ASX Close: Earlier gains lost as profit taking kicks in

Wednesday 19th August 2009

After trading well into positive territory for much of the day the Australian market drifted over the last hour of the session with the ASX 200 eventually closing lower by 7.8 point or 0.18% at 4373.8. The high for the day was 4437.20 reached about an hour into the session, but profit taking and ongoing scepticism about the continuance of the recent rally won the day.

While early advances were broad based on the optimistic mood of the morning, it was the energy, industrial and consumer discretionary names that received most of the buying interest and held onto their gains.

Energy, having been the worst performing sector yesterday was the best performer by day's end, up 1.5% helped by higher overnight crude oil prices and (which settled 3.7% higher at US$69.19) and a pleasing earnings results from sector heavyweight Woodside Petroleum.

Woodside surprised the market in announcing a half-year underlying net profit of $898m which was ahead of consensus estimates of $849m but down 11% on the prior period. Shares finished higher by 3.6% on the result and guidance suggesting a stronger second half production profile could be expected.

Also in the energy space, Origin Energy announced an underlying net profit result of $530m up 20% from last year's $443m. The result was in-line with expectations with the company guiding to a further 15% lift in profits for the current year. Shares initially traded 1% higher before drifting to close down 2.0%. It seems the expectations bar has moved quickly higher over the course of reporting season where an in-line result just doesn't cut it!

Worley Parsons was the sectors best performer settling higher by 4.1%.

Industrials traded stronger by 1.5% with Qantas, surging 3.6%, being a standout performer despite the company announcing an 88% fall in FY09 net profit to $117m, which was also below consensus estimates of $131.5m. The market appeared to be more focussed on comments highlighting increased traffic, stabilising yields and further cost cutting initiatives.

United Group saw some follow-through buying after yesterday's strong earnings result and a slew of broker upgrades to be trading higher by 6.1%. Other industrial names seeing buying interest were Brambles, Downer EDI and Macquarie Infrastructure Group, all up between 1.4% and 3.6%.

Materials were sold off late in the session finishing lower by 0.5% with sector heavyweights BHP slipping by 1.5% and Rio Tinto rising 2.2%. Centennial Coal was a pure play name to enjoy solid support closing up 1.5% after posting a profit result at the top end of expectations.

Financials were in the news in the morning session with Bank of Queensland announcing it was raising $340m at $10 per share, an 11.5% discount to the last traded price. All four major banks finished lower between 0.8% and 2.8% to drag the sector index 0.6% into negative territory. Macquarie Bank was a standout, finishing higher by 2.5%

Consumer discretionary closed higher by 0.6% with Fairfax Media, David Jones and Harvey Norman all advancing between 2.2% and 4.6%. The consumer staples also closed up by 0.2% with Fosters and Metcash gaining by 1.1% and 0.7% respectively.

Healthcare was the day's laggard falling 1.5% despite CSL posting a better-than expected $1.15b profit, which was up 63% from the previous year's $701.8m. Shares in the company rose early but later slipped to close lower by 1.3%

With healthcare traditionally seen a defensive sector due to the supposed inelastic nature of its earnings, CSL has been a forgotten player in the market rally over the last six months. Make no mistake though CSL is a growth stock. It is widely regarded as having one of the best management teams in the country, its pipeline of new product ensures it never disappoints come reporting season and it surely boasts a growth profile that warrants more investor attention that it currently gets.

Cochlear and Ansell were also drags on the sector settling lower by 3.6% and 2.8% respectively.

The afternoon sell-off in stocks saw the AUD retreat from earlier highs of 0.8275 to 0.8210 and crude trade off from just shy of US$70 to be hovering around the US$68.85 level.

Prices are in AUD unless otherwise stated.
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