Australian Stocks Fall

123jump.com Staff
10 Mar, 2008
New York City

The largest mortgage lender in Australia raised its rate on the mortgage loans by 35 basis points, more than 25 basis points raised by RBA last week. Several other banks have raised rates more than the increase from the RBA. AED Oil soared 19.5% after it agreed to sell its Timor Sea based oil field unit to Sinopec. The field delivered far lower than expected output. Heral Resources accepted $2.50 per share bid from a group of companies based in Indonesia and China.

[R]3:00AM New York, 7:00PM Sydney – Australia stocks fell 1.6%. Commonwealth Bank of Australia raised rates more than raised by the RBA.[/R]

Market Sentiment

ASX 200 index shed 1.6% or 83.6 to close at 5,180.40.

The preliminary market turnover was 1.69 billion worth $7.19 billion, with 326 stocks moving up, 927 moving down and 341 unchanged. The most traded stock was Empire Oil & Gas with 137.87 million shares trading worth $3.05 million.

Market Driver

Australia''s top mortgage lender, Commonwealth Bank of Australia Ltd announced today that it would increase interest rates on a range of deposit, variable home loan and business loan accounts, reflecting recent increases in market interest rates and wholesale funding costs.

The deposit interest rate on the NetBank Saver and Business Online Saver accounts will increase by 0.25% annually, effective 12th March. The applicable interest rate for the NetBank Saver account is now 7.00% and Business Online Saver moves to 7.15%.

The bank would raise its variable home loan rate by 35 basis points, above the 25 percentage point rise in official rates to 7.25% by the Reserve Bank of Australia last week.

Group Executive Retail Banking Services, Ross McEwan said, ""The Commonwealth Bank has absorbed a significant proportion of the increased funding costs that it has experienced since August 2007. Unfortunately, the volatility in global markets remains and we have seen funding costs continue to increase, particularly since February as funding from global markets has become tighter and as a result more costly.""

This week, the Australian market has seen one of the larger non-bank mortgage lender to stop issuing new loans.


Ross McEwan added, ""Despite this latest increase, which can be directly attributed to the increased cost of funding experienced by all banks, we are still maintaining a balance between the needs of shareholders and customers by continuing to absorb a significant portion of the additional costs being incurred.""

In January, most Australian banks moved their home loan rates independent of a central bank increase for the first time in more than a decade, in response to rising funding costs. Australian interbank rates jumped to their highest in 13 years on Monday as tight global credit markets and mounting risk aversion saw banks hoard cash.

Westpac Banking Corp, Australia''s fourth-biggest bank, raised its variable mortgage rates by 29 basis points, while St George Bank Ltd, the fifth-biggest lender, flagged it would raise rates by about 40 basis points.

CBA shares dropped 1.7%.

Gainers and losers

Of the ASX 200 index stocks, AED Oil Limited led the gainers with a rise of 19.5% followed by increases in Challenger Finance of 19.4%, in Asciano Group of 14.9%, in Babcock & Brown of 6% and in ABC Learning of 5.4%.

Of the ASX 200 index stocks, Allco Finance Group led the decliners with a fall of 11.4% followed by losses in Lynas Corp Limited of 11.4%, in Centennial Coal of 10%, in Macarthur Coal of 10% and in Leighton Holdings of 8.7%.

Babcock& Brown not selling assets

Babcock & Brown confirmed that it has retired over $250 million of short term ''margin'' loans since 31 December 2007 from existing resources and has received commitments for new term finance, to replace all the remaining outstanding ''margin'' loans secured against marketable securities in Babcock & Brown managed funds.

The new term financing facility contains no market price based covenants, no margin call obligations and no obligations to post additional collateral based on the prevailing market price of securities in our Managed Funds.

The company said whilst it anticipated an increase in its corporate banking facilities, overall gearing would reduce as a consequence of increased retained earnings and the $250 million repayment of short term ''margin'' facilities.

Phil Green, CEO of Babcock & Brown said, ""Today''s announcement removes all short term debt secured against marketable securities in Babcock & Brown managed funds and reconfirms our statement on Friday that we have no intention or requirement to dispose of any interest in our managed funds.”

""This announcement further demonstrates that we continue to have multiple funding sources and in particular we have a large number of strong banking relationships which provide us with flexible funding solutions to support our business.

The company said that it expects to earn $750 million in 2008, 15% rise compared to 2007.

The company also announced a joint initiative with a leading distribution house for closed funds and structured products in Germany, HCI Capital AG, to acquire its first aircraft leasing investment with the purchase of two Boeing 777-200LR aircraft delivered to Air Canada in February 2008.

The aircraft have been leased back to Air Canada under long-term operating leases. Norddeutsche Landesbank Girozentrale provided the long-term and equity bridge loan financing for the transactions. Babcock & Brown Aircraft Management would serve as the aircraft fund''s asset manager and re-marketing agent.

Meanwhile Babcock & Brown also revealed that in conjunction with completion of the documentation of the new term finance facility announced this morning, it would issue approximately 14.28 million options over Babcock & Brown securities with a strike price of $23 and an expiry date of 31 July 2010.

Its share shed 1.2% at the close of trade.

Tango and Shenzhen Zhongjin Lingnan lodges $2.50 per share bid for Herald Resource Limited

The Special Purpose Vehicle owned by PT Antam Tbk, Tango Mining Pte Ltd and Shenzhen Zhongjin Lingnan, formed for the takeover of Herald Resources Limited, today lodged its Bidder''s Statement for its cash offer of $2.50 per Share.

Tango notes that the Herald Board has recommended that Herald shareholders accept the Tango Offer of $2.50 per share in the absence of a superior proposal. Tango also notes the Herald Board has withdrawn its previous recommendation to accept the lower offer of $2.25 per share of Calipso Investment Pte Ltd.

The Tango offer price of $2.50 cash for each Herald share represents a substantial premium to the historical trading levels of Herald shares, prior to recent corporate interest in the company.
The Tango Offer also provides Herald shareholders with an attractive opportunity to realise cash value for their investment in Herald.

Tango was prepared to offer Herald shareholders superior value because an acquisition of Herald and the Dairi Project meets the strategic needs of Antam, a large and diversified Indonesian metals and mining company, and Zhongjin, which owns zinc and lead smelters and mining operations in China.

In a separate statement the Herald board strongly advised Herald shareholders to withhold their acceptance until near the end of the Tango offer period, the closing date of which Tango will advise. Shareholders should note that once they accept the Tango offer, they might forgo the opportunity to accept a subsequent superior proposal.

The Tango Offer is subject to a number of conditions, including 50.1% minimum acceptance, Foreign Investment Review Board approval, Antam shareholder approval on 18th April 2008 while the Zhongjin shareholder meeting is expected to be held in late March 2008.

AED share rises 19.5%

Shares in Australian oil explorer drilling in the Timor Sea, AED Oil Limited rose the most in three weeks after it sold 60% of its largest field to a unit of China Petrochemical Corp or Sinopec Group.

Sinopec International Petroleum Exploration & Production Corp would pay $600 million for the stake in the Puffin and Talbot oil ventures. Lower-than expected output from Puffin prompted a 76% plunge in AED shares over six months before they were halted Feb. 27.

AED spent more than $160 million on the first phase of Puffin, which started production in October. Sinopec International Exploration will take over as operator of the venture as part of the transaction, which values AED''s assets at about $1 billion.

Sinopec Group, China''s second-largest oil producer, pumped about 140,000 barrels a day of crude from overseas fields last year. Puffin has been producing between 6,000 and 10,000 barrels a day, less than expected, AED said Jan. 10.