Australian Confidence Index Up

Darlington Musarurwa
10 Nov, 2009
New York City

Stocks in Sydney gain after Australian business confidence rises in October. Australian banks imposing tighter lending conditions. Australian dollar edged to its high of the year.

[R]3:00 AM New York, 7:00 PM Sydney – Stocks in Sydney gain after Australian business confidence rises in October. Australian banks imposing tighter lending conditions. Australian dollar edged to its high of the year.[/R]

Australian stocks gained after index of business conditions and confidence increased and indicated higher activities in October. Australian dollar advanced on the economic optimism and in New York traded as high as 93.05 U.S. cents.

Australian stocks gained after business confidence surged in October, according to a private report.

In Sydney trading ASX 200 Index rose 1.3% or 58.7 to 4,733.60.

Of the ASX 200 index stocks. 140 increased, 47 declined, and 13 were unchanged. Western Areas NL led gainers in the index shares with a rise of 10.3% followed by Emeco Holdings increasing 7.8%.

ANZ plans to sell at least 1 billion euro bonds to bolster its balance sheet and that may yield 57 basis point more than the relevant benchmark, according to Bloomberg News.

Australian Business Conditions Rise in October

National Australia Bank reported in its monthly business survey & economic outlook that business confidence gained 2 points to 16 points in October. Demand for transport, constructions and personal & recreational services increased but activities in the mining sector were weaker.

Business conditions climbed 9 to 12 index points.

According to the survey, all parts of the index rose markedly, with profits up 9 points to 13 points, trading 7 points to 15 points and employment rising 8 points to 7 points.

Capacity utilization also jumped 2.1 points to 82.1% in the period, while the stock index gained 9 points to 4 index points and forward orders declined 4 points to 3 index points.

Credit availability however remained unchanged.

The NAB revised up its GDP forecast for 2009 to 1% from the previous estimate of 0.5% growth.

Australian Banks Impose Tight Lending Conditions

The Australian reported that Reserve Bank of Australia official John Broadbent said today Australian banks have imposed tighter terms and conditions on their lending thereby constraining business credit.

Broadbent added that weaknesses in business credit can be attributed to firms that are reducing leverage on the back of an uncertain future.

“For most companies, it would seem that the highly uncertain economic outlook has reduced the demand for credit. They have been looking to pay back loans and have wanted to reduce gearing, despite the fact that debt finance is now cheaper,” he said.

The RBA official indicated listed corporations have raised a record amount of equity of A$60 billion, “with issues broadly based across all sectors.”

Gainers& Losers

Western Areas NL led gainers in the ASX 200 index stocks with a rise of 10.3% followed by gains in Emeco Holdings of 7.8%, in Gunns Ltd. of 6.7%, in Sino Gold of 6.5%, and Roc Oil of 6.5%.

Sino Gold rose 6.5% to A$7.67 after gold prices advanced 0.5% to $1,101.6 per ounce.

Roc Oil closed up 6.5% to A$0.66 as crude oil prices soared 3.1% to $79.8 per barrel.

Sundance Resources led decliners in the ASX 200 index shares with a fall of 6.1% followed by losses in Gud Holdings of 3.8%, in Goodman Group of 3.3%, in Astro Japan Property of 2.9%, and Linc Energy of 2.9%.

Other Movers

AMP Limited increased 4.4% to A$6.39 after the wealth management company was upgraded to “buy” from “hold” at Citigroup Inc.

AXA Asia Pacific Holdings Limited rose 1.2% to A$5.77 after the insurer was upgraded to “neutral” from “underperform” by Credit Suisse.

BHP Billiton plc the mining company added 2.3% to A$38.49.

Boart Longyear Limited increased 5.2% to A$0.30 after the provider of drilling services to mining companies was upgraded to “neutral” from “underperform” at Credit Suisse Group AG.

Fairfax Media Limited the newspaper owner fell 0.9% to A$1.63.

Orica Limited advanced 2.2% to A$24.13 after the industrial explosives maker was upgraded to “outperform” from “neutral” by Credit Suisse AG.

Pacific Brands Limited rose 3.1% to A$1.30 after the maker of underwear was upgraded “overweight” at Morgan Stanley.

Primary Health Care Limited fell 0.8% to A$6.13 after the provider of medical diagnostic tests agreed to A$1 billion debt refinancing loan.

Rio Tinto Limited the mining company advanced 2.5% to A$67.45.

Wesfarmers Limited added 2.7% to A$27.43 after the conglomerate said on Tuesday that its Coles supermarkets have been trading well since reporting first quarter same-store sales growth of 6.1%.

Woodside Petroleum Ltd gained 1.6% to A$49.31 after the oil and gas producer Chief Executive Don Voelte said that the company won''t take part in the latest effort to revive Iraq''s war-ravaged energy sector and focus on its Australian liquefied natural gas projects.