PM Sydney, Australia – Reserve Bank of Australia left the key interest rate unchanged. Trade surplus widened in May. Aspen''s Sigma bid faces uncertain future. QBE Insurance Group acquires NAU Country Insurance. Australian dollar climbs on optimistic economic view from the Reserve Bank.[/R]

Stocks in Australia gained after reports showed that the nation’s trade surplus widened in the month of May and the central bank decided to keep its policy rate unchanged.

The ASX 200 Index gained 1.28% or 54 points to close at 4,276.10 in Sydney today.

The Reserve Bank of Australia kept its policy interest rate unchanged at 4.5% as widely expected. The RBA governor said he expects consumer inflation likely to be in the upper half of the target range over the next year and could reach 3% near-term.

“The economic expansion of the world remains uneven, with major advanced countries recording only modest growth overall, but growth in Asia and Latin America to date has been very strong,” said the bank’s governor Glenn Stevens in his statement accompanying the decision.

Australia’s trade surplus widened further in May as exports zoomed on demand from Asia, outpacing imports. This trade surplus was also fueled by price increases in coal and iron ore.

“The trade surplus widened in May to A$1.65 billion from A$1.12 billion in April. While exports rose to A$24.7 billion, imports were A$23.1 billion, said the Bureau of Statistics in its report released in Sydney today.

After selling its sugar unit yesterday to Singapore-based Wilmar, Australia’s CSR Ltd today agreed to sell its Asian insulation units to Denmark’s Rockwool International A/S for A$128 million.

“Rockwool will acquire 100% of CSR’s insulation, panels and trading businesses across Asia, excluding the aerated concrete panel plant in Malaysia,” the company said in a statement today.

“Our core focus remains in Australia and New Zealand and it is now appropriate for us to focus our strategic agenda on these markets, whilst providing the Asian businesses the opportunity to develop further under a different ownership structure,” said CSR Building Products CEO Robert Sindel in the statement.

Bilfinger Berger AG, Germany’s second-largest construction company had planned to sell stocks of its Australian unit Valemus Ltd in the scheduled IPO between A$2.20 and A$2.50 a share. The IPO listing has been withheld after investors balked at the price the company was seeking.

“Plans to sell the stocks in this unit at that price range cannot be realistically achieved, Mannheim-based Bilfinger said in a statement yesterday.

Xstrata Plc and Rio Tinto restarted work on projects in Australia after the mining tax issue was resolved. While Xstrata has started work at three coal projects in Queensland State, Rio Tinto Group has revived its study of iron ore expansion projects in the Pilbara region.

Macarthur Coal Ltd has revised it forecast for the full year estimating that profit, excluding accounting adjustments, maybe between A$115 million and A$125 million compared with its earlier forecast of profit between A$103 million and A$113 million, the company said in its statement today.

ASX Movers

Adelaide Brighton Ltd led gainers in the S&P ASX 200 index with a rise of 9.2% followed by iSOFT Group Limited 8.5%, Toll Holdings Limited 6.3% and Gunns Limited of 5.7%.

Mirabela Nickel Ltd led decliners in the S&P ASX 200 index with a loss of 3.8% followed by IRESS Market Technology Limited 3.7%, Biota Holdings Limited 3.3%, InvoCare Limited 2.6% and Elders Limited 2.3%.

Other Movers

BHP Billiton plc added 0.5% to A$37.16 after the mining company was upgraded to ""buy"" from ""hold"" at Independent Research GmbH.

Chairman JAc Nasser noted in a letter to shareholders that the revised profit tax regime only applies to new iron ore and coal projects. And the effective rate is 30% which after deduction is 22.5%. The tax is calculated based on the value of the resources at the mine level and adjusted for all extraction cost.

Leighton Holdings Limited rose 1.8% to A$28.62.

QBE Insurance Group Limited rose 0.1% to A$17.62 after it acquired NAU Country Insurance.

Rio Tinto Limited fell 0.2% to A$65.08.

Sigma Pharmaceuticals Limited closed unchanged at A$0.39 after the drugs distributor extended exclusivity period with Aspen Pharmacare ended at the close of business yesterday, with no news on the drugmaker''s intentions, The Australian reports.

Slater & Gordon Limited, the law firm, closed unchanged at A$1.45.