ASX CLOSE: Macarthur Coal lobbies a friendly takeover bid

Wednesday 23rd December 2009

Across Asia, regional indices are little changed as we head into the Christmas holiday period. Volumes are very light as you would expect this time of the year. The Shanghai Composite is higher by 0.4%, the Kospi is up 0.1% while the Hang Seng is trading flat. The Japanese market is closed for Emperor's Day.

In Australia, the ASX 200 closed nicely to the upside, higher by 0.75% at 4739, having traded as high as 4742 earlier in the session.

Despite being modestly higher today our market was somewhat defensively postured with the consumer staples, healthcare and telecommunications sectors being among the biggest percentage gainers - higher by 1.7%, 1.2% and 0.7% respectively. That said, our heavy weight financial, materials and energy sectors also ended in positive territory and contributed most to the day's gains.

As you would expect on the last full day of trading before Christmas, volumes were non-existent and interest levels are low with many insto desks only maintaining skeleton staffing.

The big news story of the day was Macarthur Coal lobbying a friendly $668m takeover bid on Gloucester Coal, with Gloucester's 87.7% owner, Noble group agreeing to accept 0.84 Macarthur shares for each of its Gloucester shares. Minority shareholders will be offered the same scrip bid or can accept $8 per share in cash. Gloucester shares surged on the bid ending higher by 27.8% while Macarthur shares finished up 5.6%, a sign the market is viewing the transaction positively. This would have been a fantastic trade for those who recently got set in Gloucester prior to Macarthur's advances.

Overnight, we again saw US materials names rally despite a stronger USD, and those favourable leads helped our major resource names to some modest gains today. BHP and Rio Tinto both closed firmer by approximately 0.7%, with the latter announcing it had accepted Amcor's offer to purchase its Alcan packaging assets, while Newcrest Mining closed up 2.6%, despite a weaker gold price, after reporting it had recommenced operations at its Telfer mine after the passing of Cyclone Lawrence.

Elsewhere around the market, financials were broadly stronger with the four major banks convincingly higher, led by Westpac and ANZ which were up 2.2% and 1.1% respectively, while most of our heavyweight energy names were also in the green. Woodside, Santos and Caltex finished higher by 0.2%, 0.9% and 1.8% respectively while Oil Search closed down 0.3%.

Turning to our major retailers, staples names Wesfarmers and Woolworths were higher by 3.2% and 0.8% respectively, David Jones was up 0.6% while Myer continued to lag, down 1.4%. Harvey Norman was higher by 0.7% while JB Hi-Fi ended weaker by 0.9%.

For those who read our morning update, the three stocks we mentioned leveraged to those strong US housing numbers we saw overnight - Boral, CSR and James Hardie - ended higher by 0.5%, 1.7% and 1% respectively.

Just one finishing note - it's a key session for US markets tonight with personal income and spending and new home sales on the economic calendar. Should we get some good numbers, we can hope to trade through (and more importantly close above) that key 1121 level on the S&P which represents the 50% Fibonacci retracement from the March 2009 lows to the 2007 highs. But first let's hope the data is good and then let's hope there's enough participation to get us through there. Should this occur we can expect to see a wave of fresh money hitting the market! Should be a very interesting night!

Prices are in AUD unless otherwise stated.
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