- The market closed more than 1% higher boosted by China's rate cut news
- Miners led the surge, particularly Fortescue Metals, which rose more than 10%
- AUDUSD went up more than 100 pips breaking 0.8700 before pulling back below it
Editor's note: Currencies ($) AUD unless specified otherwise
The markets got a huge boost today led by our miners as our stock market reacted to the surprise rate cut in China, announced on Friday evening. The XJO Index closed 1.08% higher for the day at 5361.80.
Our materials sector lifted a whopping 3.32% with huge gains seen in Fortescue Metals, which rallied 10.78% to close just shy of $3 at $2.98. BHP Billiton put on $1.20 or 3.79% to $32.90 and Rio Tinto soared $1.89 or 3.35% to close at $58.30. In terms of value traded today, BHP dominated with $338,525,939 being turned over in the stock alone.
The markets were also encouraged to learn that Andrew Forrest (founder of Fortescue Metals) bought $11 million worth of shares in Fortescue when their value hit a five-year low last week. He bought 4 million Fortescue shares on November 19 and 20. The purchase takes Forrest's stake in the company from 33.2% to 33.3%. Fortescue's CEO Nev Power also increased his stake in the miner last Wednesday, forking out $275,000.
The markets were encouraged to learn Fortescue Metal's founder, Andrew Forrest, has been spending millions buying shares in the company. Photo: Thinkstock
Our banks traded higher as optimism was also felt in this sector. Westpac gained 25 cents or 0.78% to close at $32.50; Commonwealth Bank of Australia was 33 cents higher or 0.41% at $80.42; National Australia Bank rose 0.4% to $32.40 and ANZ Bank added 5 cents or 0.16% to $31.87.
All eyes are on the Medibank float which takes place tomorrow at noon. The market learnt over the weekend that the stock will be priced at $2.15. Please see research on this by Saxo Bank's Head of Equity Peter Garnry.
ALS Limited (ALQ) one of the world’s largest and most diversified testing services providers in materials, energy, industrials and life sciences, seriously outperformed the market on a day where the market outperformed itself. Up an impressive 17.86% to $5.28, the results came in light of better than expected interim results – after an initial profit warning on September 22.
Key figures to note include: revenue was up 3% to $769.1; NPAT of $67.7m for the half year, up from $64m guidance but also 33% down from the corresponding period last year; and the 10 cent interim dividend is down from 19 cents. Despite this stellar one day performance, do keep in perspective the fact that ALQ was trading at $7 the day before its September 22 profit guidance.
Minerals Resources Limited (MIN) also outperformed today and was up 6.38% on the back of China’s news of lowering the cash rate. MIN, which is a diversified mining services, contracting, processing and commodities production company and now has low leverage of only 7%, took well to the news. Now operating on a 8.93 price-to-earnings ratio and still maintaining a $1.4 billion market cap, MIN is still down 30% for the year and with no doubt hope a change is in the air.
In a day that had few losers, oddly enough it was our gaming entertainers Aristocrat, Echo Entertainment and Tabcorp that were uniformly down. All companies have done well these past two months and it is our view it is not that they have done poorly today, rather other industries showed more opportunity in recent economic announcements.
The Chinese interest-rate cuts sent commodity related currencies rallying as it indicated the Chinese government might start to be more active in stimulating its stalling economy. AUDUSD went up more than 100 pips breaking 0.8700 and then pulled back below it.
AUDUSD looks to be strong in the meantime with the next resistance at 23.6% retracement level of 0.8767, while choppy price actions are expected.
The SPI rebounded from two weeks of sell-off, led up by the miners. Since the false break made through 5300 last Friday, SPI has been trading above it. This level is expected to be the key support and SPI looks to test the next resistance level of 5400 as both Europe and US markets are looking bullish.
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