Australian Home Starts Fall; Asciano Plunges

Darlington Musarurwa
17 Jun, 2009
New York City

Australian stocks declined on weak U.S. industrial production data and general weakness in Asian markets trading. Australian leading economic index rebounded in April from March and home construction declined 4% in March. Asciano plunged after it increased its plan to raise more capital.

[R]3:00AM New York, 7:00PM Sydney – Australian stocks declined on weak U.S. industrial production data and general weakness in Asian markets trading. Australian leading economic index rebounded in April from March and home construction declined 4% in March. Asciano plunged after it increased its plan to raise more capital. The unwieldy conglomerate CSR may spin-off its sugar and renewable energy businesses.[/R]

Australian stocks closed lower following weak sentiment in the U.S. and lower indexes in Asia. The weakness in industrial production in the U.S. suggested that talks of the U.S. economic recovery are premature.

Australia’s leading index, gauging the pace of economic activity in the next three to nine months recovers in May from April. The index designed to look ahead in the economy tracks among other activities profitability, productivity and consumer confidence.

Home construction declines 4% in March.

In Sydney trading ASX 200 Index declined 1.5% or 58.4 to 3,904.10.

Of the ASX 200 index stocks, 41 increased, 150 declined, and 20 were unchanged. Virgin Blue Holdings led gainers in the index shares with a rise of 6.2% followed by OZ Minerals gaining 6% after concluding the China Minmetals deal.

The Australian dollar edged higher to 79.59 U.S. cents from 79.43 U.S. cents.

Australia Leading Index Rises

Westpac reported today the Westpac-Melbourne Institute Leading Index, which measures economic activity three to nine months into the future rose to –3.5% in April from –5.1% in March.

The report notes that if this rate of growth continues, Australian economy may grow in the first six months of 2010. Upward movements on the index were caused by share prices rising 0.4%, overtime worked 0.7%, dwelling approvals 0.2%, US industrial production 0.2%, and corporate profits 0.2%.

Three out of the four components of the index rose in April, with the all ordinaries index increasing 5.6%, dwelling approvals 5.1%, real money supply 0.8%.

The level of the Coincident index gained 0.5%, but its growth rate was revised downwards for the fourth straight month, dragged by the unemployment rate that increased to 5.5% in April.

Westpac chief economist Bill Evans said, ""The economy, while likely to contract in the near term, can be expected to be entering a period of modest growth from the end of the year. However rising unemployment; higher fixed interest rates; and likely economic disappointment offshore will continue to make the case for more rate cuts in Australia.""

Home Construction Falls 4% in March

Australian Bureau of Statistics reported today that the total number of housing units fell 4% from the previous month and 22.5% from the previous year to 30,949 units in March.

New private sector house commencements declined 4.1% in the March quarter and 16.3% from the same period a year ago to 21,428 units.

Also new private sector other residential building fell 6.6% in the month and 34.9% on the year to 8,321 units.

Gainers & Losers

CSR Limited surged 6% to $1.59 after it announced that the company is looking to spin-off its sugar and renewable energy businesses as a separate company.

Asciano Group plunged 14.7% to $1.25 after it increased capital raising plan to $2.3 billion from $2 billion.

OZ Minerals increased 6.2% after the company concluded a deal with China Minmetals.

Commodity stocks fell as crude oil prices shed 0.2% to $70.5 per barrel. Gloucester Coal 13.6%, Linc Energy fell 13.6% and Beach Petroleum 4.1% and Linc Energy shed 8.5%.

Rio Tinto declined 0.1% to $57.68 on adjustment for the rights offering of $15.2 billon. The offering, 21 new Rio shares will be offered for every 40 shares at a price of $28.29 each.

Macquarie Group declined 4.4% to $35.95 and other banks also closed lower. Macquarie delayed its plan to alter senior managers’ compensation as the federal government is likely to tax employee stock incentive program.

ASX 200 Index Movers

Boart Longyear Group led the decliners in the ASX 200 index of 20.0% followed by losses in Asciano Group of 14.6%, in Gloucester Coal Ltd of 13.5%, in Macquarie Office Trust of 11.1% and in Elders Ltd of 8.8%.

Virgin Blue Holdings Limited led gainers in the ASX 200 index with a rise of 6.1% followed by gains in OZ Minerals Limite of 6.0%, in CSR Limited of 6.0% and Healthscope Limited of 5.9%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 87.97 or 0.90% to 9,840.85, Hang Seng index in Hong Kong decreased 80.90 or 0.45% closed to 18,084.60, CSI 300 index in China higher 49.37 or 1.67% closed to 3,010.59. ASX 200 index in Australia decreased 58.40 or 1.47% closed to 3,904.10. The KL Composite index in Malaysia lower 3.22 or 0.30% closed to 1,070.90.

The Kospi Index in South Korea decreased 7.98 or 0.57% to close at 1,391.17.SET index in Thailand closed lower 10.40 or 1.74% to 586.14 and JSE Index in Indonesia decreased 5.40 or 0.27% closed to 2,024.96. The Sensex index in India decreased 435.07 or 2.91% closed to 14,522.84.