Australian Stocks Struggle on China Slowdown; ANZ, GUD QBE in Focus

Marcus Jacob
20 Jan, 2015
New York City

Market indexes in Australia eased after China said economic growth dropped to 7.4% and expanded at the slowest pace in 24 years. Commodities and oil prices were under pressure after the IMF lowered its estimate of global economic growth.

[R]5:30 PM Sydney – Market indexes in Australia eased after China said economic growth dropped to 7.4% and expanded at the slowest pace in 24 years. Commodities and oil prices were under pressure after the IMF lowered its estimate of global economic growth.[/R]

Australian market indexes closed down and investors focused on the latest economic growth data from China.

China’s economic growth in 2014 slowed to 7.4% after expanding at 7.7% in 2013. The growth slowed to a 24 year low as local governments and corporation struggle under heavy debt load and China takes steps to cut lending growth.

In addition, International Monetary Fund today estimated China’s growth to slow down further to 6.8% in 2015 and may drop below 6.5% in 2016.

The IMF in its latest global growth forecast estimated world economic growth to slow to 3.5% in 2015 and expand at 3.7% in 2016, lowering outlook for both years by 0.3 percentage points.

The lowered economic outlook and weakening growth levels in China also played in the decline in oil and commodities prices today.

The Australian Bureau of Statistics reported new motor vehicle sales in December climbed 3% to 94,903 units sequentially and the highest level since June 2014.

Australian dollar closed at 81.77 U.S. cents and in stock-trading turnover slipped to 656 million shares worth $3.95 billion.

ASX 200 Index slid 1.40 to 5,307.70 and broader All Ordinaries Index fell 2.20 to 5,286.80.

In commodities trading, gold closed flat at US$1,277 an ounce and light crude oil dropped US$1.24 to US$47.89 a barrel. Brent crude declined 47 cents to close at US$49.51 a barrel.

Australian Stock Movers

Australia and New Zealand Banking Group gained 0.7% to $31.51 on media report the bank plans to divest its vehicle and equipment finance business with about outstanding loans of $16.2 billion and may fetch as much as $2 billion.

Blackmores Limited surged 11.6% to $38.50 after the health products provider reported group sales in the first-half climbed 22% to $206 million compared to a year ago period.

The company forecasted profit for the first-half to soar 50% on higher sales.

GUD Holdings Limited jumped 5.6% to $7.18 after the owner of the kitchen appliances brand Sunbeam said revenues in the first-half ending in December fell 0.4% to $297.1 million from $298.4 million a year ago period.

Net profit in the period surged 261% to $17.3 million compared to $4.8 million and earnings per share jumped to 24.4 cents from 6.7 cents in the same period a year ago.

The company reaffirmed its operating earnings forecast for the year in the range of $55 million to $60 million.

QBE Insurance Group Limited fell 0.09% to $10.53 after the general insurance company signed an agreement to divest its North America’s agency businesses to California-based Alliant Services Inc for about US$300 million.

The sale is expected to close in early February.

Rio Tinto Limited slid 0.9% to $53.69 after the mining company announced production of iron ore in the year ending in December climbed 11% to 295.4 million tons and shipments jumped 17% to 302.6 million tones.

Rio Tinto estimate to produce iron ore in 2015 of about 330 million tons from the Pilbara mines, a 12% higher than the year earlier and may produce more than 350 million tons in Australia.