Australian Index Rises 1.8%; Challenger Up

Darlington Musarurwa
22 Feb, 2010
New York City

A private report indicated that housing affordability index in Australia dropped 18.4% in December on rising costs and slower building approvals. The benchmark index gained 1.8% on higher commodities prices. Gunns first half profit declined 98.7%. Challenger Financial interim profit increased 9%.

[R]3:00AM New York, 7:00PM Sydney – A private report indicated that housing affordability index in Australia dropped 18.4% in December on rising costs and slower building approvals. The benchmark index gained 1.8% on higher commodities prices. Gunns first half profit declined 98.7%. Challenger Financial Services interim profit increased 9%.[/R]

Australian stocks closed higher after gains in international markets, precious metals and energy prices in international markets. Market gains were trimmed after a private report indicated housing affordability declined in December.

Immediate month futures of gold increased 0.3% to $1,122 an ounce and crude oil prices edged up 0.5% to $80.20 per barrel.

In Sydney trading ASX 200 Index rose 1.8% or 82.4 to 4,717.50.

Of the ASX 200 index stocks, 165 gained, 30 dropped, and 5 were unchanged. OZ Minerals led gainers in the index shares with a rise of 8.2% followed by Energy World Corp. jumping 7.4%.

Housing Affordability Falls 18.4%

Housing Industry Association reported today in the HIA-CBA First Home Buyer Affordability Report that Australia’s housing affordability plunged by 18.4% in the three months to December to be 22.3% lower than a year ago.

Affordability was adversely impacted by higher house prices, increased interest rates, and the winding-down of the first home buyers’ boost.

The report noted that affordability decreased in all capital cities and regional areas in the review period, with the largest falls recorded in Sydney, Brisbane, Hobart, and Canberra.

The HIA forecasts a moderate housing recovery through 2010 with around 152,000 homes commencements, 190,000 lower than increases required to keep up with Australia’s population growth.

Ben Phillips, Senior Economists at the association said, “Without the required new home building to keep up with underlying requirements house prices and rents are expected to continue pushing upwards through 2010.”

Housing supply dragged by increased regulation, a slow and increasingly restricted building approvals process, and a limited land supply, new home taxation, and skilled labor shortages that impacted the industry last cycle.

Gunns Ltd. Profit Drops 98.7%

Gunns Ltd reported today that its interim profit for the period ended December 31 dropped 98.7% to A$420,000 from a year earlier on a rising Australian dollar and downturn in the Asian markets.

Operating earnings declined 88% to A$4.8 million.

Wood fibre revenue fell 38% to A$140.6 million and earnings decreased to A$6.9 million. Timber Products revenue dropped 2% to A$127.7 million with earnings increasing to A$5.5 million.

Chairman John Gay said the group will institute a corporate restructure to create a separate investment vehicle “to facilitate direct investment in our significant plantation forestry estate, more appropriately valuing these assets and allowing us to expand it through further consolidation of hardwood plantation assets across Australia”.

The hardwood timber business of ITC Timber Pty Ltd was acquired in December 2009 for A$88.5 million.

Challenger Financial Profit Rises 9%

Challenger Financial Services Group reported today that the company’s net profit after tax in the six months ended in December rose 9% to A$116 million from the comparable year ago period.

Statutory net profit after tax climbed to A$177 million on investment gains of A$61 million at Challenger’s life company.

The company declared an interim dividend of 6 cents per share.