Australian Stocks Weak, Telstra Reaffrms Outlook

Darlington Musarurwa
27 Oct, 2009
New York City

Stocks in Australia and Asia declined after commodities prices fell and the prospect of higher interest rates kept investors on the sidelines. Australia

[R]3:00AM New York, 7:00PM Sydney – Stocks in Australia and Asia declined after commodities prices fell and the prospect of higher interest rates kept investors on the sidelines. Australia’s business confidence rises to seven-year high. ING Industrial Fund to raise A$700 million.[/R]

Australian market averages declined as commodities declined and markets in China, Hong Kong and Japan fell sharply. World investors are increasingly cautious after the recent rally that has stretched two quarters and mixed earnings supported by strong economic stimulus.

Gold prices dipped 1.3% to $1,042 per ounce and crude oil prices fell 2.3% to $78.70 a barrel.

A private report suggested that business conditions rose to a seven-year high in September. However, the report indicates that business is still cautious on future investments.

In Sydney trading ASX 200 Index declined 1.6% or 76.8 to 4,753.50.

Of the ASX 200 index shares, 23 rose, 172 dropped, and 5 were unchanged.

WorleyParsons led decliners in the index shares with a drop of 8% after warning that should the Aussie stay at current levels for fiscal 2010 its net income will be reduced by A$35 million to A$40 million.

The Aussie rose 0.3% to 91.84 against the U.S. dollar in today’s trading.

Australia Business Confidence Rises

National Australian Bank said today in a statement the country’s business confidence rose 20 points from minus four to 16 in the September quarter, jumping the most in seven years.

Business conditions increased from minus six to five, profitability climbed from minus five to eight, while employment expectations soared from minus 18 to minus four.

However, the index on capital expenditure rose by a mere six points to eight, indicating that investors are still cautious.

National Australia Bank projects that the economy will rise 1.2% in the current fiscal year, while unemployment is projected to increase to 6.75%.

NAB notes that the present difference between confidence and planned expenditure is being precipitated by the drive towards using inventories.

“This divergence has very important growth implications and puts a real note of caution against overly optimistic growth expectations. Thus, while business capital plans have improved from the ""Armageddon"" levels of early 2009, they still imply little to no growth in investment over the next 6-12 months,” said National Australia Bank chief economist Alan Oster said.

ING Industrial Fund to Raise A$700 million

ING Industrial Fund said in a statement today it intends to raise A$700 million in a 1-for 1 non renounceable offer to retire its debt and pursue its development activities.

The fund plans to raise A$544 million from existing unit holders, while the remainder will be through an institutional placement. The units are expected to be priced at 48 cents each, 20% discount from yesterday’s closing price.

The IIF chief executive officer Paul Toussaint said after the capital raising exercise, it will be able to pay distributions to unit holders from January 2010.

The fund has since negotiated for the extension the A$1.6 billion syndicated facility to complete the offering.

Gainers & Losers

Mount Gibson Iron fell 7.8% as gold prices fell 1.3% to 1,042 per ounce and crude oil prices shed 2.3% to $78.7 per barrel. Linc Energy declined 6.3%, Macarthur Coal plunged 6.1% and Energy World Corporation slipped 5.8%.

ASX Movers

WorleyParsons Limited led the decliners in the S&P ASX 200 index with a loss of 8.0% followed by losses in Mount Gibson Iron Limited of 7.8%, in St Barbara Limited of 7.6%, in Charter Hall Group 6.9% and in Virgin Blue Holdings Limited 6.3%.

Wotif.com Holdings Limited led gainers in the S&P ASX 200 index with a rise of 3.1% followed by gains in Karoon Gas Australia Ltd 2.8%, in Emeco Holdings Limited of 2.3% and in AWB Limited of 2.0%.

Other Movers

AWB Limited increased 2.0% to A$1.23 after the wheat exporter was upgraded to “buy” from “neutral” at UBS AG.

BHP Billiton plc the mining company decreased 2.2% to A$38.85.

James Hardie Industries N.V the building materials company slipped 4.2% to A$7.00.

Newcrest Mining Limited fell 3.1% to A$33.97 and the gold producer announced an 8.4% decline in gold production.

PanAust Limited slipped 5.0% to A$0.47 after the owner of the copper mine in Laos was downgraded to “underperform” from “neutral” at Credit Suisse group AG.

Rio Tinto Limited the mining company declined 2.8% to A$65.02 and Santos Limited the oil and gas explorer dropped 1.1% to A$15.27.

Telstra Corporation Limited rose 1.5% to A$3.24 and later in the day the company reiterated its annual free cash flow outlook of A$6 billion and low single digit increase in its revenues and operating earnings.

Ten Network Holdings Limited rose 1.6% to A$1.57 after the broadcaster was upgraded an “overweight” rating at Morgan Stanley.

Woodside Petroleum Ltd the oil and gas producer decreased 2.4% to A$49.60.

WorleyParsons Limited plunged 8.0% to A$26.68 after the engineering company said it is likely to miss earnings expectations if the Australian dollar remains high.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 150.16 or 1.45% to 10,212.46, Hang Seng index in Hong Kong decreased 420.14 or 1.86% to 22,169.59, and CSI 300 index in China lower 99.52 or 2.91% to 3,314.72. ASX 200 index in Australia decreased 76.80 or 1.59% to 4,753.50. The FTSE Bursa KL Composite index in Malaysia was higher 0.38 or 0.03% to 1,260.30.

The Kospi Index in South Korea decreased 7.58 or 0.46% to close at 1,649.53, SET index in Thailand closed higher 2.71 or 0.38% to 714.54. JSE Index in Indonesia decreased 42.51 or 1.72% to 2,425.20. The Sensex index in India decreased 387.10 or 2.31% to16,352.40.