Stocks make good start but close in the red

Resource stocks anchored the market in what turned out to be an uninspiring day for investors.

By InvestSMART · 27 Mar 2012

By InvestSMART ·
27 Mar 2012

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Resource stocks anchored the market in what turned out to be an uninspiring day for investors.

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.

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/S&P/ASX 200 index today and why should everyday investors care?

The S&P/ASX 200 shed 7.6 points (about 0.2%) to finish at 4,262.8 after giving up early gains. For everyday investors, small daily moves like this typically reflect sector rotation or news-driven selling—so it’s a reminder to focus on your investment plan rather than short-term index noise.

How did resource stocks influence the market performance?

Resource stocks anchored the market and contributed to what the article called an uninspiring trading day. When resource shares weaken, it can drag the broader ASX down because the materials sector is a significant part of the Australian market.

How could the Queensland Liberal National Party election result affect government bonds and investors?

Analysts said the LNP win and the new government’s plans to aim for a triple-A credit rating would be positive for Queensland government bonds, with spreads likely to start pulling back and trade more like Victoria or New South Wales. However, the article notes those reforms would take years to deliver and depend on global financial conditions, so bond and investor impacts may be gradual.

What happened to the major Australian bank shares and what did analysts say?

Several of the big four banks hit yearly highs: Commonwealth Bank’s shares rose to $49.98, ANZ to $22.81, Westpac to $21.43 and NAB to $24.41. Goldman Sachs’ Richard Coppleson warned that Australian banks were in a 'zombie-like' state, suggesting their stocks may not fall far or rally strongly—an observation investors can weigh when assessing bank exposure.

What did Bank of Queensland announce and what does the trading halt mean for shareholders?

Bank of Queensland said bad loans would lead to a $91 million first-half loss, and its shares—last trading at $7.30—were placed in a trading halt. A trading halt prevents buying or selling while the company finalises material information, so shareholders should wait for the company’s update before making decisions.

What did Qantas announce about Jetstar Hong Kong and how did the market react?

Qantas said it had set up a joint venture called Jetstar Hong Kong to tap into demand for low-cost airfares in China. The market reacted positively: Qantas shares rose by about 3.5% to $1.765 on the news.

Why was Aquila Resources placed in a trading halt and what should investors watch for?

Aquila Resources’ shares slipped to $4.94 before being placed in a trading halt pending an announcement about its Isaac Plains coalmine. Investors should watch for that company announcement, as it will likely explain the reason for the halt and any material implications for the business or operations at Isaac Plains.

What capital-raising plans did Gunns signal and what is its current trading status?

Gunns said it might seek to raise about $400 million via a new capital raising that could include a placement of shares to new investors. The article also notes the Gunns stock has been suspended since March 9, so any prospective capital raising will depend on the company’s plans to resolve the suspension and provide formal updates.