Australia Tracks Lower Metals; Leighton Drops

123jump.com Staff
14 May, 2009
New York City

Investors in Australia focused on the recent slide in metals prices. Fairfax Media dropped on rating downgrade. Leighton Holdings declined after nine month profit was cut in half.

[R]8:00PM Sydney, Australia – Investors in Australia focused on the recent slide in metals prices. Fairfax Media dropped on rating downgrade. Leighton Holdings declined after nine month profit was cut in half.[/R]

Australian stocks dropped as expected after the release of weak April retail sales in the U.S. Markets in China, Japan and other nations in Asia declined.

Investor sentiment has been swaying between the prospect of a recovery on huge government stimulus in Japan, China and U.S. and worried that inflation curve has shifted to the higher level for years to come.

In Australia ASX 200 index lower 132.70 or 3.44% to close 3,723.40.

Gainers & Losers

Alumina Ltd. declined 12.4% to A$1.20 after the speculation that aluminum companies in China may have resumed operations. The prospects of higher production will certainly keep prices lower for the rest of the year.

BHP Billiton Ltd. declined 6.2% to A$32.30 and Rio Tinto Group plunged 12%. The metal prices in London and New York trading declined. Zinc, copper and nickel fell as nervous speculators focused on the protracted global economic recovery.

Commonwealth Bank of Australia edged 3.5% lower to A$35.47 after Goldman Sachs and JBWere Pty lowered the rating on the bank. The downgrade was reported first by Reuters and newratings.com.

Fairfax Media Ltd dropped 5.1% to A$1.02 after the rating agency S&P lowered its long term rating to BB+ stable outlook. The company noted that rating downgrade will cost in higher interest cost of A$10 million in fiscal 2010. In a filing with the ASX, the newspaper company noted, “The company remains comfortably within its various financial covenants.”

The questionable ratings of mortgage securities by S&P and Moody’s are at the heart of the current financial crisis around the world where investors have lost more than $15 trillion in asset prices.

Leighton Holdings Ltd. fell 7.5% to A$22.52 after it reported net profit declined to $220 million from $375 million a year ago period of nine months. The revenues in the nine month period ending in March 2009 increased 37% to $13.7 billion and the backlog of projects increased to $36.5 billion from $28.1 billion. The company also estimated full year profit, lower than previously forecasted.

Earnings Review

Singapore Telecommunications Limited, Southeast Asia’s largest telephone company said first quarter revenues fell 5.1% to S$3.57 billion from S$3.76 billion a year ago. Net profit fell 17% to S$903 million compared to net profit of S$1.09 billion a year ago.

ASX 200 Index Movers

Kagara Ltd led the decliners in the ASX 200 index of 18.4% followed by losses in Valad Property Group of 15.9%, in Aquarius Platinum Limited of 15.5%, in Aquila Resources Limited of 14.6% and in Lynas Corporation Limited of 13.7%.

Energy Resources of Australia Limited led gainers in the ASX 200 index with a rise of 3.4% followed by gains in SP AusNet of 3.3%, in Healthscope Limited of 2.3% and Goodman Fielder Limited of 2.1%.

Asian Markets Review

In Tokyo Nikkei 225 Index closed lower 246.76 or 2.64% to 9,093.73, in Hong Kong Hang Seng index decreased 517.93 or 3.04% closed to 16,541.69. In Australia ASX 200 index lower 132.70 or 3.44% to close 3,723.40. In Malaysia KL Composite index decreased 10.85 or 1.06% closed to 1,011.99.

In South Korea Kospi Index decreased 33.57 or 2.37% to close at 1,380.95, in Thailand SET index closed lower 26.16 or 4.73% to 526.55 and Indonesia JSE Index edged decreased 66.33 or 3.58% to 1,785.00. Sensex index in India decreased 146.74 or 1.22% to 11,872.91