Australia Market Report July 14: Tortured by Uncertainty

Sydney, July 14, 2008 AEST (ABN Newswire) - The Australian share market is expected to open lower today after Wall St fell over one per cent on Friday. On the Sydney Futures exchange, the September share price index futures contract lost 74 points, or 1.49 per cent, to 4,880.
The Australian share market rose 0.9 per cent on Friday as resource stocks, led by gold and oil companies, surged on higher commodity prices and the banks pared early losses.

The benchmark S&P/ASX200 index firmed 42.5 points, or 0.86 per cent, to 4,979.9 but was two per cent lower for the week. The broader All Ordinaries added 47.3 points, or 0.94 per cent, to 5,067.8.

Oil prices briefly spiked to a new record above $US147 a barrel Friday, as rising hostilities between the West and Iran and unrest in Nigeria sent investors rushing back to energy markets.

CommSec equities economist Savanth Sebastian tipped the market to dip as much as 60 points as local financial stocks bore the brunt of uncertainty. In contrast, the resource sector was likely to hold up well given recent gains in metal prices and Friday's intraday record for oil, he said.

IT'S shaping up to be another tough week for investors, with choppy conditions tipped for the share market and home loan rate hikes coming into effect.
Meanwhile, some Australian borrowers face higher home loan rates after hikes announced Friday by the Commonwealth Bank come into effect today.

Federal Government backbenchers have criticised the major banks for increasing interest rates independently of the Reserve Bank of Australia (RBA).

Key Economics Data

Today, the Australian Bureau of Statistics releases lending finance data for May.

IPO and M&A News

THE world's largest bank, the Industrial and Commercial Bank of China (SHA:601398)(HKG:1398), is interested in forming alliances with Australian banks.

And it has not ruled out taking an equity stake in one of the major Australian banks. Mr Ruixiang Han, the general manager of ICBC Australia, said his bank was taking "a steady path" to building its local operations after securing a branch licence from the Australian Prudential Regulation Authority. Mr Han, who arrived in Sydney last week to manage the business, is cautious about talking up the company's ambitions in Australia.

THE new owner of Rio Tinto's Kintyre uranium deposit should be under no illusion it could be mined while Labor was in power, West Australian Premier Alan Carpenter said yesterday. Rio Tinto (ASX:RIO) announced last week it had an agreement to sell the deposit for A$515 million to a consortium made up of subsidiaries of Cameco Corporation and Mitsubishi Development. There are nine uranium deposits in Western Australia. Companies are allowed to explore for the metal, but Labor Party policy prevents it being mined.

TATTS Group boss Dick McIlwain has acknowledged the potential benefits of merging some of his empire with rival Tabcorp Holdings. Mr McIlwain's comments yesterday will add fuel to speculation the gaming giants could consider a tie-up as they recover from the Victorian government's decision ending their duopoly over the state's gaming machines.

Stocks to watch on the Australian stock exchange today (noon):

ASX:TOL - TOLL HOLDINGS LTD - up 22 cents to A$6.60

ASX:VBA - VIRGIN BLUE HOLDINGS LTD - up one cent to 51.5 cents
Toll Holdings Ltd will exit its majority stake in Virgin Blue by paying a special dividend to shareholders, using its shares in the airline. The special dividend to Toll shareholders will be worth about A$330 million, with shareholders receiving the Virgin Blue shares on a one-for-one basis. Virgin Blue today also confirmed its April 11 guidance for a fiscal 2008 underlying net profit in a range of $132 million to A$137 million.

ASX:HER - HERALD RESOURCES LTD - down one cent to A$2.92
Takeover target Herald Resources Ltd has rejected a claim that Indonesia company PT Basya Tunggal Jaya holds an interest in the Dairi zinc project in North Sumatra.
Herald says it has received a letter from Basya that claims it holds a 12.25 per cent interest in the holding company through which Herald holds its 80 per cent stake in the Dairi project.

ASX:VPG - VALAD PROPERTY GROUP - down 3.5 cents, or 6.36%, to 51.5 cents
Valad Property Group Ltd said it had raised A$158 million in equity from nine institutions for the successful close of an A$822 million industrial fund in France.

ASX:FXL - FLEXIGROUP LTD - down 2 cents to 46 cents
Electrical appliances financing company FlexiGroup Ltd has agreed to acquire interest-free finance provider Certegy Australia Ltd for about A$31.4 million.

ASX:BCI - BC IRON LTD - steady at A$1.20