Australian Stocks Surge 4.5%

123jump.com Staff
22 Sep, 2008
New York City

Australian stocks rallied after stocks in Asia and commodities prices gained. The U.S. bailout plan of $700 billion and Morgan Stanley sale of a stake to Mitsubishi UFJ lifted financials. Commodities stocks gained after gold, copper and zinc surged. Australia extend ban on short sales.

[R]3:00AM New York, 7:00PM Sydney - Australian Securities and Investments Commission extends ban on short selling. The RBA injects A$2.025 billion of liquidity.[/R]

Stocks in Australia advanced buoyed by news that the U.S. government will unveil a $700 billion package that is meant to purchase toxic assets from financial institutions and prevent the crisis from spreading into the mainstream economy.

Rising commodity stocks also added impetus to the rally.

Market Sentiment

In Sydney trading ASX 200 gained 4.5% or 216.4 to 5,020.50.

Of the 200 ASX 200 index, 132 rose, 55 declined, and 13 were unchanged. Babcock & Brown led advancers in the index shares with a rise of 54.72% on the hopes that the U.S. bailout plan will unfreeze credit markets.

ASIC Extends Short-Selling

The Australian Securities and Investments Commission announced on its Web site yesterday that contrary to the announcement that was made on Friday last week covered short sales for all listed stocks will now not be permitted, but this is subject to a limited authorized market-maker exception.

ASIC will reassess and advice the market in 30 days whether or not at a later date it will permit covered short sales for non-financial stocks.

The Australian regulator joined the U.S. lead ban of short sales. Several countries around the world agree to extend the ban on short sales o prop up falling financial stocks. The U.K., Germany, Switzerland, Ireland and Canada have recently instituted the ban on covered short sales in financial stocks.

RBA Pumps A$2.025 billion into the Market

The Reserve Bank of Australia pumped in A$2.025 billion to the financial system to provide liquidity into the market.

The U.S. Treasury proposed a bailout plan of $700 billion in a fund that will purchase the riskiest mortgages that are hard to trade. The plan is an effective bailout of troubled financial institutions and rich investment bankers and is designed to unclog the credit market squeeze and free up capital for normal commercial lending.

Gainers & Losers

Babcock & Brown led advancers in the ASX 200 index shares with a rise of 54.72% followed by increases in Fortescue Metals of 25.44%, in Macquarie DDR Trust of 17.86%, in Minara Resources of 17.65%, and Atlas Iron of 17.32%.

Babcock & Brown and other financial institutions rose as the U.S. government announced plans of a $700 billion bailout package.

Commodity stocks also rose as metal prices increased. Zinc rose 3.7% and copper gained 4.6%. Murchison soared 15.57%, Panoramic Resources edged up 12.79% and BHP Billiton jumped 12.15%.

Macquarie Media led decliners in the ASX index shares with a fall of 8.97% followed by losses in Valad Property of 7.94%, in HFA Holdings of 7.69%, in OM Holdings of 6.58%, and Seven Network of 5.76%.