Index Heads For Record Territory

Sydney Morning Herald

Friday April 24, 1998

By MORGAN MELLISH

The sharemarket surged to with- in four points of a new record yesterday when a rally in bonds and firmer commodity prices boosted buying interest in both mining and industrial stocks.

The All Ordinaries index rose throughout the trading session, finishing at 2877.8, up 21 points, its highest level for the day.

Volume was strong with 29,000 trades worth $1.06 billion changing hands. The average daily volume this year is 25,000 trades worth $919 million.

On Wall Street, the Dow Jones Industrial Average slid 8.2 points to 9184.9. Broking firm Prudential-Bache said there was concern US stocks had run too far, despite first-quarter earnings showing a positive bias.

"The Dow is up 16 per cent this year which annualises out to a 60 per cent gain which is not going to happen. So, some pause in here would not be surprising," the broking firm said.

Bank stocks were among the best industrials after 10-year bonds fell eight basis points to 5.58 per cent. National Australia Bank rose 25c to $23.35, ANZ 10c to $11.60, Westpac 6c to $11.02 and Commonwealth Bank 3c to $18.93.

"The banks didn't perform as well as could be expected considering the rally on the bond market," Westpac Investment Management head of investment management Mr Don Hamson said.

"That was possibly because of the takeover premiums built into bank stocks over the last few weeks, although it's unlikely there will be any big mergers until the Government changes its (four pillars) policy."

News Corp rose 11c to $10.94 to regain some of the 27c investors wiped off the stock the previous day when they learnt of the breakdown of chairman Mr Rupert Murdoch's marriage.

Publishing and Broadcasting rose 8c to $7.76, while Fairfax fell 14c to $2.82.

Mayne Nickless rose 34c to $8.77 amid brokers' estimates the company would get between $1 billion and $1.4 billion from its 24.9 per cent stake in Optus Communications which is likely to be floated in the next 12 months. If the firm gets $1 billion, then it's estimated the shares are worth $9 to $9.50 because it will receive $400 million of capital gains tax-free equating to a distribution of up to $1.20 a share.

Lang Corp, which has been suspended, unsuspended, suspended and then unsuspended again over the past two days, fell 18c to $1.70 as investors awaited news from the Federal Court.

"It now appears the market was far too optimistic in the first few days of the dispute," one fund manager said. "It's going to be a long, drawn-out affair."

Other industrials to gain ground included Orica up 25c to $11.63, Amcor 14c to $7.32 and Coca-Cola Amatil 36c to $12.36.

"Stocks such as Amcor, Mayne Nickless and Orica that have been underperforming for some time are beginning to come back into favour because they look cheap," said Legal & General head of equities Mr Albert Hung. "When there's a bit of positive news people tend to jump on it."

Among the miners, MIM rose 5c to $1.07, BHP 9c to $15.62, Rio Tinto 54c to $21.90, Newcrest 12c to $2.88 and Normandy 7c to $1.82.

"We've had a big bear market in gold for some time and this is a bounce back from an oversold position," one analyst said. "Gold is overcooked and we're pretty close to the short-term peak for this rally."