Metals Stocks Lead The Charge

Sydney Morning Herald

Thursday October 27, 1994

By MATTHEW KIDMAN

Surging commodity prices sparked a languishing Australian sharemarket yesterday as much needed offshore funds flowed into the country in response to falling base metal stockpiles and a pick up in world economic growth.

The renewed demand for mining stocks flowed through to the rest of the market, with the All Ordinaries index rising 14.6 points to 2032.2. Aluminium, copper, zinc and oil made substantial gains overnight, driving the All Resources index 1.3 per cent higher.

Volume was swelled by the expiry of monthly options with a total of 220.2 million shares traded valued at $555.8 million.

The reaction on the futures market was similar, with the SPI gaining 17 points to close at 2013, still at a 19.2-point discount to the physical market.

Both local and offshore investors targeted the big miners, which have leverage to a range of base metals. BHP led the way, up 46c to $20.50 after touching $20.56. Australia's premier stock was boosted by rumours it was on the verge of selling its stake in the nation's leading oil stock, Woodside Petroleum.

CRA rose 32c to $18.90, Western Mining 13c to close at $8.37 and MIM 4c to$2.89. Nickel company QNI enjoyed a good day, firming 7c to $2.22 on more than 7 million shares traded.

Brokers were relieved to see the market kick higher after a lean period, but warned there was no guarantee it would maintain its momentum.

"It was a pretty good performance today, and it has a good feel about it at the moment," said Mr John Bowie Wilson from Hambros Equities. "Customers have a smile on their faces, but we don't want it to move too quickly and we might see it take a rest."

Importantly, the push from offshore has forced the hand of local institutional investors, many of whom had been hesitant to support the anticipated rise in metal prices.

"I think what we are seeing in the market is that local fund managers, who tended to be sceptical, have been pushed to put money into resources," said Bankers Trust executive vice-president Mr Olev Rahn.

Mr Rahn said the key to a sustained rise in base metal prices was whether the US recovery would last throughout the next 12 months. Even though demand for raw materials is expected to come from Europe and Japan, a falling away in US growth could limit the upside in commodity stocks.

The long-suffering industrial sector benefited from the move in the commodity-based stocks, with CSR lifting 8c to $4.46, BTR Nylex firming 3c to$2.38 on more than 12 million shares traded and Amcor rising 8c to $8.96.

ACP rose 30c to $4.20. Brokers said the rise reflected investors' relief that the proposed merger with the Nine Network had been approved. Nine rose 10c to $3.90.

Despite the gold index remaining steady, Newcrest added 21c to close at$7.21.

Meanwhile, Asian markets recorded moderate gains, with Hong Kong's Hang Seng index rising 52.14 points to 9,304.58 and Tokyo's Nikkei index closing 50.01 points higher at 19,796.36.