Home Demand Drops; ASX Rises 2.9%

Chandrasekhar Atreya
30 Sep, 2010
New York City

Stocks in Sydney fell on the worries that a slowdown in home sales may affect banks. In addition a plan by a rating agency to stress test bank portfolio for mortgage securities. Drop in new home building approvals brings down the Australian dollar from its near two-year high level.

[R]6:00 PM Sydney, Australia – Stocks in Sydney fell on the worries that a slowdown in home sales may affect banks. In addition a plan by a rating agency to stress test bank portfolio for mortgage securities. Drop in new home building approvals brings down the Australian dollar from its near two-year high level. August Job vacancies climb by 4.4% from a year ago.[/R]

Stocks in Australia declined after a rating agency announced a plan to stress test mortgage securities valuation in the wake of sustained decline in home prices. Banks led the decliners. Separately, demand for new homes declined in August.

The ASX 200 Index in Sydney dropped 1.34% or 62.10 to close at 4,582.90. The benchmark index in September increased 2.9% but for the year to date declined 5.9%.

Demand to build new homes in Australia dropped sharply in August as fewer people sought out a mortgage, new data released Thursday showed. The Australian Bureau of Statistics said building approvals fell by a seasonally adjusted 4.7% in August to 13,049 units from a year ago, after a revised 0.1% drop in July.

Separately the RBA said growth in total credit rose by just 0.1% in August or 3.1% increase from a year ago.

The Australian dollar fell today from its near two-year high after home building approvals dropped in August.

The Australian dollar fell to 96.65 U.S. cents at close in Sydney trading from 96.97 cents in New York yesterday.

The Australian Bureau of Statistics also said Thursday, the job vacancies rose by 4.4% 178,700 in seasonally adjusted terms in the quarter ended August from a year ago period.

The Reserve Bank of Australia said Thursday in its half-yearly financial stability review published in Sydney that the country’s financial system remained in strong and stable condition after the nation’s fourth largest bank reported a 15% surge in earnings after fully recouping higher funding costs due to the global financial crisis.

In a largely upbeat appraisal of Australia by IMF released in Washington on Wednesday, the organization said there should be more reliance on consumption based taxes like the GST rather than the MRRT.

However, both the ruling coalition and opposition have rejected this recommendation of the IMF to increase the GST from 10%.

A labor senator slammed Telstra’s reported plan to slash 6,000 jobs, saying the telecom giant and other big companies owe it to the government to keep people in work. The remark came after a report by the Australian Financial Review which said Telstra will reduce staff by 15% over three years to maintain margins.

RiverCity Motorway, the financially troubled owner of Brisbane’s Clem Jones Tunnel said Thursday it could be forced to wind up the company after September 2011, if it doesn’t reach a financing agreement with its banks.

Qantas Airways Ltd said Thursday passenger count has increased 8.5% for the eight months to August from a year ago but the revenue seat factor declined 0.9% from a year ago to 79.6%. Passenger numbers for August were 7.8% higher from a year earlier.

The airline also said it has hedged 58% of its remaining fuel requirement in the current fiscal year with the maximum fuel price of $87.80 per barrel.

Ratings agency Fitch said it will stress test the Australian mortgage market to assess the impact of a fall in house prices and a substantial increase in mortgage default rates on mortgage-backed securities, as market sentiment fuels suggestions that a correction in housing sales is imminent.

An independent report that could influence whether BHP’s hostile takeover bid for Potash Corp wins Canadian approval is delayed and will not be released until Monday.

Resource News

Newcrest Mining said Thursday it reached an agreement with Triple Plate Junction to earn a majority interest in the Manus Island gold project in Papua New Guinea.

Melbourne-based Cougar Energy said its board advised that it should talk with strategic partners to form an alliance to develop underground gasification projects.

Asciano Group secured a 10-year coal hauling contract with Centennial Coal worth about A$550 million. The renewal contract is for hauling 4.5 million tons of coal from Centennial’s mines in the Southern and Western Coalfields regions of NSW.

Gainers & Losers

Sundance Resources Ltd led the gainers in the ASX with a gain of 6.38% to A$0.25 followed by Sigma Pharmaceuticals Ltd 3.23% to A$0.48, Southern Cross Media Group Ltd 2.48% to A$2.07, Tower Australia Group Ltd 2.18% to A$2.34 and Aquarius Platinum Ltd 1.99% to A$5.63.

St Barbara Ltd led the decliners in the index with a drop of 6.02% to A$0.39 followed by Charter Hall Office Reit 5.43% to A$2.44, Perseus Mining Ltd 4.61% to A$2.90, Panaust Ltd 4.41% to A$0.65 and Boral Ltd 4.16% to A$4.61.