Australian Market Report - Australia Shares End Down 0.2%; Financials Offset Resources Recovery
Thursday, 17 May - The Australian share market hit a four-month low as offshore funds sold financials after the sector outperformed in the face of rising fears that Greece may exit the euro zone.
The All Ordinaries fell 6.2 points (-0.15%) to 4,208.5 while the S&P/ASX 200 weakened 8.1 points (-0.20%) to 4,157.4.
Boart Longyear (BLY)
Boart Longyear (BLY) said it expects to draw an increasing portion of its revenue from South America and West Africa, as miners bolster their exploration efforts in the regions in search of commodities like copper and gold. The company, which provides mineral exploration drilling services and drilling products to mining companies, currently cites Asia Pacific as its most significant region for demand, accounting for around 26% of its sales. However, orders have been rapidly increasing from South America and West Africa, Chief Executive Craig Kipp told reporters at a press conference in Sydney. Mining companies in Peru plan to invest about $53bn in new mines and expansion projects this decade, while a raft of gold companies, including IAMGOLD and Randgold, are targeting new discoveries in the relatively under-explored areas of West Africa. BLY gained 16 cents (5.13%) to $3.28.
Insurance Australia Group (IAG)
Insurance Australia Group (IAG) is considering whether to sell off its UK operations after a sharp improvement in performance, the insurer said. In the six months to 31 Dec., the UK business reported an insurance loss of $5m, compared with a $121m loss in the same period a year earlier, IAG said in a press release. IAG Chief Mike Wilkins said the improved performance, combined with a deteriorating outlook for the UK economy, made it an "appropriate time" to assess options for the business--including a potential sale of all or part of the business. IAG rose 4 cents (1.2%) to $3.38.
Commonwealth Bank (CBA)
Commonwealth Bank of Australia (CBA) reported a 3% rise in cash profit in the third quarter of fiscal 2012, as subdued credit demand and high funding costs continued to eat into its profit margins. Unaudited net profit for the three months to 31 Mar. at Australia's biggest bank by market value was $1.7bn, the bank said in a statement to the exchange. Cash profit, a smoothed measure more closely watched by investors, was $1.75bn in the period. In the first half of fiscal 2012, CBA reported a record $3.58bn in cash earnings. "Consistent with the uncertain outlook that we indicated in the Group's half-year results in February, we have retained our conservative business settings, including tight expense control, a conservative funding profile and strong provisioning levels," said group chief executive Ian Narev in a statement. CBA fell 75 cents (1.45%) to $51.02.
Centro Retail (CRF)
Centro Retail Australia (CRF) announced the sale of a 50% stake in each of three shopping centres to privately-owned Perth-based property investor Perron Group for $690.4m. Under the co-ownership arrangement, Centro will provide property management, development and leasing services from its existing management platform for the three shopping centres--Galleria in Perth, The Glen in Melbourne and Colonnades in Adelaide. Centro's Chief Executive, Steven Sewell, said proceeds from the sale will be used to reduce core debt ahead of debt restructuring that the company hopes will help secure it an investment-grade credit rating. The sale is part of Centro's strategy to realise equity from a small number of higher-value assets to strengthen its balance sheet, he said. Proceeds from the sale will enable Centro to reduce gearing to 26%, allowing it to progress its pipeline of redevelopment projects across its portfolio of Australian shopping centres, Sewell said in the statement. CRF advanced 1 cents (0.53%) to $1.91.
Economic News
Western Australia To Create Sovereign Wealth Fund Using Mining Royalties
The Western Australian state government plans to channel 1% of its China-driven minerals wealth each year into a sovereign wealth fund expected to be worth $4.7bn by 2032, the state's top financial official said. The so-called Future Fund will be established in the second half of this year and quarantined from spending for 20 years, Western Australian Treasurer Christian Porter said when he delivered the state's annual budget in Parliament. Seeded by royalties from the state's booming minerals royalties, the fund is targeting an annual 5.2% return by investing in cash, bank bills and bonds, Porter said. Its investment strategy is different to that of the approximately $70bn Future Fund operated by Australia's Commonwealth Government in Canberra, which invests in equities along with bonds and other debt instruments. State Premier Colin Barnett first flagged in February the establishment of a Norway-style fund to help store earnings from the sale of Western Australia's vast quantities of minerals and petroleum to Asia. The state is the country's fastest-growing region, fuelled by strong Asian demand for its vast reserves of high-quality iron ore, gold and liquefied natural gas. Over the next four years the fund will be "seeded" from the state's existing Royalties for Regions scheme, which includes benefits from the state's recent move to increase royalties on iron ore fines production.
The NZSX50 rose 7.00 points (0.20%) to 3,521.51 while the Nikkei firmed 75.42 points (0.86%) to be last quoted at 8,876.59 and the Hang Seng dropped 85.61 points (-0.44%) to 19,174.22.
The Australian dollar was last quoted at 99.34 US cents.
Companies Holding Annual General Meeting (ASX 300):
Adelaide Brighton Limited
Highlands Pacific Limited
Ivanhoe Australia Limited
Roc Oil Company Limited
Sydney Airport
Overseas Market Report -
