Profits in Australia Fall; Home Sales Rise

Darlington Musarurwa
30 Nov, 2009
New York City

Australian market indexes look higher after banks recover and Dubai World sought loan restructuring on only less than half the loans. Australian company profits fall 2.1% in the third quarter and new home sales decline 6% in October. New Zealand housing approvals gain 11% in October.

[R]4:00 PM New York, 8:00 AM Sydney – Australian market indexes look higher after banks recover and Dubai World sought loan restructuring on only less than half the loans. Australian company profits fall 2.1% in the third quarter and new home sales decline 6% in October. New Zealand housing approvals gain 11% in October.[/R]

Australian market averages rose led by financial stocks despite company profits declining in September and new home sales dropping in October.

Financial stocks were mainly driven by expectations Dubai’s debt problems are less likely to spread to other emerging markets around the world. Markets in United Arab Emirates declined 7% or more as investors digested the impact of Dubai World debt renegotiation plan.

After the market close in Dubai, Dubai World said in a statement that negotiations with banks are “constructive” to restructure $26 billion of the $59 billion loans. The holding company that owns some of the largest construction projects in the world and two subsidiaries Nakheel World and Limitless World are parts of the negotiations.

In Sydney trading ASX 200 Index rose 2.8% or 129.2 to 4, 701.31.

Of the ASX 200 index stocks, 158 increased, 33 declined, and 9 were unchanged. Aquila Resources led gainers in the index shares with a rise of 11.9%.

Gold prices fell 1.1% to $1,176 per ounce and crude oil prices slipped 4% to $74.9 per barrel.

The Aussie rose 1.2% to 91.66 U.S. cents.

Australian Business Profits Fall 2.1% in September

Australian Bureau of Statistics reported today business gross operating profits fell 2.1% in the three months to September from the previous quarter and dropped 19.6% from the same period a year ago.

However, sales of goods and services for the manufacturing sector rose 1.2% from the previous quarter but fell 6.9% from a year earlier.

Sales for the wholesale trade gained 0.9% for the quarter and rose 2.2% year-on-year.

Inventories advanced 0.8% in the September quarter but declined 3.4% from the comparable year ago period.

In addition, wages and salaries remained unchanged from the June quarter and dropped 1.5% from a year ago.

Australia’s New Home Sales Fall 6% in October

Australia’s Housing Industry Association reported today the country’s new home sales declined 6% in October falling for the second straight month on higher interest rates and waning first home buyer activity.

Sales of detached home sales fell 6.9% in October after dropping 4.3% the previous month, and the number of apartment sales edged up 2.4% in the review period.

Detached new home sales declined 12.1% in New South Wales, 4.2% in Victoria, 9.1% in Queensland, 7.2 % in South Australia, and 3.4 % in Western Australia.

HIA chief economist Dr Harley Dale said, “Given the narrowly based private sector recovery, costly delays in planning approvals, and reports of land shortages beginning to re-emerge, it is looking like 2010 will be a year where the number of new homes built will fall well short of what is required to match Australia’s rapidly growing population.”

New Zealand Housing Approvals Rise 11% in October

Statistics New Zealand reported today the number of housing units approvals gained 11% in October in seasonally adjusted terms after rising 3.5% in September.

Housing units, including apartments, jumped 12% in the review period.

Building consents were issued for 1,321 new housing units (excluding apartments) in October 2009, while consents were issued for 103 new apartment units.

The report notes that the value of residential building approvals at $481million if all building approvals in the month.

Also the value of non-residential building construction was $329 million.

Gainers & Losers

Aquila Resources led gainers in the ASX 200 index shares with a rise of 11.9% followed by increases in SMS Management & Technology of 8%, in Energy World Corp. of 7.7%, in Caltex Australia Ltd. of 6.1% and National Australia Bank of 6%.

National Australia Bank and other financial stocks rose on expectations Dubai’s debt problem will be solved. Bank Queensland advanced 6% to A$11.14, Australia & New Zealand Bank rose 4.5% to A$22.15, and Westpac Banking soared 4.4% to A$22.14.

Platinum Asset Management led decliners in the ASX 200 index shares with a fall of 6.1% followed by losses in Babcock & Brown of 5.6%, in Paperlinx of 3%, in Hills Industries of 3%, in Beach Petroleum of 2.9%.

Commodity stocks fell as gold prices dropped 1.1% to $1,176 per ounce and crude oil prices fell 4% to $74.9 per barrel. Linc Energy tumbled 1.3% to A$1.56 and Dominion Mining tumbled 1.2% to A$3.98.

Other Movers

Aquila Resources Limited surged 11.8% to A$10.93 after the explorer for coal, iron ore and manganese resources have received a significant boost after the company reported an update to the JORC Resource estimate for the Australian Premium Iron Joint Venture in relation to its West Pilbara Iron Ore Project in Western Australia.

Australia and New Zealand Banking Group Limited rose 4.5% to A$22.15 said it completed the acquisition of ING Groep N.V.''s 51% shareholding in the company’s wealth management, life insurance and advice joint ventures in Australia and New Zealand.

Commonwealth Bank of Australia advanced 4.3% to A$52.80.

Energy Developments Limited surged 11.6% to A$2.69 after the developer and operator of power generation projects said that Greenspark Power Holdings Ltd., which is jointly owned by entities advised by private equity group Pacific Equity Partners has offered A$431 million to buy the company.

Fortescue Metals Group Ltd rose 4.9% to A$4.21 after the iron ore producer was upgraded to “hold” from “sell” at Deutsche Bank AG.

National Australia Bank Limited added 5.9% to A$28.62 and Westpac Banking Corporation increased 4.3% to A$24.14.

PaperlinX Limited slipped 3.0% to A$0.48 and Platinum Asset Management Limited fell 6.0% to A$4.81.