ASX CLOSE: Markets close higher; China's growth still intact

Friday 11th September 2009

Across the region, Asian markets were mostly higher following the strong overnight leads and news that China's industrial production grew at a faster pace than forecast in August. Also, new lending unexpectedly accelerated to 410.4 billion yuan vs expectations of 320 billion yuan. Markets had been concerned recently that the Chinese government was trying to slow down the economy through reigning in lending.

A slew of Chinese economic data was released today, all in-line or slightly better-than-expectations. Year-on-year retail sales were higher by 15.4% (forecast: 15.3%), year-on-year fixed asset investment was up 33% (forecast: 32.7%) while year-on-year industrial production levels rose 12.3% (forecast: 11.8%). The most promising data though was the new loans print for August which came in at 410.4b yuan, was well ahead of consensus expectations of 320b yuan and easing concerns about a sharp retreat in Chinese lending.

The monthly release of Chinese data is always both highly anticipated and closely analysed as there are still many sceptics over whether China can lead the world out of the current crisis.

Today's numbers provided confirmation that China's momentum and growth trajectory are still very much intact and this has obviously allowed markets to sustain themselves at highs of the week. Had China's numbers disappointed, it may have given the market the excuse it has been looking for to sell-off into the weekend. They didn't disappoint.

The Nikkei 225 finished 0.7% lower after Q2 GDP growth came in weaker-than-anticipated while the Kospi rose 0.4% for the session. The Shanghai Composite and Hang Seng are still trading, currently up 1.7% and 0.8%, respectively.

In Australia, the ASX 200 closed 0.6% higher at 4596.1 after climbing to a high of 4608.6 earlier.

This market just keeps on going from strength-to-strength. There's no stopping it. The big macro theme of ‘too much cash and not enough equity ownership' is overriding the ‘September effect'.

Also, we're starting to see the return of merger and acquisition activity, as well as IPO talk, both of which are positive signs for equity markets.

The word on the street is that resource-specific short positions, designed to cash in on typical September weakness, are bleeding and may be forced to concede defeat by covering their positions, adding even more fuel to the fire.

Looking across the sectors, the telecommunications (1.3%), financials (0.9%), materials (0.6%) and property trusts (0.6%) were the major gainers today.

Following positive leads from Wall Street overnight where the S&P Financial index and the KBW Bank index were higher by 0.9% and 0.5% respectively, the Australian financial sector saw solid support. All of the Big-4 banks finished well into positive territory, up between 0.5% and 1.7%. Macquarie Bank saw some selling pressure to finish weaker by 0.4%.

Leads for the materials sector were mixed at best. Base metals on the London Metals Exchange were all down with Copper falling 1.3%, Nickel 3.4%, Aluminium 1.8% and Zinc 4%. In London, both Rio Tinto and BHP Billiton finished slightly higher, up 0.2% and 0.1%. In US trade, the S&P Basic Materials sector rallied 1.7% with Freeport McMoRan rising 2.3% and Alcoa up 0.2%.

However, Australia's materials stocks chose to follow leads from the US with most names closing in the black. Newcrest Mining, Amcor, Lihir Gold and BHP Billiton are the biggest gainers, all up between 0.8% and 2.8%, with Amcor the best performer.

Gold traded down in early trade overnight, hitting a low of $982 before rebounding strongly. It's currently trading at $1000.40 per ounce.

Among property trusts, Macquarie Office Trust (7.4%), ING Office Fund (3.5%), Mirvac Group (3.3%) and Macquarie Countrwide Trust (2.3%) were the major drivers. Goldman Sachs JBWere this morning upgraded ING Office to ‘buy' from ‘hold' and revised its target to 66 cents. They said "with our positive view on GDP in Australia, we suggest the office sector represents a cyclical investment opportunity.

After a positive start to the session, the energy sector slipped in afternoon trade, eventually finishing the session flat. Oil Search (2.8%) and Santos (1.5%) added points while Paladin Energy (-3.8%) was the largest drag. Crude Oil is currently trading at $72.20 as government data showed a bigger-than-expected drop in US Crude Oil inventories and the International Energy Agency raised tis forecast for global oil demand.

Like the energy sector, the industrials stocks also drifted throughout the session, eventually closing down 0.2%. Names that performed well included United Group, Qantas and Macquarie Infrastructure Group, all up between 2.3% and 1.4%.

Prices are in AUD unless otherwise stated.
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