Australian Stocks Struggle; Rents on the Rise

Darlington Musarurwa
13 Jan, 2010
New York City

Lower commodities and unease related to recent China move to increase bank reserve ratios damped the mood in trading. Sydney stocks closed lower. WorleyParsons lowered its earnings outlook and weaker than expected power sales in the U.S. Residential rents are expected to rise in Australia.

[R]3:00 AM New York, 7:00 PM Sydney – Lower commodities and unease related to recent China move to increase bank reserve ratios damped the mood in trading. Sydney stocks closed lower. WorleyParsons lowered its earnings outlook and weaker than expected power sales in the U.S. Residential rents are expected to rise in Australia led by 11% in Perth as the government stimulus to buy homes expire.[/R]

The benchmark stock index in Sydney closed lower 0.6% as commodity stocks fell and WorleyParsons slashed its profit forecasts.

Investors were also unnerved by China’s move to increase the reserve ratios banks are expected to hold to 15.5%.

In Sydney trading ASX 200 Index fell 0.6% or 31.4 to 4,868.10.

Of the ASX 200 index stocks, 68 increased, 118 fell, and 14 were unchanged. Southern Cross Media Group led gainers in the index shares with a rise of 5.1% followed by Linc Energy gain of 3.9%.

The Australian dollar rose 0.4% to 92.37 U.S. cents.

WorleyParsons Downgrades Profit Forecast

WorleyParsons lowered its fiscal 2010 annual earnings to between A$280 million to A$320 million from the October estimate range of A$320 million to A$335 million.

The company lowered expectations after the decreased demand in the U.S. power operations and the uncertainty on legislation surrounding the treatment of carbon.

In addition, the market for services in the US domestic refining and petrochemicals industries “has weakened significantly.”

WorleyParsons also notes that the acquisition of Australian infrastructure services company Evans & Peck and Brazilian services group CNEC Engenharia will not contribute significantly to second half results as earlier expected.

WorleyParsons Limited plunged 11.4% to A$25.99.

Australian Growth Estimate at 1.8%

Credit reporting agency Dun & Bradstreet estimated Australian economic growth in 2009 of 1.8% and 7.9% for China.

Australia’s Residential Rates to Rise in 2010

Australia Property Monitors said that the residential rents will rise in 2010 as government’s home incentives wane and interest rates continue to rise.

Rents are expected to increase the most in Perth by 11%, in Brisbane by 8% and in Sydney by 4.4%.

Australia’s rental growth fell to 2% in 2009 from 12% the previous year.

APM Economist Matthew Bell said December is likely to be “the last quarter of flat rental growth.”

ASX Movers

WorleyParsons Limited led the decliners in the S&P ASX 200 index with a loss of 11.4% followed by losses in Medusa Mining Limited of 6.1%, in Iluka Resources Limited of 5.9%, in Murchison Metals Limited 5.9% and in Gindalbie Metals Ltd 5.1%.

Southern Cross Media Group led gainers in the S&P ASX 200 index with a rise of 5.1% followed by gains in Linc Energy Ltd 3.9%, in Wotif.com Holdings Limited of 3.0% and in Ten Network Holdings Limited of 2.9%.

Other Movers

BHP Billiton plc fell 0.8% to A$43.12 after the mining company is looking to increase copper price by 3% in the current year.

CSR Limited the manufacture and supply of building products dropped 2.6% to A$2.00.

Newcrest Mining Limited the gold producer fell 1.1% to A$36.84.

Qantas Airways Limited the carrier rose 0.3% to A$2.95.

Rio Tinto Limited decreased 1.5% to A$77.12 after the mining company will negotiate a collective deal with its iron ore rail workers for the first time in 15 years according to the Construction, Forestry, Mining and Energy Union said.