Financials, Metals Power Australian Rally

123jump.com Staff
14 Nov, 2007
New York City

Australian stocks closed sharply higher reflecting strengths in New York and in Asian markets. ASX 200 index gained 1.3% to 6,598.60. Financials, gold and steel, and infrastructure companies led the gainers. Qantas said that it plans to purchase 188 narrow body short haul planes to expand its service in Australia and Asia. Gold and steel stocks rose sharply on positive comments by brokers and executives at companies. Australian dolar rose against the U.S. dollar.

[R]9:30PM Sydney, 5:30AM New York – Stocks in Australia jumped 1.3% on a strength in financial stocks, sharply higher close in New York, and merger talks between BHP and Rio.[/R]

ASX 200 index gained 1.3% or 83.40 to close at 6,598.60. Preliminary stock turnover was 1.92 billion shares worth $7.04 billion, with 809 stocks rising, 498 falling and 328 unchanged.

The most traded stock on the market was Kalgoorlie-Boulder with 154 million shares changing hands worth $33 million. Its shares gained 108.7% to 24 cents.

Banks led the rising stocks. Commonwealth bank was up 1.5%, Westpac added 1.3%, Australia and New Zealand bank was higher at 1.1% and National Australia Bank edged higher by 1.6%.

Stock broker, UBS indicated that BHP Billiton Ltd could afford to make a $27 billion offer in cash to push through its proposed three-for-one stock offer for rival Rio Tinto Group.

According to a report dated November 13th that was released by the company, a cash-and-stock bid would be more attractive to Rio''s shareholders, than the all-stock bid by BHP and a promise to buy back $30 billion of shares in the combined company. BHP has offered 28 premium to the then trading price of RTP, but market is looking for a premium as high as 60%.

BHP''s initial bid valued Rio at $153 billion or 28% premium to its trading price before the date of the offer. BHP estimates cost synergies and savings of $3.5 billion and the merged company is likely to have pre-tax earnings of $40 billion.

The combined company will control one third of global iron-ore production, and will be the largest global producer of coal, aluminum, and copper, with operations in six continents.

Qantas today announced that it would buy up to 188 narrow body aircraft for short haul flights in Australia and Asia. The airline said the funding of the purchases wouldn''t affect its investment grade credit rating. Qantas plans to open operating hubs for its discount travel carrier Jetstar in Darwin and Perth. Qantas closed down 1.2%.

At the close the Australian dollar was trading at $0.9035, up sharply from yesterday''s close of $0.8880. During the day it traded between $0.8950 and $0.9029.

Of the ASX 200 index shares, Iluka Resources led the gainers with a rise of 11.4% followed by increases in Caltex Australia Limited by 7.9%, in Sally Malay Mini by 7.1%, in Con Minerals by 6.5%, and in Gwa International Limited by 6.4%.

Of the ASX 200 index stocks Hills Industries led the decliners with a fall of 2.6% followed by losses in AED Oil Limited of 2.7%, Macquarie Office by 2.95%, in Kagara Zinc Limited by 2.96%, and 7.5% in Murchison Metals.

Shares in Babcock & Brown Environmental Investments Ltd (BEI) vaulted 24% after investment house Babcock & Brown Ltd offered to buy the 70% of poorly performing bio-fuels listed fund that it does not already own, for about A$48 million.

In other stocks, resource stocks were both up with BHP Billiton edging higher by 1% and Rio Tinto 1.1% lower for the second day in a row.

Stocks in the energy sector were down after oil fell by more than $3 a barrel, the largest decline in three months. Oil closed at $91.40 per barrel. Woodside lost 0.8%, Santos was 0.7% lower and Oil Search sank by 0.4%.

Weakness in gold price did not hurt gold stocks. Lihir Gold put on 2%, Newcrest added 1.8% and Newmont gained 0.5%.

In media sector, News Corp added 1.5% while its non-voting shares were up 0.5% to $23.50. Fairfax Media dipped 0.2% and Publishing and Broadcasting shares lost 0.2%. Seven Network traded up 1.8% and Ten Network increased 1.5%.

BlueScope Steel''s share price powered ahead by 6.6% after managing director Paul O''Malley told shareholders """"the future of the steel industry is rosy''''.

Project developer Leighton Holdings was up 3.4%, while building and construction materials manufacturer Boral jumped 1.7%.

Investors snapped up shares in fertilizer producer Incitec Pivot after it more than tripled its annual profit and said that the outlook for global fertilizer prices is strong. Incitec surged 5.3%.


