Australian Stocks Rise on Liquidity Move

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

The Reserve Bank of Australia in conjunction with the Federal Reserve Bank in the U.S. and other Central banks in Europe and Canada indicated a plan to add liquidity to the credit markets. The news sent stocks in the U.S., Hong Kong, Europe, Canada, and Australia higher. The plan is expected to bolster market confidence and encourage mortgage lending and stem the rising mortgage rates denominated in the U.S. dollar.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index rose 2.4% after gains in financial on the back of the Federal Reserve Bank in the U.S. led liquidity injection plan in the global credit markets.[/R]

Market Sentiment

ASX 200 index gained 2.4% or 123.7 to close at 5,257.90

The preliminary market turnover was 1.71 billion worth $7.16 billion, with 856 stocks trading up, 400 trading down and 291 unchanged. The most traded stock by share volume was Empire Oil & Gas with 73.49 million shares worth $1.08 million.

Market Driver

Australia & New Zealand Banking Group chief executive Mike Smith warned that banks may be forced to add to three interest rate increases this year as they seek to recoup higher wholesale funding costs.

He said all banks will have to adjust rates if the funding costs continue to increase. All major banks including ANZ have increased their rates above those of the central bank even as it pushes rates to a 12-year high, seeking to mitigate rising global credit costs. The move has put pressure on households in a nation where mortgage payments are already rising at least 2 1/2 times faster than incomes.

ANZ and St. George Bank Ltd lifted rates by 35 basis points yesterday. That takes their increases this year to 80 basis points, compared with an average of 75 basis points for Australia''s top five banks.

ANZ share rose 5.8%.

Gainers and losers

Of the ASX 200 index stocks, City Pacific Ltd led the gainers with a surge of 45.6% followed by increases in Babcock & Brown of 12.2%, in Sundance Resource of 11.8%, in Timbercorp Limited of 11.7%, and in St George Bank of 7.5%.

Of the ASX 200 index stocks, Compass Resource led the decliners with a fall of 9.6% followed by losses in AED Oil Ltd of 6.6%, in Hills Industries of 6.2%, in APN/UKA European of 4.8% and in Macquarie Office of 4.6%.

Macquarie Media to divest from Taiwan Broadband Communications

Macquarie Media Group today entered into an agreement to divest its 60% economic interest in Taiwan Broadband Communications to Macquarie Korea Opportunities Fund for approximately $400 million.

The sale price is equivalent to $1.87 per stapled security. Macquarie Media said Macquarie Korea has already secured all necessary investor approvals for the transaction, and is expected to complete in the June 2008 quarter subject to regulatory approvals in Taiwan.

Macquarie Media said the sale has been approved by its Independent Directors who have received independent financial and other advice, including advice that the sale price is fair and reasonable to MMG''s external investors.

The Independent Directors have concluded that the sale has been conducted on arm''s length terms. The price is in line with recent comparable transactions in the sector.

Macquarie Media''s share was up 3.7%.

Asciano reaffirms last week''s-unaudited results

Transport infrastructure firm Asciano Group Ltd has affirmed its financial results for the first half of 2007/08 in audited figures released today.

Asciano last week indicated that it had booked a net loss of $71.07 million for the half when it released its unaudited figures.

The result included pre-tax significant items of $150.12 million, related to asset write downs and restructuring costs on the group''s grain haulage business in NSW and Victoria states. Earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items rose 19.2% to $365.9 million.

Asciano also downgraded its annual earnings forecast for this year, citing ongoing problems shifting coal in the New South Wales Hunter Valley.

After adjusting for special items, Asciano estimated EBITDA in the range between $610 million to $620 million.

Rio Tinto releases pro forma 2007 results

The Rio Tinto Group today confirmed its subsidiary Rio Tinto Alcan as its third major division after it posted a pro forma 2007 underlying earnings before interest, taxes, and depreciation of $4,813 million. Three divisions in the company now are iron ore, copper, and alumina and bauxite.

Rio Tinto Alcan reported pro forma 2007 underlying earnings for Primary Metal and Bauxite & Alumina of $2,092 million, representing 23% of Rio Tinto''s pro forma underlying earnings before corporate items and interest.

Alcan pro forma share of production was estimated at 4.2 million tons of aluminum, 8.5 million tons of alumina and 32.0 million tons of bauxite in 2007.

Rio Tinto completed the acquisition of Alcan on 23 October 2007, and the new product group, comprising the combination of Alcan and the original Rio Tinto Aluminium businesses, was named Rio Tinto Alcan.

In order to aid analysis of the Rio Tinto Alcan product group going forward this pro forma information is being provided illustrating the enlarged product group, as though Alcan were part of Rio Tinto for the whole of 2007.

Rio Tinto''s chief executive, Tom Albanese said, """"These pro forma numbers reinforce the significance of the Alcan acquisition, which has transformed our aluminium group into an industry leader and the third major business within Rio Tinto.

In addition to these earnings, we look forward to the synergies from the acquisition. Our internal target is $1.1 billion, exceeding the $940 million after tax synergies announced in November 2007.""""

Qantas to benefit from frequent-flier program

National airliner Qantas frequent-flier program may be worth $2 billion representing more than a quarter of Australia''s biggest airline''s market value, an analyst at JPMorgan Chase & Co told reporters today.

The analyst Matt Crowe said because of Qantas'' affluent customer base and rising earnings, the loyalty program might attract a price of more than 12 times estimated earnings rather than the 6.4 times that Qantas currently trades at.

He added that Chief Executive Officer Geoff Dixon is making it easier for customers to convert points into flights which may lead to 75% profit growth for the plan in 2009 as it shortens the 2.2-year gap between points being earned and redeemed for flights, the time when they are recognized as earnings.

``We believe Qantas Frequent Flier is sitting on a `hollow log'' of pretax earnings worth at least A$1 billion,'''' said Crowe, ``We think it is unlikely that Qantas Frequent Flier is being fully priced.'''' Qantas share fell 2.6%.

Forrest against duplication of rail infrastructure in Pilbara region

Fortescue Metals Group chief executive Andrew Forrest today said the duplication of rail infrastructure to mines in Western Australia''s Pilbara region will contribute to inflation and it was time for all parties to cooperate.

Fortescue is battling Rio Tinto Ltd and BHP Billiton Ltd through the courts and National Competition Council to open up their Pilbara rail network. Fortescue wants access to Rio''s Hamersley Iron and Robe River railway network and BHP Billiton''s Goldsworthy and Mt Newman rail line.

""""Let''s stop trying to cut each other off at the legs and let''s cooperate for the good of Australia and the good of our shareholders, Forrest said.

""""We''re a growing economy but what we don''t need to do is spend wasteful, precious investment dollars where we don''t have to because this will just drive up the cost of living right across Australia.

Rio Tinto Ltd iron ore chief executive Sam Walsh who is attending the same meeting said an end to protracted iron ore price negotiations will not be reached in the short term.

Rio Tinto share rises after announcing intentions to increase output in Canada

Rio Tinto''s share rose 5% after approving a $511 million expansion to increase output from its Canadian iron ore division.

Rio Tinto, the world''s third largest miner, approved a 511.14 million expansion of its majority owned Iron Ore Company of Canada, which is expected to increase concentrate output to 22 million tons a year.