Australian Trade Deficit Up; CSR Spinoff Halted

Darlington Musarurwa
03 Feb, 2010
New York City

Australian trade deficit widens in December as imports increase faster than exports. Federal court rejected CSR plan to spin-off its sugar unit. Australia

[R]3:00 AM New York, 7:00 PM Sydney – Australian trade deficit widens in December as imports increase faster than exports. Federal court rejected CSR plan to spin-off its sugar unit. Australia’s service industries index fell in January.[/R]

Australian stocks rose 0.9% boosted by a profit upgrade by News Corp as earnings in the media and entertainment unit rose more than forecasted.

The company reported that its second quarter profit rose to $254 million from a $6.4 billion loss in the comparable year ago period. Operating earnings for the year are expected to increase by a percentage in the low twenties.

In Sydney trading ASX 200 Index advanced 0.9% or 42.6 to 4,647.90.

Of the ASX 200 index stocks, 130 rose, 58 fell, and 12 were unchanged. Fortescue Metals led gainers in the index shares with a rise of 6.2% followed by Suncorp-Metway Ltd soaring 5.9%.

The Australian dollar fell 0.1% to 88.54 U.S. cents.

Metallurgical Corporation of China Ltd plans to invest $200 million for as much as 5% stake in Australia based Resourcehouse ahead of the planned Hong Kong listing.

Clive Palmer controlled iron ore and thermal coal company is looking to raise as much as $3 billion not all in the public offering according to an interview published in the Australian.

The company owns China First project in Queensland and has iron ore deposits and oil and gas assets in Western Australia. The mining company also controls oil and gas reserves in Papua New Guinea.

Australia Service Industry Falls in January]

The Australia Industry Group/Commonwealth Bank Performance of Services Index, which measures the strength of the service industry, dropped 2.6 points to 47.4 in January.

A reading above 50 shows expansion, while a reading below 50 shows contraction.

Downturn in activity was broadly based, with all sectors, excluding volatile transport and storage sector, falling in the review period.

The report noted that the increase in interest rate between October and December “has dampened consumer and business confidence.”

Activity only expanded in the transport and storage sector in January as compared with five sectors a month earlier.

The personal and recreational services sector led the decline among all sectors for a second successive month.

Seasonally adjusted sales sub-index fell 0.7 points to 51.7, declining for the third successive month.

According to report, sales remained steady in retail trade for the second successive month and capacity utilization decreased from 78.7% the previous month to 74% in January.

New orders also declined for a second successive month in January, with the seasonally adjusted sub-index decreased to 48.0.

Court Blocks CSR Demerger

The Australian reported that a federal judge Margaret Stone today blocked the planned demerger of CSR sugar business, citing that the restructure will make the company less likely to meet its future asbestos liabilities.

Justice Stonen noted the demeger was “inconsistent with public policy and commercial morality.”

CSR had considered demerging its sugar and renewable energy business into a spin-off Sucrogen, while the ""new"" CSR would retain the building products, property and aluminium business.

“I cannot be satisfied that the provisions made are consistent with commercial morality of that the Scheme, if given effect, would not involve an unfair or oppressive result,” said Justice Stone.

Australia’s Trade Deficit Widens in December

Australian Bureau of Statistics reported today that the country’s deficit widened by A$524 million from the revised figure a month ago to A$2.3 billion in December.

Exports rose 4% to A$19.8 billion driven by an increase in non-rural goods by 5%; coal, coke and briquettes components by 10%, metals excluding non-monetary gold 25% and the other mineral fuels by 13%, rural goods by 7%.

However non-monetary gold exports fell 4% and service exports rose A$15 million.

Imports advanced 6% to A$22 billion, with intermediate and other merchandise goods rising by 11%, fuels and lubricants by 26%, capital goods by 7%, non-monetary gold by 51%.

Consumption goods fell 1% and services imports advanced 1%.

ASX Movers

Roc Oil Company Limited led the decliners in the S&P ASX 200 index with a loss of 30.7% followed by losses in Beach Energy Limited of 7.1%, in iSOFT Group Limited of 4.5%, in Sundance Resources Limited 3.7% and in Platinum Asset Management Limited 2.9%.

Fortescue Metals Group Ltd led gainers in the S&P ASX 200 index with a rise of 6.1% followed by gains in Suncorp-Metway Ltd 5.9%, in Aquila Resources Limited of 5.5% and in Energy World Corporation Limited of 5.5%.

Other Movers

BHP Billiton plc climbed 2.5% to A$41.50 and the mining company has approved investment in Mumbwa, Zambia based copper and gold exploration project.

Boral Limited advanced 4.4% to A$5.60 after the building materials company was upgraded to “buy” from “neutral” at UBS AG.

CSR Limited rose 0.5% to A$1.85 after a Federal Court Judge has rejected company’s proposed spin-off of its sugar unit, citing uncertainty over how asbestos claims against the company would be funded, according to Dow Jones report.

James Hardie Industries N.V. the seller of home siding in the U.S added 3.7% to A$7.96.

News Corporation gained 5.3% to A$17.78 after the diversified media company expects segment operating income growth for the fiscal year in the ""low 20 per cent range.""

Rio Tinto Limited rose 1.3% to A$72.00.

Roc Oil Company Limited plunged 30.7% to A$0.44 after the energy explorer said that its energy reserves are likely to decline as much as 25%.