Australia Stocks Rise, Banks Pass Less Rate Cut

123jump.com Staff
10 Nov, 2008
New York City

Stocks in Australia gained after China announced a stimulus package of Rmb 4 trillion. Commodities prices and resource sector stocks gained. Financial stocks declined after RBA noted that only half of recent rate cuts have been passed on to customers by banks.

[R]3:00AM New York, 7:00 PM Sydney - Australian stocks soar on China''s Rmb4 trillion stimulus package.[/R]

Stocks in Australia gained after China announced a stimulus package of Rmb4 trillion of $585 billion stimulus package.

Commodity stocks gained on the speculation that the initiative taken by Beijing will help to boost demand for raw materials. Oil and metal prices increased.

However financial stocks pared gains after the central bank showed in its quarterly report that major lenders only passed on 69 basis points of the 125 basis points in cuts since September.

In Sydney trading ASX 200 gained 1.4% or 56.5 to 4,107.80.

Of the ASX 200 index stocks 136 increased, 56 declined, and 8 were unchanged. Tishman Speyer led advancers in the index shares with a rise of 21.9% followed by Panaust Ltd advancing 17.4%.

RBA May Further Cut Cash Rate

The Reserve Bank of Australia said in its statement on monetary policy for November that a weakness in global economic conditions is likely to persist and may shrink global and local demand and output.

At its September meeting the central bank''s Board noted that inflation was likely to decline over time and that may give more maneuvering room to lower interest rate further.

“In reviewing the stance of policy each month in the period ahead, the Board will be seeking to strike the appropriate balance between avoiding an unduly sharp weakening in demand and the need for inflation to fall back to the target over a reasonable period,” noted the central bank in the statement.

China Announces Rmb 4 trillion Stimulus

China''s State Council announced yesterday a Rmb4 trillion or $585 billion package to be used over the next two years to boost growth in low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding.

Beijing will also cut taxes, and begin massive infrastructure spending programs to insulate the economy from the global economic slowdown led by the U.S.

Industry costs will be lowered by Rmb120 billion through the reform of value added tax, while commercial bank ceilings will be scrapped to encourage lending to rural areas, small enterprises and industrial rationalizations through mergers and acquisitions.

China will invest in the fourth quarter, Rmb400 billion.

The report notes that the country is changing its policy to “active” fiscal from “moderately active” monetary policies, as it adjusts from fighting inflation to sustaining economic growth.

The State Council noted, “As long as we take the right measures in a resolute and timely way to grasp the chance and rise to the challenges, we will surely secure steady and relatively fast economic growth.”

Australian Home Approval Loans Drop

Australian Bureau of Statistics reported today that in seasonally adjusted terms the total value of dwelling finance excluding alterations and additions declined 1.6%, while owner occupied commitments dropped 1.9% and investment housing declined 1.1% in September from the previous month.

The report notes that the number of commitments for owner occupied housing finance plummeted 1.9% and commitments for refinancing existing houses shed 1.3%.

Gainers & Losers

Tishman Speyer led advancers in the ASX 200 index shares with a rise of 21.9% followed by rises in Panaust Ltd. of 17.4%, in Mirvac Group of 17.1%, in ING Industrial of 15.6%, in ING Office Fund of 14.7%.

Commodity stocks rose after crude oil for December delivery soared 5.3% to $64.3 per barrel. Copper futures increased 7.5% and gold prices edged up 1.9%. Aquarius Platinum surged 13.4%, Panoramic Resources rose 12.5%, Murchison Metals advanced 9.2% and Oz Minerals soared 9%.

Babcock & Brown led decliners in the ASX 200 index shares with a fall of 40.7% followed by losses in Babcock & Brown of 24%, in Babcock & Brown of 20.4%, in MacMahon Holdings of 10.7%, and NRW Holdings of 9%.

Financial stocks slumped after the central bank''s quarterly monetary policy statement indicated that big lenders have only passed 69 basis points of the 125 basis points in cuts since September.

Westpac slid 5.2%, Commonwealth Bank of Australia declined 5.2% and Australia & New Zealand Bank dropped 4%.

Company News

National Australia Bank will increase its capital raising to A$3 billion following strong institutional demand, especially after the deal was priced at A$20, which is a 9% discount from the closing price on Friday last week.

The lender says after the institutional placement it will offer retail shareholders the opportunity to participate in a non-underwritten share purchase plan at the institutional placement price.

NAB''s Tier 1 ratio will increase to 8% after the capital raising.

Rio Tinto, Fortescue Cuts Iron Ore Production by 10%

Rio Tinto and Fortescue Metals slashed iron ore production by 10%. Rio announced today that it expects to ship 175 million tons of iron ore from an earlier estimate of 195 million tons.

Similarly Fortescue lowered its annual production estimate by 10% to 2 million tons on planned maintenance shutdown of its port and mine processing plant.