Australian Index Drops 3%; Leighton Falls 4%

Mayank Mehta
27 Nov, 2009
New York City

Australian stocks declined tracking the world market weakness after Dubai worries unnerved world investors. Leighton Holdings Limited confirmed that certain project payments in Dubai are delayed. Australian dollar traded weak. Gold miners closed lower after precious metals decline.

[R]10:35 PM Sydney, Australia – Australian stocks declined tracking the world market weakness after Dubai worries unnerved world investors. Leighton Holdings Limited confirmed that certain project payments in Dubai are delayed. Australian dollar traded weak.[/R]

Stocks in Australia declined following the losses in the region as investors struggle to understand the impact of the debt rescheduling requested by construction company Nakheel PJSC.

Nakheel is a subsidiary of Dubai World an entity controlled by the Dubai, UAE government is negotiating with as many as 70 banks to reschedule the debt of as much as $10 billion.

Dubai World has $80 billion of debt and investors are worried that the current fallout if not contained may lead rating agencies to downgrade Dubai sovereign rating. However, analysts downplay the likelihood of such an action.

ASX 200 index in Australia decreased 136.50 or 2.90% to 4,572.10 and of the stocks in S&P ASX 200 index, 8 increased, 186 declined and 6 were unchanged.

Australian dollar briefly dropped below 90 U.S. cents and recovered to close at 90.65 U.S. cents. Analysts urged investors to take advantage of this opportunity and advised investors to accumulate the Australian dollar.

ASX Movers

Energy World Corporation Limited led the decliners in the S&P ASX 200 index with a loss of 12.3% followed by losses in Eastern Star Gas Limited of 7.6%, in PanAust Limited of 6.5%, in Platinum Australia Limited 6.5% and in Ten Network Holdings Limited 6.4%.

IOOF Holdings Limited led gainers in the S&P ASX 200 index with a rise of 1.9% followed by gains in Infigen Energy 1.1%, in Macmahon Holdings Limited of 0.8% and in Commonwealth Property Office Fund of 0.5%.

Other Movers

Australia & New Zealand Banking Group Limited declined 3.5% to A$21.19 said Standard Chartered Bank Asia and the bank are arranging a $421 million 18-month bridging loan to back the largest ever merger and acquisition deal in Cambodia.

BHP Billiton plc the natural resources company declined 3.3% to A$40.39.

Caltex Australia Limited decreased 3.6% to A$9.16 and Merrill Lynch analyst said the company may face a difficult time to maintain its operating margins. The analyst lowered its operating earnings outlook for the year by 9% to A$359 million.

Separately the Australian Competition and Consumer Commission is likely to approve the purchase of 320 petrol gas stations from Exxon Mobil for A$300 million.

Energy World Corporation Limited plunged 12.3% to A$0.39.

Eastern Star Gas Limited fell 7.6% to A$0.78.

IOOF Holdings Limited added 1.9% to A$5.65 after the financial services company estimated higher earnings at the top end of prior range between A$65 to A$75 million underlying net profit after tax and between A$8 million and A$12 million increase in amortization expense from the AWM and Global One mergers.

Infigen Energy rose 1.1% to A$1.32 said the company recently purchased 8.5% of all outstanding shares at 90.1 cents a share.

Leighton Holdings Limited fell 4.0% to A$34.77 after the construction company said that payment on certain Dubai projects is late and the company is confident of recovering the same.

PanAust Limited the gold miner dropped 6.5% to A$0.50.

Westpac Banking Corporation fell 3.8% to A$23.13 and the bank issued dual tranche bond comprising Sfr300 million of five-year bonds and Sfr225 million of nine-year bonds.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 301.72 or 3.22% to 9,081.52, and Hang Seng index in Hong Kong decreased 1,075.91 or 4.84% to 21,134.50, and CSI 300 index in China lower 103.26 or 2.96% to 3,382.51. ASX 200 index in Australia decreased 136.50 or 2.90% to 4,572.10. Markets in Malaysia were closed today.

The Kospi Index in South Korea decreased 75.02 or 4.69% to close at 1,524.50. SET index in Thailand closed lower 5.36 or 0.78% to 680.37. The Sensex index in India decreased 222.92 or 1.32% to 16,632.01. The markets in Indonesia were closed today.