Budget Wait Lifts Banks, Insurance
The Age
Tuesday May 13, 1997
MARKETS
Banks and insurance rallied yesterday in anticipation of strong profit results and a favorable Budget outcome.
The New South Wales regional St George was steady at $8.15 after it announced a 12.3 per cent increase in net interim profit to 31 March, following its merger with Advance Bank in January.
National Australia Bank, whose result is due tomorrow, gained another 15.7 cents to close at $18.337, while Commonwealth Bank rose 19 cents to $14.55.
However, the biggest winner in the sector was Macquarie Bank, which rose 32 cents, or 3.5 per cent, to $9.54.
QBE headed a list of positive gains on the Insurance Index, with a 10 cent rise to $7.15. National Mutual also enjoyed a strong day, adding four cents to $1.92 with three million shares traded. The only loser was GIO, which shed three cents.
The other big news was the fall of the paper manufacturer Amcor, which slid 18 cents to $8.45 after wiping $114 million from its market value. The company told the market its second-half result would be disappointing.
Against the Wall Street-fuelled jump in the All Ordinaries, which hit a new high of 2534.3, the Building Materials Index fell 1.6 per cent. The slump was led by CSR, which was further punished after its 36 per cent drop in interim net profit announced on Monday. The diversified builder fell 13.3 cents to $4.63.
It appeared to be a case of guilt by association on the index, with two other heavies, James Hardie and Boral, dropping. Hardie fell 10 cents to $4 while Boral dipped 8.7 cents to $3.73.
ICI continued its recovery, adding 15 cents to $11.85 as the market came to terms with the sell-off by its British parent.
Disappointment that no resolution had been reached between Optus and Telstra over sharing cable infrastructure appeared to hit Mayne Nickless, whose share price fell 3.9 cents to $7.65. The transport and health care group, which owns a 26 per cent stake in the soon-to-be floated Optus, has fallen 49 cents since late April as concerns over an agreement between the two telcom giants mounted.
Resources stocks continued their rally, with oil companies leading the way as the price of crude oil surged to its highest price for seven weeks. The rise followed a report that Iraq was massing forces on its northern border, prompting speculation that tensions in the region could disrupt oil supply.
In New York, West Texas crude rose 95 US cents to $US21.38 a barrel, its highest price since 21 March. With Australian oil producers already on an exploration-led roll, the higher price led them further ahead.
The stars were Woodside Petroleum, which rose 16 cents to $10.86 and Novus Petroleum, up 3.3 cents to $4.393. Tap Oil added one cent to close at $1.41, while Santos was steady at $5.52. The exception was Oil Search, which slipped four cents to $2.81.
Nickel rose $US56 to $US7741 on the London Metal Exchange, helping to push WMC seven cents higher to $8.04. However, Queensland Nickel fell five cents to $2.49.
After big gains on Monday, gold stocks were mixed yesterday after the bullion price pulled back $US2.65 to $US346.
With a lot of stocks slipping, Sons of Gwalia was one of the minority recording a gain, adding a cent to $1.65. Plutonic was another to rise, climbing four cents to $5.14 and Normandy rose a cent to $1.65.
In contrast, Newcrest's nightmare continued, with a loss of nine cents to $3.21. Delta Gold slipped three cents to $2.19.
The Media Index slipped nearly half of 1 per cent, led down by News Corporation, which lost five cents to $5.93 on news that News was negotiating to buy the Los Angeles Dodgers baseball team for an estimated $A450 million.
It was all quiet on the local media front, with Publishing and Broadcasting down two cents to $6.48 and John Fairfax steady at $3.23.
Stockwatch
Stronger aluminium prices pushed aluminium stocks higher yesterday. On the London Metal Exchange, the three-month price for aluminium rose $US14 to $US1676 a tonne. The rise coincided with the issuing of HSBC James Capel's global mining strategy, which forecast higher aluminium prices in 1997-98 as supply moved into deficit.
Comalco rose 26 cents, or nearly 4 per cent, to $6.86. Its 67 per cent owner RTZ-CRA rose nine cents to $19.80. WMC, the 40 per cent owner of the giant United States alumina producer Alcoa, rose seven cents to $8.04, while Eastern Aluminium rose two cents to $1.27.
Money market
Trade on Australian financial markets was quiet yesterday ahead of the handing down of the Federal Budget.
However, buying out of Japan and the further weakening of the US currency helped propel the Australian dollar back above the 78 US cents mark to close at 78.16 US cents.
Dealers said the market had priced in a favorable outcome from Canberra.
Bonds were also stronger. The yield on November 2006 Commonwealth bonds closed five points down at 7.59 per cent.
April 2000 bonds closed three points lower at 6.71 per cent.
IN SUMMARY: The sharemarket reached yet another record high yesterday, although trade was subdued. Bank and insurance stocks dominated trading, buoyed by a series of anticipated strong profit results, which kicked off with St George Bank's announcement of a 33.8 per cent rise in net earnings. The All Ords closed 9.5 points higher at 2534.3, having reached 2540.4 earlier, driven by another record-shattering performance on Wall Street, where the seemingly unstoppable Dow Jones Industrial Average climbed 123.21 points to 7292.75, a 1.7 per cent gain. Brokers said the local index's performance was disappointing in comparison with the Dow. They said it had little direction. However, the June contract on the Share Price Index market leapt to a 12.7-point premium at 2547.
© 1997 The Age