MARKETS SPECTATOR: Breathless over Ben

Australian investors are holding their collective breath ahead of Federal Reserve chairman Ben Bernanke's testimony as bank stocks continue to rise.

Not for the first time are Australian stock investors obsessed with a Federal Reserve chairman testimony before Congress. The singular focus on what Ben Bernanke may say this week is compounded by a dearth of news from local companies or economic reports due for release in coming days.

In this environment any news is likely to be pounced on. Witness the reaction to Lend Lease’s statement yesterday that conditions for its construction business in Australia, Europe, the Middle East and Africa “have softened” this year. The stock plunged 7.5 per cent after falling as much as 8.3 per cent.

No wonder bank stocks are back in favour. Shares in ANZ, Commonwealth Bank, National Australia Bank and Westpac all rose at least 1.8 per cent yesterday as investors sought companies whose market share seems secure enough for them to continue healthy dividend payouts.

It also helps that these same bank stocks have been the subject of rapacious profit taking. It now makes them seem better value for money. Westpac shares have dropped 14 per cent to $29.47 since their 52-week high on May 1 of $34.06.

National Australia Bank’s stock has fallen 12 per cent to $29.92 from its 52-week high of $34 on April 30. Commonwealth Bank shares have slid 6.8 per cent to $68.47 from their 52-week high of $73.49 on May 20. ANZ shares have slipped 11 per cent to $28.45 from their 52-week high of $31.84 on April 30.

Amid the refocus on yield, Telstra shares yesterday ended trading unchanged at $4.65. The stock has fallen 9.5 per cent from its 52-week high on May 22 of $5.14.

Bloomberg News is reporting that New York-based private equity firm Apollo Global Management wants to buy Rio Tinto’s Canadian iron ore operations. Credit Suisse has said the business could be sold for as much as $US3.5 billion. Credit Suisse has been hired by Rio to sell all or part of its 59 per cent stake in Iron Ore Co of Canada, according to Bloomberg.

For Rio and iron ore producers such as Fortescue and BHP Billiton the iron ore price is holding up well. The spot price for iron ore imported through the north-east Chinese port of Tianjin rose a third consecutive day to $US115 a tonne, up from $US110.90 on June 12.

Rio’s shares have fallen 26 per cent to $53.65 from their 52-week high of $72.07 on February 14. Fortescue’s stock has dropped 40 per cent to $3.25 from their 52-week high of $5.39 also on February 14. BHP Billiton shares had declined 16 per cent to $32.80 from their 52-week high of $39 on February 19.  

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