Financials Lift Aussie Stocks, RBA $10 B Swap

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

Stocks in Australia rose after financial stocks in the region rose and the benchmark index added 1.2%. The IMF lowered its growth estimate for Australia to 2.7% in the current year. The U.S Federal Reserve offered $10 billion credit swap lines in the U.S. dollar to ease liquidity.

[R]3:00AM New York, 7:00PM Sydney – Australian stocks rose with a rise in metals prices. IMF lowered growth estimates for Australia. The U.S. Fed offered $10 billon in swap lines to RBA.[/R]

Market Sentiment

In Sydney trading ASX 200 rose 1.19% or 58.4 to 4,981.90.

Of the ASX 200 index stocks 127 rose, 58 declined, and 15 were unchanged. Babcock & Brown led advancers in the index shares with a rise of 32.81% followed by Valad Property gaining 19.30%.

IMF Forecasts Australia GDP to Narrow 4% in 2009

The International Monetary Fund said today in a staff report that the Australian current account deficit is projected to narrow in 2009 to between 4 % and 4.5% of GDP and widen in the medium term as commodity prices ease.

The Fund also forecast that the economic growth will slow to 2.7% in 2008 from 4.3% in 2007. Inflation risks are observed to be on the upside due to capacity constraints noticeable in the mining and housing sectors.

However, the authorities contend that a tightened monetary policy stance is needed to anchor the medium-term inflation expectations.

The report also notes that Australian banks have been able to stand their ground against the tide of rising turbulence in the global financial markets, as major banks were able to maintain access to funding from offshore markets. But the turmoil is believed to have highlighted the financial institution’s vulnerability to rollover risks arising from short-term wholesale funding.

Four large banks that account for two-thirds of bank assets continued to report strong profits through early 2008, while impaired assets estimated to be 0.2% of assets.

Also IMF staff noted that several large banks have increased their provisioning for bad debts to reflect the potential impact of a downturn and rising interest rates. Smaller banks however remain well capitalized, with aggregate capital ratio in excess of 10%.

U.S. Fed Lends US$10 B to RBA

The Federal Reserve reported today on its Web site that it has authorized the establishment of new swap facilities with the Reserve Bank of Australia and central banks of Sweden, Norway and Denmark.

Under the facility the Federal Reserve will support the provision of U.S. dollar liquidity in amounts of up to $10 billion each by the Reserve Bank of Australia and the Sveriges Riksbank and $5 billion each by the Danmarks Nationalbank and the Norges Bank.

The new facilities represent a $30 billion addition to the $247 billion previously authorized temporary reciprocal currency arrangements with other central banks. The reciprocal currency arrangements have been authorized through January 30, 2009.

Gainers & Losers

Babcock & Brown led advancers in the ASX 200 index shares with a rise of 32.81% followed by rises in Valad Property of 19.30%, in Minara Resources of 18.70%, in Spark Infrastructure of 10.96%, and Macquarie Group of 10.80%.

Sino Gold led decliners in the ASX 200 index shares with a fall of 9.09% followed by losses in Centennial Coal of 6.21%, in Aquarius Platinum of 4.90%, in Babcock & Brown of 4.76%, and Paperlinx Ltd. of 4.70%.

Commodity stocks slumped on falling metal prices. Rio Tinto plummeted 2.53% and Gloucester Coal dropped 1.92% as a result.