With Rates on Hold, Bargain Hunting Drives Australian Stocks Higher

Marcus Jacob
01 Dec, 2015
New York City

The Reserve Bank of Australia left the official cash rate unchanged at historic low 2% and held out for a possible rate cut in 2016. Building approvals increased 3.9% in October. ASX 200 index soared 1.9%.

[R]5:30 PM Sydney, Australia – The Reserve Bank of Australia left the official cash rate unchanged at historic low 2% and held out for a possible rate cut in 2016. Building approvals increased 3.9% in October. ASX 200 index soared 1.9%.[/R]

Bargain hunting and positive economic news drove Australian markets higher on Tuesday after losses in BHP Billiton, Slate & Gordon, and Dick Smith in the previous session.

BHP Billiton jumped 3.7%, Slater and Gordon recouped 28%, and Dick Smith Holdings surged 25%.

The Reserve Bank of Australia kept interest rates on hold at a record low of 2%, as inflation still hovered below the central bank’s target range of 2% to 3%.

The central bank didn’t exclude the possibility for another rate cut in 2016 and cited weakening global scenario for commodities market.

Building approvals increased 3.9% in October to 19,652, following an increase of 2.2% in September, according to the Australian Bureau of Statistics. The data exceeded beats market and analyst projections.

Current account deficit in the third quarter narrowed down to $18.10 billion from $20.5 billion in the second-quarter.

The Australian dollar slid to 72.62 U.S. cents and stock trading turnover slid to 1.08 billion shares worth $6.2 billion.

At the close, the ASX 200 Index jumped 99.60, or 1.9%, to 5,266.10, while the broader All Ordinaries Index increased 94.40 to 5,312.60.

In commodities trading, gold soared US$14 to US$1,071 an ounce and Brent crude future for immediate month delivery added 16 cents to US$44.77 a barrel.

IPO

8IP Emerging Companies Limited closed unchanged at $1 after the mortgage broker priced its initial public offering at $1 a share

Australian Stock Movers

Freedom Foods Group Ltd gained 1.9% to $3.12 after the food producer completed the acquisition of rival cereal and snack producer Popina Foods.

Decmil Group Limited slumped 3.7% to 91 cents after the mining, infrastructure, oil and gas services provider agreed to acquire telecommunication company SC Holdings Pty Ltd for about $14 million.

QMS Media Ltd was halted at $1.19 after the media and advertising company announced plans to acquire New Zealand-based rival iSite for about $44.4 million.

The company plans to raise $50.3 million to fund the acquisition, a 1-for-5 accelerated non-renounceable pro rata entitlement offer for $41 million, and a retail entitlement offer for another $9.3 million.

iSite has 450 billboards, presence on more than 1,500 buses in New Zealand, and a growing digital billboard portfolio.