All Ords Struggles In Vain

Sydney Morning Herald

Monday May 20, 1996

By JUSTINE TRUEMAN

The Australian sharemarket put on a brave face yesterday, gaining 11 points, but gave it all back after lower commodity prices and profit taking took the shine off resource stocks.

The All Ordinaries index had rallied at the opening on positive leads from Wall Street, with better performing bank stocks lifting it before lunch.

Then local and offshore players made their presence felt in the resources sector and the All Ords finished down 0.4 of a point at 2251.2.

"It's partly offshore selling but the domestics are switching out of resources into things like banks," said Mr Stephen Hiscock of National Australia Asset Management.

He said most fund managers had been extremely overweight in resource stocks so were taking profits and favouring the industrials in the short term.

On the futures market, the June SPI contract fell 10 points to 2253, still at a slight 1.8-point premium to the physical market.

The resources sector was nervous after a fall in base metal prices, with copper plummeting more than 6 per cent on Friday night due to rising stockpiles and rumours of a large US fund selling about 100,000 tonnes of the metal. Leading resource companies suffered - BHP fell 10c to $18.89, CRA was 34c weaker to $20.62, WMC was down 15c to $9.36 and QNI lost 12c to $3.04.

After falling for the last few weeks, the price of oil (West Texas crude) was slightly higher on Friday at $US20.63 a barrel.

But the market yesterday was digesting rumours that the United Nations would allow Iraq to sell $US2 billion worth of oil even though oil prices are off their highs.

A bond rally, prompted by US movements, helped boost interest-rate-sensitive stocks such as banks and insurers.

St George jumped 16c to $7.75 while National Australia Bank rose 7c to $11.77 and ANZ added 6c to $5.96.

Also, Queensland-based building society Ipswich and West Moreton rose 4c to $2.55 on takeover rumours.

Meanwhile, there was a slight recovery in companies such as Pacific Dunlop, Mayne Nickless and Burns Philp, which have been pounded recently after profit downgrades.

Brokers said Brambles was considered a safe haven from downgrades. The stock added another 12c yesterday, to $17.84. It was around $16.60 last month.

At the smaller end of the market, the rumour mill

continued to churn.

Despite rumours of another bid for Archaean Gold by Delta at $1.20, the stock fell 1c to 89c. Lachlan Resources, a subsidiary of Plutonic, has already made a bid which was rejected by Archaean.

Pharmaceutical stocks also went crazy, reaching all-time highs. Biota jumped 50c to $5, Norvett added 10c to $2.06, Cortecs rose 10c to $7.05 and FH Faulding was up 10c to $7.50 on offshore buying.

Brokers said both US and UK buyers were re-weighting into technology stocks.

Tokyo's Nikkei Index closed 62.40 points higher at 21,979 due to arbitrage-related buying and strong market sentiment bolstered by a weaker yen.