Australian Stocks Fall, Asciano Plunges 60%

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

Stocks in Australia fell sharply after the business confidence index dropped to the lowest level in two decades. Mounting recession worries and a drop in metals prices led the resource stocks lower. Banks fell on the worries that transportation company Asciano Group may need more capital.

[R]3:00AM New York, 7:00PM Sydney – Australian stocks dropped 3.6% after business confidence declined to the lowest level in two decades.[/R]

Stocks in Australia plummeted after business confidence dropped to the lowest level in the seventeen years.

Stocks were also dragged by a decline in transportation group, Asciano after Citigroup said that the troubled company will need to raise A$2.1 billion to lower its debt level and assigned ‘sell’ rating to the stock.

In Sydney trading ASX 200 declined 3.6% or 146.9 to 3,960.90.

Of the ASX 200 index stocks 27 rose, 164 declined, and 9 were unchanged. Abacus Property led gainers in the index shares with an increase of 13.5% after interbank rates dropped.

Australian Business Confidence, Lowest Since 1991

National Australian Bank reported today in its monthly business survey that confidence dropped 21 points to minus 29 in October from the previous month, the lowest since the survey began.

Business conditions also dropped 10 points to minus 11, raising the specter of an imminent recession.

According to the survey, construction, retail, wholesale and transport sectors had the biggest drop in confidence, while trading conditions, employment levels and profitability declined to the most in seven years.

Forward orders slid 10 points to minus 20, falling the most since 1991 and forward orders in the retail and manufacturing sectors are at the recessionary levels.

The monthly capital expenditure index dropped to zero in the review period and annual wage growth fell to 5.1%, but retail prices increased 3.6%.

A quarter of the 400 companies indicated that it was difficult to access funding in October and 35% expect the situation to deteriorate next month.

The lender forecasts that 2009 economic growth in Australia at 1.3% and global economic growth at 2.4%.

NAB also projects that the central bank will slash the key rate by 75 basis points in December and by a further 75 basis points in the first quarter of next year.

NAB chief economist Alan Oster said, “It appears that the continuing volatility in global equity markets, emergency financial packages, falling commodity prices, and continuing talk of global recession have finally broken business optimism and now fear reigns supreme. Confidence readings worse than the bottom of the 1990s recession have more to do with fear of the unknown than actual current outcomes.”

Australia Injects A$1.84 billion into the Money Market

Reserve Bank of Australia today injected A$1.84 billion into the money markets after forecasting a deficit of A$2.26 billion.

Interbank lending rates dropped 3 basis points to 4.9% for 3-month loans.

Gainers & Losers

Abacus Property led advancers in the ASX 200 index shares with a rise of 13.5% followed by increases in Dexus Property of 11.2%, in Stockland of 6.6%, in Great Southern Lines of 6.3%, and Mirvac Group of 6.3%.



Energy stocks increased as crude oil prices rose $1.37 to $62.4 barrels per day.

Gold prices increased by $12.30 to $746.5 per ounce. Murchison Metals gained 2% as well.

Asciano Group led decliners in the ASX 200 index stocks with a fall of 59.9% followed by losses in NRW Holdings of 22%, in Babcock & Brown of 20.4%, in Minara Resources of 20%, and Babcock & Brown of 18%.