Australian Stocks Drop 6%

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

Australian stocks plummeted 5.9% as commodity stocks retreated on falling metal prices and 5% decline in crude oil prices. Copper and aluminum prices dropped to three-year lows as stockpiles increased on falling global demand for raw materials. Commonwealth Bank estimated higher loan losses.

[R]3:00AM New York, 7:00PM Sydney – Australia is likely to ban naked short selling. Commodities drag Australian stocks on recession fears. Commonwealth Bank estimated higher loan impairment charges.[/R]

Australian stocks plummeted 5.9% as commodity stocks retreated on falling metal prices.

Copper and aluminum prices dropped to three-year lows as stockpiles increased on falling global demand for raw materials. Oil prices also declined more than 5%.

In Sydney trading ASX 200 fell 5.9% or 2.30 to 3,697.30.

Of the ASX 200 index stocks 16 rose, 174 declined, and 10 were unchanged. Asciano Group led advancers in the index shares with a rise of 30.4% followed by Babcock & Brown gaining 20%.

Asian Markets and Currencies Fall

Asian markets fell sharply on the back of weakness in New York trading. Australia, Hong Kong, Japan and India dropped at least 5%.

Asian currencies declined sharply. Indonesian rupiah dropped 2% to 11,800 reaching the low reached seven years ago. Korean won declined 2.2% to 1,391.50 and Thai baht fell to 35.019. Singapore dollar declined to S$1.512 and Australian dollar to 63.88 U.S. cents. Rupee in India dropped 2.3% to 49.30 at close and has lost now 20% for the year.

Australia Legislates Short Selling

Minister of Superannuation and Corporate Law Nick Sherry today released the final Corporations Amendment (Short Selling) Bill 2008 that will be introduced to Parliament before the end of the week.

The bill was drafted after consultation with industry, the Australian Stock Exchange and the Australian Securities and Investments Commission and is expected to provide “total transparency in the use of covered short selling”. UK and the U.S. recently banned naked short selling, a practice used by several speculators and hedge funds.

Through the legislation, government will ban naked short selling because it has a higher risk of settlement failure and might distort the operation of financial markets by causing increased price volatility and facilitating market manipulation.

The move is designed to support the stocks of financial companies and banks and contain market volatility and ensure regular trade settlements.

However the securities and investment commission will reserve the right grant exemptions from naked short selling prohibition, especially when non-speculative naked short sales are necessary.

In addition, the law will confirm the power of the ASIC to limit, prohibit and impose additional conditions on short selling transactions.

Sherry said today in a statement, “There are no easy solutions or quick fixes to the global financial crisis, but we are taking decisive action to protect our markets, especially from trading practices that may involve manipulation or abuses.”

CBA Issue Bad Debt Warning

The Commonwealth Bank of Australia reported today in its trading update for the three months to September that the full year impairment is forecasted to be 40 to 50 basis points on exposure to collapsed groups ABC Learning Centres and Allco Finance Group.

Home lending rose to an annualized rate of 12% in the quarter ending in September and deposits rose at 23%. The company claims that is share of retail deposits market stands at 30%.

CBA has completed 40% of its funding needs and its Tier 1 capital ratio is 7.5% at the end of review period.

Funds under management in the wealth management division declined 3.8% to A$178 billion in the quarter to September on declines in the Australian and global equities markets and the outflow in short-term mandates. Retail net fund flows were down $266 million in the quarter.

The group has liquid asset of $66 billon with excess of $39 billion or 59% of the total liquidity which largely consists of residential mortgage backed securities that can be used to borrow up to $26 billion from the Reserve Bank of Australia.


Gainers & Losers

Asciano Group led advancers in the ASX 200 index shares with a rise of 30.4% followed by increases in Babcock & Brown of 20%, in NRW Holdings of 19.7%, in Kingsgate Consolidated of 5%, and Macquarie DDR TR of 4.4%.

Kingsgate advanced after announcing that it has discovery a new gold find in Thailand, which has the potential to be bigger than its Chatree operation.

Goodman Group led decliners in the ASX 200 index shares with a drop of 17.7% followed by losses in Panoramic Resources of 17.1%, in Timbercorp. of 17%, in Lynas Corp. of 16.3%, and Kagara Ltd. of 15.8%.

Commodity stocks fell as metal prices dipped on declining stockpiles. Copper prices slipped to a three-year low at US$3,570 per ton as inventories at LME-registered warehouses rose by 4,625 tons to 270,100 tons.

Aluminum prices dropped to US$1,911 per ton. Also crude oil prices for December delivery lost 5.3% to $56.16 per barrel.

Paladin Energy shed 15.9%, Macarthur Coal declined 12.6%, Aquarius Platinum fell 11.9%, and BHP Billiton plunged 11.7%.

St George Approves Merger With Westpac

More than 94 % of St Georges shareholders today approved the merger with Westpac at an extra ordinary general meeting.

Under the deal, Westpac is offering 1.31 of its shares for every St George share and a special dividend payment.

St George chairman John Curtis said, “The Westpac proposal was about bringing together two very successful businesses with iconic brands and complementary cultures and therefore it made great strategic sense.”