ASX CLOSE: Market rises following positive leads from US

Wednesday 26th August 2009

Major indices across Asia were higher this Wednesday after US consumer confidence beat expectations and home prices rose 1.4% for the month of June, the second consecutive month of gains.

The Nikkei 225 was up 1.4% while the Shanghai Composite and Hang Seng are up 2.1% and 0.5%. In Japan, the automotive sector added points with both Toyota and Honda performing well.

In Australia, the ASX 200 finished 1.1% higher at 4454.5, driven by gains among the property trusts, financials and materials stocks. Overall, the market was very well supported, especially in the financials space where we saw good buying following positive leads from US peers overnight.

Westfield Group was the biggest points contributor to the overall index after it reported its results this morning. Management's decision to cut its distribution ratio from 100% to 70-75% is likely to reduce the stock's appeal as a yield play. However, the company's decision not to undertake a capital raising was clearly well received, with investors having the confidence to buy into the stock without concerns of dilution.

Despite materials being higher, professionals seem nervous and wary of a pullback following recent volatility on the Shanghai Composite, falls in the Baltic Dry shipping index and weakness among steel and iron ore prices.

Gains came from the property trust (4.6%), financials (1.3%), materials (1.3%), consumer discretionary (1.1%) and energy (0.7%) sectors.

In the property space, ING Office Fund (7.9%), GPT Group (7.5%), Mirvac Group (6.4%), Stockland Group (5.4%), Macquarie Countrywide (5%) and Westfield Group (4.7%) led the way. The big news within the sector came from Westfield Group after they reported a net loss of $708 million for the six months to June 30 compared to a profit of $1.29 billion a year earlier. First half net operational earnings, excluding property revaluations and non-cash items, rose 12% to $1.04 billion. This was slightly ahead of market expectations of $1.03 billion.

AMP, Suncorp-Metway, Insurance Australia Group and Westpac Banking Corporation advanced the most in the financials space, up between 1% and 2.4%. Leads from US financials were strong with the S&P Financials sector rising 1.3% and the KBW Bank Index 0.6% higher.

Among materials stocks, Lihir Gold (7.8%), Orica (1.9%), Alumina (1.5%), Amcor (1.5%) and BHP Billiton (0.9%) added the majority of points. The major news was Lihir Gold's result. The gold miner reported a first half net loss of US$300.9 million. As expected, the loss was heavily impacted by the US$409 million impairment charge for the Ballarat Mine, which was more than the guided US$250 - US$350 million. Its underlying profit of US$154.9 million was roughly inline with market expectations.

However, this was offset by the impressive upgrade to resources at both its Lihir Island and Ivory Coast assets. Indicated gold resources were upgraded by 31% to 43 million ounces at Lihir Island while measured and indicated resources were upped by 22% to 442,000 ounces in the Ivory Coast.

In the consumer discretionary sector, Consolidated Media (12%), West Australian News (5.4%), Crown (4.7%) and Billabong International (4.4%) were the standout gainers. Consolidated Media announced this morning that it had sold its stake in Seek for $5.05 per share, totalling $440.6 million. Also, Seven Network chairman, Kerry Stokes, was very chatty about the group's stake in Consolidated Media, telling analysts the investment was of a strategic nature and he sees growth for both the free-to-air and pay TV advertising models in years ahead. He also said there was no reason why Seven and Packer couldn't work together.

Despite a significant move lower in oil prices overnight, the energy sector added points with WorleyParsons, Origin Energy, Caltex Australia and Santos all gaining between 0.4% and 4.5%.

Prices are in AUD unless otherwise stated.
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