Resource stocks lift index on China move

THE sharemarket yesterday hit its highest level since October - a nine-month high - after China's central bank said it planned to increase the supply of cash to the world's second-biggest economy.

By InvestSMART · 20 Apr 2012

By InvestSMART ·
20 Apr 2012

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THE sharemarket yesterday hit its highest level since October a nine-month high after China's central bank said it planned to increase the supply of cash to the world's second-biggest economy.

Australian resource stocks, which account for roughly a quarter of the market, reacted positively

to the news, which in turn pulled the rest of the market higher.

In the sharemarket's second day of advance in

a row, it shrugged off a negative lead from Wall Street where the Dow Jones Industrial Average had dropped 82.79 points,

0.63 per cent, to 13,032.75, largely on concerns about Europe.

The S&P/ASX 200 Index closed up 14 points, or

0.3 per cent, at 4362.7.

ATI Asset Management's head of research, David Liu, said Australian investors had enjoyed some strong days from the major miners and energy companies, with the release of positive quarterly production reports from BHP Billiton, Rio Tinto and Woodside Petroleum, as well as positive updates from Fortescue Metals.

That was helped by news that China's central bank could soon increase liquidity, an action intended to lift economic activity.

"Looking at the flow of funds over the past few days, there's definitely been a move into BHP Billiton and Rio and some of the large miners, that's probably the most significant thing," he said.

"Predominantly the consensus trade has, until recently, been underweight resources and overweight financials. That's coming back a little bit."

BHP Billiton shares climbed 40? to $35.50 while Rio Tinto rose 10? at $66.60.

Fortescue Metals gained 9? at $6.02, despite third-quarter iron ore production falling below guidance following the cyclones in Western Australia.

Shares in oil and gas producer Woodside Petroleum climbed 49? to $35.04 after it maintained its full-year production target and increased its first-quarter revenue.

Santos firmed 4? to $14.04 as higher oil and gas production and stronger prices boosted first-quarter sales revenue by 50 per cent.

Among the big banks, Commonwealth was flat at $50.78 after it announced plans to increase market share. Westpac dipped 4? to $22.02, ANZ firmed 4? at $23.30 and NAB rose 6? to 25.24.

Among other stocks, ports and rail operator Asciano rose 4? to $4.79 as it reached agreement with the Maritime Union of Australia on a new enterprise agreement for container terminal workers across Australia.

Telstra rose 3? to $3.39.

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Frequently Asked Questions about this Article…

What pushed the Australian sharemarket to a nine-month high?

The market rose after news that China's central bank planned to increase the supply of cash (liquidity), which boosted demand expectations for commodities. That helped Australian resource stocks — which make up roughly a quarter of the market — and pulled the S&P/ASX 200 higher to close up 14 points at 4,362.7, its highest level since October 14.

How did China’s planned liquidity increase affect ASX resource stocks?

Reports that China may increase liquidity lifted expectations for higher Chinese demand, prompting a flow of funds into large miners and energy companies. Major resource names reacted positively, helping drive a rally across the ASX as investors rotated back into resources from previously overweight financials.

Which major miners showed notable gains and what were their prices?

BHP Billiton rose to $35.50 and Rio Tinto climbed to $66.60. Fortescue Metals also gained to $6.02, despite third‑quarter iron ore production falling below guidance after cyclones in Western Australia.

How did oil and gas producers perform on the day and why?

Woodside Petroleum rose to $35.04 after it maintained its full-year production target and reported increased first‑quarter revenue. Santos increased to $14.04 as higher oil and gas production and stronger prices boosted its first‑quarter sales revenue by around 50%.

What happened with the big banks on the ASX that day?

The big banks were mixed: Commonwealth Bank was flat at $50.78 after announcing plans to increase market share. Westpac dipped to $22.02, ANZ firmed to $23.30, and NAB rose to $25.24.

Were there any other companies or sectors that stood out?

Yes — Asciano rose to $4.79 after reaching an agreement with the Maritime Union of Australia on a new enterprise agreement for container terminal workers, and Telstra increased to $3.39 on the same day.

What does the article say about investor positioning between resources and financials?

According to ATI Asset Management’s head of research David Liu, consensus positioning had been underweight resources and overweight financials. Recent fund flows show a rotation back into large miners like BHP and Rio, signalling a partial reversal of that stance.

Should everyday investors change their portfolios based on this single market move?

The article highlights a clear short‑term rotation into resources driven by China liquidity hopes and positive production reports, but it doesn’t recommend specific actions. Everyday investors should note the trend — increased interest in miners and energy stocks — and consider it alongside their long‑term goals and risk tolerance rather than making hasty changes after one trading day.