Investors snapped up retail stocks such as Myer and telecommunication shares such as Telstra today after recent precipitous declines, as formerly harsh assessments of China’s economic and financial stability receded and Kevin Rudd’s second stint as prime minister hastens an election date that will remove domestic political uncertainty and bolster business confidence.
At 1353 AEST the S&P/ASX200 Index rose 82.985, or 1.8 per cent, to 4,814.70, after rising as high as 4,830.50 or 2.1 per cent. The index has gained 3.4 per cent in its last two trading days but has fallen 8 per cent from its 52-week high of 5,220.987 on May 14.
Bruce Rolph, head of equity research at Citigroup in Australia, says after last week’s global sell-off of stocks and retreat to cash “there is plenty of money out there” to buy shares.
Rolph says the global economic picture has brightened after this month’s nervousness about the world’s two biggest economies. The US economy is on “a broader, deeper rebound” than some had expected, he says. Fears that China’s financial system would melt down because of a lack of liquidity have not come to pass. Rolph says he is “sanguine” about efforts by China’s policy makers to balance growth with social concerns of an increasingly vocal population.
The return of Rudd as leader of the Australian Labor Party and prime minister has prompted some investors to look to the federal election and a new government that will probably have a decisive majority, removing the political uncertainty over the country’s leadership that has dogged Julia Gillard’s three years in power.
Department store operator Myer added 13.5 cents at 1353 AEST, or 6 per cent, to $2.395. The stock has fallen 25 per cent since its 52-week high on April 29 of $3.21. Electronics and furniture seller Harvey Norman gained 13 cents, or 5.2 per cent, to $2.62. The shares have dropped 13 per cent since their 52-week high on April 30 of $3.
Myer rival David Jones increased 11 cents, or 4.4 per cent, to $2.62. The shares have slipped 16 per cent since their April 3 52-week high of $3.11.
Telstra gained 14 cents, or 3 per cent, to $4.79. The stock is up 6.3 per cent in the last three trading days after falling from a 52-week high of $5.14 on May 22. TPG Telecom rose 12 cents, or 3.5 per cent, to $3.54. The shares are down 9.7 per cent from their 52-week high of $3.92 on May 16.
But BHP shares fell 2 cents, or 0.1 per cent, to $31.60 and Rio Tinto dropped 37 cents, or 0.7 per cent, to $51.53. The spot price for iron ore delivered to the north east Chinese city of Tianjin has fallen four consecutive days by $US6.80 a tonne or 5.8 per cent. The Tianjin iron ore spot price is now at $US113.80 a tonne.