Financials Decline, Woodside Gains

123jump.com Staff
19 Jun, 2008
New York City

Australian stocks fell after the worries related to credit market rises. Hedge fund manager Paul Johnson estimated credit market related losses to increase to $1.3 trillion. In additon, Morgan Stanley reported 61% decline in earnings. On the news, stocks of five retail banks in Australia fell between 2% and 4%. Babcok Brown Power cancels dividend for the six month period to lower its debt.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index lost 1.4% as financial stocks weakened. Qantas appoints new directors. ACCC commences proceedings against ABC. QGC increase its coal seam gas estimate by 80%.

Market Sentiments

ASX 200 index lost 1.4% or 76.6 to close at 5,366.60. The preliminary market turnover was 1.99 billion, worth $7.03 billion, with 557 stocks up, 683 stocks down and 377 unchanged. The most traded stock was Telstra with 63.2 million shares worth $287 million.

Market Driver

Australian stocks declined after the global credit market worried resurfaced. Overnight in New York, Morgan Stanley reported a profit decline of 61% and hedge fund manager Paul Johnson in a industry gathering suggested that total credit market related asset write down may reach $1.3 trillion. So far the world wide banks have reported losses of $392 billion.

Of Australia''s top five retail banks, St George''s share led the decliners with a loss of 4.6% followed by losses at ANZ of 4.3%, at Westpac of 4.2%, at National Australia Bank of 3.9% and at Commonwealth Bank of Australia of 1.8%.

Gainers and losers

Of the ASX 200 index stocks, Centro Retail led the gainers with a rise of 14.5% followed by increases in FKP Property Group of 7%, in ABB Grain Ltd of 6.6%, in Sino Gold Mining of 6.6% and in Felix Resources of 6.4%.

Of the ASX 200 index stocks, Babcock & Brown Power led the decliners with a fall of 20% followed by losses in Asciano group of 9.5%, in ABC Learning of 9.5%, in Macquarie Infrastructure of 8.2% and in Duet Group of 8.2%.

Woodside aims to be a global leader in LNG production

Don Voelte, chief executive of Australia''s second-largest oil and gas producer, Woodside today indicated that the oil producer is aiming to be a global leader in LNG production.

He told a UBS conference in Sydney that they were already “up there with the super-majors” in terms of operated capacity. He said its NWS fields have over 20 trillion cubic feet of gas reserves after 24 years of production. Woodside gas reservoirs could recover up to 90% gas.

Mr Voelte said the liquefied natural gas market expected to remain short until 2015, a factor that was likely to keep during demand up and delays in supply projects.

Woodside has already approved the development of Pluto LNG project worth $12 billion. The project is one of three LNG projects to be approved worldwide in the last three years.

Woodside share gained 2.8%, fellow oil miner Oil Search Ltd was up 2% and Santos gained 2.6%.

Queensland Gas increases coal seam gas reserve estimate by 80%

Queensland Gas Company today said that it will increase its estimate of reserves of coal seam gas by 80% from 1,317 petajoules (PJ) to more than 2,370 PJ, of which QGC''s share would be more than 1,895 PJ.

The upgrade, expected by 30 June after final confirmation by independent certifiers Netherland Sewell & Associates, would represent an increase in the key reserves by 80% across the Surat Basin acreage.

QGC has owned 80% of the reserves since completing a key transaction with BG Group on 11 April. BG Group, which is partnering QGC in the Queensland Curtis LNG project to export liquefied natural gas from Gladstone, owns the balance of 20% of the reserves.

The Queensland Curtis LNG Project is designed to supply 3 to 4 million tons of LNG a year to export markets from a plant to be developed at Curtis Island, near Gladstone. QGC has targeted a gas reserve base of 7,000 PJ to supply the project.

QGC share was up 2.8%.

Babcock & Brown Power scraps dividend

Babcock & Brown Power has decided against a dividend payment for the six month period ending 30 June 2008 as it looks for ways to lower debt ratio between 60% and 65% from the current 68%.

