Australian Market – Tuesday, April 6
Tuesday, April 6 – Australian shares touched an 18-month high amid signs the US economy remains on the mend and as takeover
moves in the local coal and gold sectors complemented stronger commodity prices. The RBA’s decision to raise the official
cash rate by 25 basis points to 4.25% had little immediate impact, with the market having expected at least one hike in April
and May.
The All Ordinaries rose 48.2 points (0.98%) to 4,974.1 while the S&P/ASX 200 firmed 46.0 points (0.94%) to 4,953.7.
BHP Billiton (BHP) and Rio Tinto (RIO)
The ACCC has again pushed back the date for its ruling on the iron ore joint venture between BHP and Rio as it waits on more
information from the miners. It now expects to announce its findings by May 27. Regulatory approval by the European Commission
had been seen as the biggest barrier to the joint venture, but the ACCC has taken a tougher line than expected in its statements
to date indicating it plans a thorough study of the deal.
In unrelated news, South Africa’s state power company Eskom Holdings said BHP will renegotiate long-running power supply agreements
for its aluminium smelters in South Africa and Mozambique so that they will no longer be linked to commodity pricing and foreign
currency. Eskom said it expects to sign final agreements by the third quarter for the supply of electricity to BHP’s Hillside
and Bayside smelters in South Africa and its Mozal smelter in neighboring Mozambique. BHP, whose smelters are among the single
largest consumers of electricity in South Africa, said it would maintain a 10% reduction in power use in the country but cautioned
the national grid would remain under pressure for the foreseeable future. BHP advanced 68 cents (1.55%) to $44.63. RIO rose
$1.04 (1.31%) to $80.64.
Commonwealth Bank of Australia (CBA)
CBA raised a total of C$500m from an issue of 10-year bonds and an offering of three-year floating-rate notes, according to
sources. It raised C$400m from the 10-year bond issue, pricing the offering at 154 basis points over the relevant benchmark
for a yield of 5.19%. The bonds carry a coupon of 5.15%. The minimum target to be raised from this offering was C$300m. The
C$100m, three-year offering was priced at 60 basis points over the Canadian Dealer Offered Rate. CBA rose 45 cents (0.79%)
to $57.24.
National Australia Bank (NAB)
NAB guaranteed it wouldn’t raise its standard mortgage rate by more than any interest rate rise from the RBA. The RBA has
subsequently imposed a 25 basis point cash rate rise.
In other news, a bidding competition is developing for the purchase of 318 branches in the UK held for sale by the 84% state-owned
RBS, with contenders including Banco Santander SA, and Richard Branson’s privately held Virgin Money. NAB will bid at Tuesday’s
first-round deadline, according to sources. It isn’t clear however whether it will be alone or organise a tie-up with private
equity firms. NAB increased 29 cents (1.05%) to $27.94.
ANZ (ANZ)
ANZ said it will open an operations hub in Manila. The new centre which will be located in Makati City will open in July and
employ around 300 staff by the end of the year. It will add further back office capability to ANZ’s four existing hubs in
Melbourne, Bangalore, Wellington and Fiji and its two back office centres in Singapore and Hong Kong. ANZ firmed 16 cents
(0.63%) to $25.45.
AMP (AMP)
Sources familiar with the matter have suggested AMP will likely exit the battle to take over AXA Asia Pacific if NAB’s $13.29bn
rival bid is cleared by the ACCC. AMP is reluctant to enter a bidding war with NAB, whose proposal has the backing of the
target’s independent directors and majority owner France’s AXA SA. AMP firmed 4 cents (0.64%) to $6.30.
Leighton Holdings (LEI)
Leighton Holdings subsidiary Thiess Services said it signed a new contract worth up to $325m with Western Power for the provision
of electrical services. The agreement comprised an initial two-year contract, with the potential for three one-year extensions.
Thiess would work with Western Power to upgrade and maintain the electrical distribution network in metropolitan Perth and
the south-west of Western Australia. LEI weakened 23 cents (0.59%) to $38.90.
GPT (GPT)
GPT said it purchased a 50% stake in a Sydney office block development for $333m from Grocon Developments. GPT Wholesale Office
Fund pre-purchased the property at 163 Castlereagh Street in Sydney’s CBD. The building is due for completion in 2013. Grocon
and La Salle Investment Management each have a 25% stake in the development. When completed, the 42 storey tower will be one
of only 10 premium-grade office buildings in Sydney. GPT added 1 cent (0.85%) to $0.59.
