Sydney Index Up; Australia Attempts to Stir Bank Competition

Chandrasekhar Atreya
13 Dec, 2010
New York City

Australian stocks closed higher and banks led gainers after Treasurer Wayne Swann revised banking rules to foster competition in the sector. NSW Power privatization identifies Origin Energy and TRUenergy as the key winners.

[R]6:00 PM Sydney, Australia – Australian stocks closed higher and banks led gainers after Treasurer Wayne Swann revised banking rules to foster competition in the sector. NSW Power privatization identifies Origin Energy and TRUenergy as the key winners.[/R]

The key benchmark index in Sydney rose higher led by banks after Treasurer Wayne Swann released the revised banking rules to stir competition in the sector.

The ASX 200 Index added 0.24% or 11.2 points to close at 4,757.1, while the broader All Ordinaries Index rose 0.23% to close at 4,841.2.

The Australian dollar closed lower at 98.48 U.S. cents in Sydney today.

Federal Treasurer Wayne Swan’s efforts to stir competition in banking today helped the four big banks add market cap of more than A$3 billion while the shares of second-tier banks like Bendigo & Adelaide Bank and Bank of Queensland fell sharply.

The Treasurer outlined measures in his banking competition package to allow banks to tap into the A$1.2 trillion superannuation fund to raise capital to reduce reliance on offshore funding.

The measures are designed to invigorate competition in the banking sector as rising mortgage rates have sparked a virtual political backlash against the country’s four major banks. They are aimed at boosting securitization markets and helping the smaller banks to compete better. The competition regulator gets empowered to prosecute the larger banks if they collude to lift mortgage rates by signaling their plans to competitors.

As part of the reforms the government will also inject an additional A$4 billion into the securitization markets and will ban exit fees on home mortgages on new loans from July 1 of 2011.

Qantas Airways said today it has bought the air charter operator Network Aviation, which gives it exposure to the fly-in-fly-out air charter market in Western Australia thus giving it a strong growth opportunity amid the state’s mining boom.

“This is an important market, and a growth market, and Qantas will now become a key player in meeting the needs of the resource sector,” Qantas Chief Executive Alan Joyce said in a statement today.

Total personal finance commitments dropped 0.4% in October, seasonally adjusted, to A$7.595 billion, down from the previous month’s A$7.622 billion, the Australian Bureau of Statistics said today.

Fortescue Metals Group said Saturday it sold a $1.5 billion two-part bond offering in U.S. dollars after changing the terms offer last Thursday from a single tranche of seven years and also increasing the overall deal size from $800 million.

The offer was a $600 million tranche due February 1, 2016, priced at par to yield 6.375% and another tranche of $900 million due February 1, 2018 also priced at par and offering a yield of 6.875%.

Environmental Protection Authority of WA released its assessment today for a public review of three months of Woodside Petroleum’s A$30 billion Browse gas hub project in Kimberley region.

The authority has given its recommendation that Woodside can proceed with the project. The final approval of the project rests with the federal and WA environment ministers.

The Reserve Bank Governor Glenn Stevens, facing a Senate inquiry hearing today into banking competition, defended his advice given to the competition regulator ahead of the sale of Bankwest to Commonwealth Bank of Australia in 2008.

He said that at that time Bankwest was in a situation where its parent HBOS in the U.K. was struggling and would have been sold one way or another.

The Australian Online confirmed today that Origin Energy and TRUenergy owned by Hong Kong listed giant CLP Holdings were the key winners in the privatization process of the power assets of NSW.

While Origin Energy will acquire both retailers Country Energy and Integral Energy, together with the gentrader rights to the Eraring power station, the other company will acquire the states’ largest retailer EnergyAustralia as well as the DeltaWest gentrader bundle.

Stock Movers

Among the four major banks which together added market cap of more than A$3 billion today, Westpac led the gainers with a rise of 1.46% to A$22.90.

Commonwealth Bank of Australia gained 61 cents to A$51.20, ANZ added 27 cents to A$24.10 and National Australian Bank added 35 cents to close at A$24.57.

Bendigo shares dropped 35 cents to A$9.90 with Bank of Queensland down 40 cents to A$10.97.

Rio Tinto rose 41 cents to A$87.77 while BHP Billiton stayed steady at A$45.44.

Fortescue Metals appreciated 1.83% to A$6.66 after announcing it had priced A$1.53 billion of unsecured loans in two tranches.

Newcrest Mining shares dropped 11 cents to A$40.13 on weaker gold prices.

Shares in Tabcorp Holdings dropped 7 cents to A$7.12 after it signed a deal with Queensland to boost its expansion budget to A$625 million.