[R]5:30AM New York, 7:30PM Tokyo – Tokyo rebounded 2.5% on the strength in the New York.[/R]

Nikkei 225 Index rose for the first time in nine-days with a gain of 2.47% on waning fears over credit market losses and better than expected earnings from the largest retailer Wal-Mart.

In Tokyo trading Nikkei 225 rose 2.47% or 372.93 to 15,499.56, while the broader Topix Index gained 42.98 to 1,497.71.

In the first section of the Tokyo Stock Exchange 9.7 billion shares worth 1.2 trillion yen were traded compared to 9.9 billion shares worth 1.2 trillion yen traded yesterday, while 278 million shares valued at 5.7 billion yen changed hands in the second section.

Of the Nikkei 225 stocks 204 climbed, 19 retreated, and 2 were unchanged. Of the index stocks, 26 stocks gained 4% or more.

Commercial bank Chiba Bank Limited led gainers, rising 10.09%, followed by increases in IHI Corp of 8.94%. Financial stocks gained as well on easing credit worries. Mitsubishi UFJ Financial Group rose 6.26%, Mizuho Financial Group jumped 6.38% and Sumitomom Mitsui Financial Group soared 8.49%.

Goldman Sachs chief executive Loyd Blankfein said yesterday at a Merrill Lynch sponsored conference it does not expect to be making any significant writedowns on mortgage related securities. Bank of America reported a write-down of $600 million and chief executive of JP Morgan said that the loss exposure to collaterized loans is not significant. Investors breathed a sigh of relief after commnets from the executives and Bank of America loan loss that met earlier estimates.

Wal-Mart Stores, the largest retailer, also announced yesterday that the company third quarter sales rose 9% and earnings gained 8%.

Nikkei News reported today 10-year Japanese bonds fell to a 26-month low of 1.49% yesterday, compared to the 1.5% average dividend yield on Topix index stocks.

The World Semiconductor Trade Statistics said yesterday on its website it expects the global semiconductor market to grow 3.8% to $257.2 billion in 2007. The association revised its projection upwards by 1.5% compared to its previous forecast in May of this year. Projections for 2008 and 2009 were maintained at 9.1% and 6.2% growth correspondingly.

Of the Nikkei 225 index shares, Chiba Bank Limited led advancers, rising 10.09%, followed by gains of 8.94% in IHI Corp, 8.70% in JGC Corp and 8.49% in Sumitomo Mitsui Financial Group and 8.19% in Comsys Holdings.

Exporters also gained after the yen retreated for the second day as investors resumed buying high yielding assets that are funded by Japanese loans. The yen was quoted at 111.27 at the close of trade compared to 109.22 against the dollar yesterday. Sony Corporation soared 2.47%, Toshiba Corporation firmed 3.84%, and Toyota Motor Corporation jumped 3.65% on the news.

Chipmakers also gained after the World Semiconductor Trade Statistics, forecasted sales would probably climb this year. Advantest Corp rose 1.99% and Sumco Corporation spiked 7.80% on the news.

Bloomberg news reported today that UBS said in a report it expects steelmaker’s profits to show robust recovery in the fourth quarter, adding that steel prices will remain firm in 2008 buoyed by rising demand in emerging markets such as China and India. Nippon Steel gained 4.64% on the news.

Kajima Corporation led decliners, falling 7.51%, followed by losses in Taiheiyo Cement of 4.89%, in Toho Zinc Company of 3.03%, in Asahi Brewers of 2.04% and Nippon Oil Corp of 1.23%.

Shinsei Bank Limited said today first half net income fell to 23.1 billion yen from 38.8 billion yen a year earlier. The U.S. subprime mortgage slump forced the bank to add $69 million in provisions for loans of such credits, spurring total charges to $172 million. Furthermore, Shinsei Bank said credits related to the U.S. mortgage market total $500 million compared with assets of $92 billion as of March 31. Shinsei Bank closed up 4.62%.

Mitsui & Co reported yesterday its Brazilian affiliate Multigrain SA has bought 100,000 hectares of farmland in western Bahia, western Minas Gerais and Southern Maranhao to secure a stable supply of soybeans and other farm produce. Mitsui & Co rose 0.99%.

Tokyo Electron forecasted yesterday third quarter orders would rise for 170 billion yen from 127.5 billion yen in the previous quarter. Tokyo Electron rose 4.69%.