Stocks make good start but close in the red

RESOURCE stocks anchored the market yesterday in what turned out to be an uninspiring day for investors, as bond traders considered the implications of the Queensland Liberal National Party's triumph in the state election.

By InvestSMART · 27 Mar 2012

By InvestSMART ·
27 Mar 2012

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The S&P/ASX 200 Index shed 7.6 points, or 0.2 per cent, to 4262.8 after giving up early gains.

The Campbell Newman-led LNP romped home with a crushing victory, with plans to return the state's credit rating to triple-A. But analysts warned yesterday that, though the election would be positive for Queensland government bonds, with spreads likely to start pulling back and trading in line with bonds issued by Victoria or New South Wales, Mr Newman's plans would take years to fulfil, with much depending on global financial markets.

Three of the big four banks yesterday hit highs for the year NAB, Westpac and ANZ as fears about a meltdown in Europe's financial markets continued to recede.

Despite the news, Goldman Sachs' Richard Coppleson said Australia's banks were in a "zombie-like" state, with their stocks unlikely to fall too far or rally too high.

Commonwealth Bank rose 32? to $49.98 while ANZ gained 7? to $22.81, Westpac rose 6? to $21.43, and NAB gained 6? to $24.41.

Bank of Queensland said bad loans would lead to a

$91 million first-half loss, but moved to assure investors it was protected from future losses. The shares, which last traded at $7.30, were placed in a trading halt.

Qantas announced it had set up a joint-venture

low-cost carrier called Jetstar Hong Kong to take advantage of the huge market for cheap air fares in China. Its shares rose 3.5? to $1.765.

Aquila Resources shares slipped 4? to $4.94 before being placed in a trading halt pending an announcement about its Isaac Plains coalmine.

Leighton climbed 63? to $23.75 after Tasmanian Premier Lara Giddings said the state would be the first to have its national broadband network rollout completed.

Shares in Retail Food Group rose 4? to $2.75 as

the owner of food brands Brumby's Bakeries and Donut King increased its finance arrangements to allow for more acquisitions.

Gunns said it might seek to raise about $400 million via a new capital raising that could involve a placement of shares to new investors. The stock has been suspended since March 9.

The dollar was higher against the greenback ahead of potential market-moving economic data from the US and Europe. At 5pm, it was trading at US1.0448, up from US1.0387 on Friday.

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Frequently Asked Questions about this Article…

What happened to the ASX 200 today and how did the market close?

The S&P/ASX 200 gave up early gains and finished slightly down, shedding 7.6 points (about 0.2%) to close at 4,262.8, according to the report.

How did the Queensland election result affect bonds and what should investors know about bond spreads?

The Queensland Liberal National Party's victory and plans to restore a triple‑A credit rating were seen as potentially positive for Queensland government bonds. Analysts said spreads could start to pull back and trade more in line with bonds from Victoria or New South Wales, but warned any improvement would take years and depend on global financial markets.

How did Australia's big banks perform and what does it mean for bank stock investors?

Three of the big four banks — NAB, Westpac and ANZ — hit yearly highs, and Commonwealth Bank, ANZ, Westpac and NAB were reported at $49.98, $22.81, $21.43 and $24.41 respectively. However, Goldman Sachs analyst Richard Coppleson described Australian banks as being in a 'zombie-like' state, suggesting their shares may not fall dramatically or rally strongly, a note of caution for investors looking for big moves.

What did Bank of Queensland report and how did the market react?

Bank of Queensland warned that bad loans would result in a roughly $91 million first‑half loss but said it was protected from future losses. Its shares were placed in a trading halt and last traded at about $7.30, according to the article.

What is Qantas' new Jetstar Hong Kong joint venture and why does it matter for investors?

Qantas announced a joint venture to launch a low‑cost carrier called Jetstar Hong Kong to tap into demand for cheap airfares in China and the region. The market reacted positively, with Qantas shares rising about 3.5% to $1.765.

Why were Aquila Resources shares placed in a trading halt and what should shareholders watch for?

Aquila Resources slipped about 4% to $4.94 before being put in a trading halt pending an announcement about its Isaac Plains coal mine. Investors should watch for that announcement, which is likely the reason for the halt.

What drove recent moves in Leighton and Retail Food Group shares?

Leighton climbed after Tasmania's Premier said the state would be first to complete the national broadband network rollout, which investors saw as positive for the company. Retail Food Group rose after increasing its finance arrangements to enable more acquisitions; the stock was reported at $2.75.

Are there other corporate developments and currency moves investors should note from the session?

Yes — timber company Gunns said it might seek to raise about $400 million via a capital raising or placement, though its stock has been suspended since March 9. Also, the Australian dollar was stronger against the US dollar ahead of key US and European economic data, trading at about US$1.0448 (up from US$1.0387).