ASX CLOSE: Market closes lower as traders lock in profits

Friday 18th September 2009

Across Asia, indices were generally weaker today as markets globally took a breather following a strong week of gains. The Nikkei 225 finished 0.7% lower while in Korea, the Kospi bucked the trend, up 0.3%. Both the Shanghai Composite and Hang Seng are still trading down 2.3% and 0.3%.

In Australia, the ASX 200 joined the pullback, finishing the session down 0.5% at 4693.2 as traders locked in good profits for the week. The materials sector did most of the damage, weighed down by weaker base metal prices and softer leads.

Markets had a very good run this week. It wasn't surprising at all to see some profit taking before the weekend. There was the potential for some downside volatility late afternoon as FTSE Asian indices re-weighted. However, as is usually the case, this turned out to be a non-event.

Interestingly, the S&P 500 traded 20% above its 200 day moving average overnight, which has only occurred 3 times since World War 2. The last time this occurred in Australia, on August 14 this year, the market fell more than 5% over the next five days.

On the three occasions this occurred since WW2 in the US, each following year saw the S&P 500 index rise between 13% - 20%. So longer-term, history suggests 2010 may be a pretty good one.

The materials sector was the biggest drag today, down 1.8% and accounted for 95.4% of the total points detracted. Overnight leads were weak with base metals all lower on the London Metals Exchange. Nickel fell 1.5%, Copper 1.4%, Aluminium 0.3% and Zinc 0.2%.

Locally, Lihir Gold (-3.5%), Amcor (-3.3%), Alumina (-3%), Newcrest Mining (-2.8%) and BHP Billiton (-2.3%) were the biggest percentage fallers.

In the consumer discretionary (-0.7%) space, West Australia News (-1.8%), Tabcorp Holdings (-1.8%), News Corporation (-1.8%) and JB HiFi (-1.7%) were the major decliners, all succumbing to Friday profit taking.

Among industrial stocks, the likes of Brambles, Leighton Holdings, Macquarie Infrastructure Group and Macquarie Airports all detracted, down between 1.5% and 3%, with Brambles the worst performer.

On the upside, the financials sector saw some good buying late in the session as it managed to shrug off negative leads from Wall St. The S&P Financials sector and the KBW Bank Index were both lower, down 0.4% and 1%, respectively.

At the close, Bendigo Bank topped the list of financial gainers, up 3.1%. Only another four financials finished in the black and they were all major banks. Macquarie Group was up 1.8% while ANZ, National Australia Bank and Westpac Banking Corporation all finished the day higher between 0.2% and 1.4%, with ANZ top.

Elsewhere, Australia's airlines managed to rise in a falling market. Qantas was up 3.7% while Virgin Blue added 1.3%. Qantas was upgraded to ‘buy' from ‘hold' by Royal Bank of Scotland this morning, with their price target increased to $3.20 from $2.59 due to its potential longer term valuation as "one of the financially strongest airlines in the industry". With airline demand stabilising and economic conditions improving, we believe the worst of the news cycle is now well behind us.

Also, Credit Suisse reinstated its coverage of Virgin Blue with a ‘outperform' rating and price target of 55c. It believes "Virgin blue has potential to nearly quadruple its estimated 9% share of government travel business from tender due October 6, and also expects approval of joint venture with Delta. It notes it's well positioned for a recovery in domestic and international travel demand". Both were also boosted by the strong performance of the NYSE Airline ETF.

Prices are in AUD unless otherwise stated.
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