Greek bailout approval lifts investor confidence

AN AGREEMENT for a second bailout deal for Greece buoyed the local market, with all sectors moving into positive territory as investor confidence strengthened.

By InvestSMART · 22 Feb 2012

By InvestSMART ·
22 Feb 2012

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AN AGREEMENT for a second bailout deal for Greece buoyed the local market, with all sectors moving into positive territory as investor confidence strengthened.

The benchmark S&P/ASX200 index rose 35.1 points, or 0.82 per cent, to 4291.2, while the broader All Ordinaries ended 35.4 points ahead at 4368.2.

News that euro zone finance ministers had sealed a deal for a ?130 billion ($160 billion) bailout for Greece reached the local market around mid-afternoon, sending stocks and metals prices higher.

The deal will reduce Greece's debt to gross domestic product ratio back to 120.5 per cent by 2020. It will also force private holders of Greek debt to take a 53 per cent writedown on their investments.

The news was well received and key to the local market's performance, said John Curtin, associate director with Patersons Securities. "The positive is that they've got the deal done - unlike other deals - earlier than when the deadline was. So, that's going to be good for confidence," he said. "It also gets it out of the way because the next big hurdle now will be looking at the Italian bond renewal that needs to be done by the end of March."

Market leader BHP Billiton rose 42? to $36.44, while Rio Tinto gained $1.12, or 1.65 per cent, to $69.16.

The banks also strengthened, with National Australia Bank leading the big four higher, gaining 22? to $23.40. Commonwealth Bank shares performed strongly, nearly clawing back Monday's fall when the shares started trading without a dividend. The stock finished 37? higher at $49.47.

Wesfarmers traded without its 70? dividend yesterday, but also clawed back much of the fall to finish just 20? lower at $29.65.

In corporate news, OneSteel posted a $74 million first-half net loss but was bullish about its growth through its mining interests. Shares in Australia's second-biggest steel maker rose 9?, 12.33 per cent, to 82?.

Train manufacturer and engineering firm Downer EDI said strong gains in its mining division helped it return to profitability, and the company expects solid results this year. Downer rose 22?, or 5.91 per cent, to $3.94.

Preliminary national turnover reached two billion shares, worth $4.7 billion. The March share price index futures contract was up 31 points at 4276.

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Frequently Asked Questions about this Article…

How did the Greek bailout approval affect the ASX market and investor confidence?

The euro zone’s agreement on a €130 billion ($160 billion) bailout for Greece boosted investor confidence and sent the Australian market higher. The S&P/ASX 200 rose 35.1 points (0.82%) to 4,291.2 and the All Ordinaries climbed 35.4 points to 4,368.2, with all sectors moving into positive territory as stocks and metals prices strengthened.

What are the key details of the Greek bailout package investors should know?

The bailout package totaled €130 billion (about $160 billion). According to the report, it aims to reduce Greece’s debt-to-GDP ratio to 120.5% by 2020 and requires private holders of Greek debt to take a 53% writedown on their investments—details that underpin the market reaction.

Why did analysts say the bailout deal would help market confidence?

Analysts noted the deal was completed earlier than the deadline, which helped calm markets. John Curtin of Patersons Securities said getting the deal done boosts confidence and clears a major uncertainty, though he pointed out the next big test would be the Italian bond renewal due by the end of March.

Which major mining stocks benefited from the positive market sentiment?

Major miners moved higher on the news. Market leader BHP Billiton rose to $36.44, while Rio Tinto gained $1.12 to close at $69.16, reflecting stronger metals prices and uplift in mining-sector sentiment.

How did the big four banks perform after the bailout news?

Bank stocks strengthened across the board. National Australia Bank led the big four higher, finishing at $23.40, and Commonwealth Bank performed strongly—finishing at $49.47—nearly clawing back losses from earlier trading when its shares were trading without a dividend.

What corporate results stood out on the day and what do they mean for investors?

OneSteel reported a $74 million first-half net loss but was upbeat about growth from its mining interests; its shares rose (about 12.33%). Train manufacturer and engineering firm Downer EDI returned to profitability—helped by strong gains in its mining division—and its shares rose 5.91% to $3.94. These moves show investors rewarded companies with clear mining exposure or improving profit trajectories.

What was the overall market turnover and futures activity on the day?

Preliminary national turnover reached two billion shares, worth about $4.7 billion. The March share price index futures contract was up 31 points at 4,276, indicating positive sentiment extending into derivatives markets.

Does the Greek bailout mean there are no more risks for investors?

No. While the bailout reduced immediate uncertainty and lifted markets, risks remain—most notably upcoming European events such as the Italian bond renewal due by the end of March. The bailout also includes a large writedown for private debt holders, which underscores ongoing sovereign-debt risks that investors should monitor.