Australia Falls on Weak Commodities

123jump.com Staff
06 Oct, 2008
New York City

Worries of developed nations economy sliding into a recession and dragging economies of China and India unnerved Australian investors. Exports of commmodities may fall on the weakening economies of Asia. Financials,energy and miners dropped.

[R]3:00AM New York, 7:00PM Sydney – The widening credit market crisis dragged Australian stocks lower. Heinz agrees to buy Golden Circle for A$200 million.[/R]

The fears of widening banking sector crisis from the U.S. to Europe stunned investors in Asia. At the opening, Japan and other regional markets declined sharply. Indonesia plunged 10% and India, China and Hong Kong declined to 2 year lows. Australian indexes dived on the worries that the economies of the developed nations are transitioning from a slow down to a recession conditions.

The European nations leaders struggled to find a regional solution to the rapidly growing European banking crisis. On Saturday, heads of France, Germany, Italy and UK met in Paris to form a regional solution but failed to agree on a cross border bailout plan.

After the meeting, Germany raised its protection to bank deposits and was forced to offer 50 billion in bailout to the second largest lender Hypo Real Estate Holding. The Netherlands seized Fortis operations in the country and Belgium and Luxembourg agreed to sell Fortis operation to France based BNP Paribas SA. Unicredit in Italy was forced to raise capital and offer its current year dividend in stock.

Market Sentiment

In Sydney trading ASX 200 fell 3.3% or 155 to 4,540.40.

Of the ASX 200 index stocks 12 rose, 182 declined, and 6 were unchanged. Suncorp-Metway led advancers in the index shares with a rise of 3.8% after the company reported that it is in preliminary sales negotiations of its wealth management units.

BNP Paribas Acquires Fortis Assets in Belgium and Luxembourg

French bank BNP Paribas reported on its Web site today that it has agreed to purchase the operations of troubled Fortis in both Belgium and Luxembourg, including the international banking franchises for 14.5 billion euros.

Under the terms of the transaction, BNP Paribas will acquire from the Belgian State 75% of Fortis Bank SA/NV and 100% of Fortis Insurance Belgium, and acquire 16% of Fortis Banque Luxembourg from the Luxembourg State, shoring its controlling interest in Fortis Banque Luxembourg to 67%.

For the banking business in Belgium and Luxembourg, the lender will pay 9 billion euros in approximately 132.6 million newly-issued BNP Paribas shares, while Fortis insurance will be acquired for a cash consideration of 5.5 billion euros.

As a result, the states of Belgium and Luxembourg will become shareholders with 11.6% and 1.1% equity correspondingly, with the former state appointing two board members to join BNP Paribas board.

BNP Pariba''s portfolio now include 1,458 branches located in Belgium, Luxembourg, the Fintro branch network in Belgium, and investment management activities that include former ABN AMRO Asset Management.

Effectively the financial institution''s footprint is now in Italy, France, Belgium and Luxembourg.

Fortis'' units in Belgium and Luxembourg have 3 million and 280,000 retail clients respectively.

Germany Rescues 50 billion euro in Hypo Real Estate

The German government, the central bank Bundesbank and market regulators have agreed with the financial services sector for a 50-billion-euro bailout package for Hypo Real Estate.

The Government also added that the initial contribution of 26 billion euros to Hypo will remain unchanged, notwithstanding the increase in the package''s total value to 50 billion euros.

Gainers & Losers

Suncorp.-Metway led advancers in the ASX 200 stocks with a rise of 3.75% followed by increases in Coca-Cola Amatil of 2.87%, in Resmed Inc of 1.85%, Great Southern Lines of 1.01%, and Sino Gold of 0.92%.

Linc Energy led decliners in the ASX 200 stocks with a fall of 18.20% followed by losses in Felix Resources of 15.48%, in Straits Resources Ltd. of 15.12%, Western Areas NL of 13.90%, and Gloucester Coal of 13.75%.

Linc Energy and other commodity stocks slumped after crude oil prices fell below $90 per barrel and metal prices slipped on fears that prices will plummet in the wake of slowing global demand.

Sundance Resources dropped 12.82%, and Riversdale Mining declined 11.6%.

Challenger Financial lost 11.29% and Babcock & Brown shed 12.50%.

Heinz to Acquire Golden Circle for A$200 million

Golden Circle agreed to sell the company to H.J. Heinz Company Australia Limited have for A$1.65 cash per share or A$200 million. The deal will put to a shareholder vote in December.