Lend Lease (LLC)
Lend Lease said it will set up a 50/50 joint venture with London Continental Railways as part of a deal for the regeneration
of land holdings at Stratford City in east London. Lend Lease said in a statement it expects the joint venture and other agreements
to be signed over coming weeks. The London Continental Railways landholdings are next to the Athletes Village site for the
2012 London Olympic Games, where Lend Lease is providing development, project and construction management services. LLC fell
1 cent (0.12%) to $8.67.
Alumina (AWC)
Alumina said it has repurchased and cancelled US$50m of its convertible bonds with a maturity date of May 2013. The miner
said it now has US$300m worth of convertible bonds outstanding and that bond holders have the right to require the company
to redeem some or all of these on May 16, 2011 at 100% of their principal amount together with accrued and unpaid interest.
AWC improved 7 cents (3.97%) to $1.84.
CSR (CSR)
A newspaper reported CSR has had expressions of interest from international parties interested in its sugar and renewable
energy businesses and has decided to open its books to Bright Food Company after it boosted its offer for the businesses to
$1.75bn. A handful of international players had expressed interest in the businesses after Bright Food upped its bid for the
sugar and renewables segments. Senior representatives from Bright Foods including vice-chairman Ge Junjie will fly to Sydney
for formal discussions with CSR and other stakeholders, the paper reported. CSR fell 1 cent (0.28%) to $1.75.
Macarthur Coal (MCC) and Gloucester Coal (GCL)
Peabody Energy said it is raising its takeover offer for Macarthur Coal to $3.56bn from $3.3bn. Peabody is now offering $14
cash per share, up from the initial offer of $13 a share. The revised offer represents a premium of 22% to the 30-day average
price of Macarthur’s shares ahead of the announcement of Peabody’s initial offer. Peabody said it continues to offer Macarthur’s
top three shareholders, Citic, ArcelorMittal, and Posco the opportunity of retaining their stakes in a privatised Macarthur,
as its offer is no longer conditional on receiving their commitment to the deal, provided the Macarthur board supports the
bid. Macarthur plans a shareholder vote on its own proposed takeover of Gloucester on April 12 but Peabody called on the miner
to delay the vote to allow shareholders to consider the revised takeover offer.
Meanwhile, Noble Group announced an all cash offer for the remaining shares of Gloucester Coal it doesn’t already own. Noble,
which currently owns an 87.7% stake in Gloucester, said that the offer is conditional on Macarthur Coal’s takeover bid for
Gloucester not proceeding. The offer represents a 35.3% premium to the closing price of Gloucester on April 1. GCL is in a
trading halt and was last quoted at $9.31. MCC added 23 cents (1.55%) to $15.10.
Economic News
RBA continues ‘normalisation’, raising rates
The RBA raised its cash rate target a further 25 basis points to 4.25%. The fifth rise since October 2009, the gap between
relative interest rates between Australia and other industrialised countries has widened further in 2010 as the economies
of Europe and the US remain as yet subdued. With a surge in revenue now about to wash into the economy on the back of sharply
higher coal and iron ore export prices, the hike has brought rates back into what is a normal range just as economic growth
strengthens according to the RBA. “The Board judges that with growth likely to be around trend and inflation close to target
over the coming year, it is appropriate for interest rates to be closer to average,” RBA Governor Glenn Stevens said.
ANZ Job Ads Survey Rises in March
The total number of job ads in Australian newspapers and on the internet rose 1.8% in seasonally adjusted terms in March compared
with the previous month to an average of 162,692 ads per week, contributing to an 8% annual increase, ANZ said. Internet job
ads rose 2% in March from February, contributing to an annual increase of 7.3% in seasonally adjusted terms. Job ads in newspapers
in Australia fell 1% in March from February, weighing against a 20.1% annual increase in seasonally adjusted terms. These
were coupled with an unemployment rate of 5.3% in Australia and a 19.1% jump in job ads in February.
The NZSX50 added 32.68 points (1.00%) to 3,308.91 while the Nikkei fell 56.98 points (0.50%) to 11,282.32 and the Hang Seng
strengthened 297.65 points (1.40%) to be last quoted at 21,537.00.