02/09/10 - 12:45
Ben Potter, Research Analyst
Market Update from the Trading Room – 12.45pm
Australia 200 CFD Index: 4530 (0.8%)
| Top 3 Sectors | Bottom 3 Sectors | |||
|---|---|---|---|---|
| Financials | 1.1% | Healthcare | 0.2% | |
| Property Trusts | 1.1% | Industrials | 0.2% | |
| Consumer Discretionary | 1.1% | Utilities | 0.4% |
Economy – The Australian July trade surplus fell short of expectations, coming in at $1.89 billion vs an expected surplus of $3.1 billion; exports were down 4%, while imports rose 2% in the month. Imports swelled due to the purchase of 6 Super Hornet jet fighters by the government that carried a price tag of $477 million. Nonetheless, the softer data is unlikely to reshape the picture of blossoming trade for Australia, with Chinese demand for key exports of iron ore and coal expected to remain buoyant, keeping prices and volumes high.
Base metals – In a note from commodities broker Triland Metals, it said LME base metals turned in a strong performance overnight, which saw some analysts more optimistic. The broker said the end of the Northern Hemisphere summer holidays brought increased trading activity to markets, and with prices having held during the summer months they could be heading for a strong quarterly close. In a separate comment from Commonwealth Bank of Australia, it said the solid price gains overnight provided further evidence in support of a successful economic "soft landing" in China.
James Hardie – In a broker note from Macquarie Group, it joined UBS by reiterating its bullish view on James Hardie, despite the company’s loss of appeal against a US$330.4 million tax charge. Macquarie kept its outperform rating on the stock, with a price target of $8.69. The two brokers, plus Deutsche Bank, all believe the building materials group will appeal the tax decision, so no resolution is expected for some time. Macquarie thinks the business model has held up well through the US housing downturn and James Hardie continues to offer investors strong operational leverage to the eventual recovery in US housing.
Riversdale Mining - India's Tata Steel continues to creep up Riversdale's register. Filing on the ASX shows Tata’s stake is now at 24.2%, up 2.5% from 21.7%. Entities wanting to buy shares in Australian listed companies must make a takeover bid if their holding reaches 20%. They are, however, allowed to take a maximum additional 3% every six months without having to make a bid. Riversdale is developing some big mines in Mozambique, an emerging source of coking. In a report from UBS, it noted Riversdale’s takeover appeal. UBS believes that Riversdale's coking coal exposure, large resource base and large tenement position in an emerging coking coal region make it attractive to potential corporate acquirers. Tata Steel isn't the only big player on Riversdale's register, with Brazilian steel maker CSN owning a 16% stake. This could potentially make a takeover attempt more challenging.
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