""Taking this into account and given current trading conditions BBP currently anticipates 2008 operating earnings to be in the range of $330 million to $340 million which is slightly below Alinta Scheme guidance taking into account pro-rata ownership of Alinta assets,"" the company said.

In addition the company said 2009 operating earnings are likely to be at the lower end of the analyst forecast range of $439 million to $528 million.

Australian regulator commences proceedings against ABC

The Australian Competition and Consumer Commission today indicated that it has commenced proceedings in the Federal Court in Melbourne against ABC Learning Centres Ltd.

The ACCC alleges that ABC persistently failed to comply with the court-enforceable undertakings it gave to the ACCC in December 2004 following its acquisition of the Peppercorn child care group, by not divesting two child care centres as required. The regulatory oversight pertains to only two centers and there are no other outstanding issues with the regulator.

The undertakings required ABC to divest a number of childcare centres in various regions, including two centres in Geraldton, Western Australia, namely the Kidz Retreat and Little Buccaneers child care centres.

The ACCC alleges that between December 2004 and the present, ABC did not divest the two Geraldton centres even though the ACCC agreed to extend the deadline several times.

The ACCC further alleges that ABC breached the undertakings by interfering in the role of an agent who was appointed in 2006 to expedite both sales and by failing to reasonably assist that person to divest the two centres.

A further alleged breach is that ABC failed to maintain the two Geraldton centres as fully operational competitive going concerns so as to preserve the goodwill in the centres.

The ACCC is seeking declarations that ABC breached its undertakings and for the issuance of orders directing ABC to comply with the terms of the undertakings and an additional order directing ABC to sell the two centres to a person approved by the ACCC (or instead to sell one of the other long day care centres that it owns in Geraldton).

In addition it said it would ABC continue to use its best endeavours to divest the two centres the subject of the proceedings and will continue its dialogue with the ACCC with a view to resolving this matter.

ABC share fell 9.5%.

Qantas plans for impending strike

Qantas said today it would take all necessary measures to minimize the impact of strike action by the Australian Licensed Engineers Association planned for next week.

Qantas Executive General Manager People, Kevin Brown, said the timing of the strikes by the ALAEA was deliberately designed to maximize disruption and some flights will have to be cancelled.

Mr Brown said Qantas had met with the union twice in recent weeks in an attempt to resolve this dispute. ""We met last week where the union tabled a new and higher claim valued at 5.7% per annum. A meeting was also planned for today, but was cancelled once the union notified the airline of its intention to strike.

Meanwhile Qantas'' chairman, Mr Leigh Clifford, has announced the appointment of two directors to the Qantas board. Richard Goodmanson and Barbara Ward would each fill casual non-executive director vacancies on the Qantas board.

Mr Goodmanson serves on the boards of Rio Tinto plc and Rio Tinto Limited and is Past Chair of the United Way of Delaware. He is also an economic advisor to the Governor of Guangdong Province.

Ms Ward is currently Chairman of Country Energy (a New South Wales Government-owned energy services corporation), a non-executive director of Lion Nathan Limited and Multiplex Funds Management Limited, and a trustee of the Sydney Opera House Trust.

Qantas share fell 3.1%.

World markets review

In Tokyo Nikkei 225 Index closed lower 322.65 or 2.23% to 14,130.17, in Hong Kong Hang Seng index decreased 528.19 or 2.26% closed to 22,797.61. In Australia ASX 200 index lower 76.60 or 1.41% to close 5,366.60. In Malaysia KL Composite index decreased 16.20 or 1.34% closed to 1,196.39.

In South Korea Kospi Index decreased 33.41 or 1.88% to close at 1,740.72, in Thailand SET index closed lower 23.28 or 3.04% to 742.46 and Indonesia JSE Index edged increased 8.48 or 0.36% to 2,373.06. Sensex index in India decreased 334.32 or 2.17% to 15,087.99.