Housekeeping takes stocks to year high
THE sharemarket closed at its highest for the year on Thursday, thanks to some end-of-year housekeeping by fund managers and some positive news from the Bank of Japan.
The benchmark S&P/ASX 200 Index added 16.3 points to 4634.1 while the broader All Ordinaries rose 13.4 points to 4646.6.
Most economists welcomed news that Treasurer Wayne Swan had admitted that a federal budget surplus was no longer achievable.
"This announcement should not surprise any rational-thinking analyst, merely confirming that this increasingly political commitment was not prudent during these uncertain economic times," TD Securities' head of Asia Pacific research, Annette Beacher, said.
Currency strategists said the dollar should not suffer sustained losses as a result.
"While overall it is a bigger political than economic story, a somewhat less-contractionary fiscal stance should not be a headwind for the dollar," Westpac strategist Sean Callow said.
The local market shrugged off a weak lead from Wall Street on Thursday after some cracks appeared in the US fiscal cliff negotiations, but the dollar weakened slightly to US104.75¢, from US104.84¢ earlier. The currency has fallen nearly 1 per cent this week.
Meanwhile, the Bank of Japan eased monetary policy by expanding its asset-buying and lending program, topping it up by ¥10 trillion to ¥101 trillion by a unanimous vote, expanding stimulus for the third time in the past four months.
The move was widely expected in response to intensifying pressure from incoming premier Shinzo Abe to deliver bolder steps to beat deflation.
Market watchers said much of the recent rise in the ASX 200 - nearly 7 per cent since its recent low on November 16 - could be attributed to fund managers buying up stocks before the end of the year.
"A lot of fund managers have been overweight in cash heading into year's end . . . [even though] we've had positive returns on the market for the last seven months," David Liu, head of research at ATI Asset Management, said. "So the people that were waiting for a dip, and waiting to buy the dip leading into the end of the year, haven't been able to do that . . . so a lot of people are having to utilise their cash."
Financial stocks led the day's gains, with all the big banks finishing higher.
ANZ closed 16¢ higher at $24.80, Commonwealth Bank was 18¢ stronger at $61.51, Westpac added 17¢ to $25.97 and National Australia Bank finished 8¢ higher at $24.88.
In contrast, big resource stocks finished lower, with Rio Tinto down 41¢ to $65.30, BHP Billiton shed 2¢, at $37.04, and Fortescue Metals slipped 16¢ to $4.50. With AAP
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free