Shares Recover After Shake-out

Sydney Morning Herald

Wednesday June 3, 1998

By MORGAN MELLISH

The sharemarket fell yesterday as concern mounted that the economic crisis in Asia and low commodity prices would hurt company earnings.

The All Ordinaries index plummeted 52 points to 2637 in the first two hours but recovered later when markets in the region held their ground. It finished at 2671, down 18 points.

Brokers said morning trading had been influenced by expectations that Monday's sell-off on Asian markets would continue. "The market opened very weak but when Japan opened up our market stabilised," said State Street Global Advisors' head of equities, Mr John Watson.

Japan's Nikkei index rose 233.4 points (1.5 per cent) to 15,554.5, regaining some of the ground it lost on Monday when it fell 349.8 points. Hong Kong's Hang Seng index was down 13.8 points to 8598.

Banks were weak with ANZ falling 16c to $11.01, NAB 19c to $21.81 and CBA 13c to $18.55. Westpac lost 35c to $10.06 after shedding a 21c dividend.

"The big banks have very attractive yields with the bond rate so low but there is some concern about their credit risk," said Legal & General's head of equities, Mr Albert Hung.

Macquarie Bank fell 35c to $14.10 as the market continued to react negatively to its 21 per cent profit rise. "On the surface, the numbers looked good but some analysts are focusing on the lower than expected tax rate which helps boost earnings," Mr Watson said.

Amcor fell 10c to $7.19 amid rumours the company would announce today the long-expected closure of its Burnie Paper Mill in Tasmania.

Comalco lost 7c to $5.73 after the price of aluminium fell. "Aluminium stockpiles are building and, given the problems in Asia, the consensus price forecasts - which are above the current spot prices - are likely to be downgraded," one fund manager said.

AGL gave up 20c to $10.49 and United Energy 7c to $1.98 after Victoria's Office of the Regulator-General recommended slashing the regulated income of Victoria's gas companies by 17 per cent.

Among other industrials, Coca-Cola Amatil dropped 18c to $11.36, Woolworths 10c to $5.37 while Boral rose 2c to $3.20. Boral has now bought back just under 10 million shares (0.9 per cent) out of the 50 million it intends to buy back. It has paid between $3.16 and $3.91 for the shares.

Mining stocks were weak after commodities fell heavily in overnight trading.

RGC lost 21c to $1.75, MIM 2c to 79c, WMC 7c to $4.91 and Rio Tinto 15c to $18.95.

BHP fell 1c to $13.81 amid rumours Mr Brian Gilbertson, chief executive of UK-based miner Billiton, was being considered as a candidate to head up the troubled group.

"The view is that if it is him it will be a positive for BHP because he's highly regarded," one dealer said.

Gold stocks were among the worst performers after the price of gold fell $US1.32 to $US288.45 an ounce following a decision by India to raise its gold import duties by 14 per cent. Newcrest fell 12c to $1.90 and Normandy 6c to $1.39.

In futures trading, the June Share Price Index fell as low as 2614 before closing at 2665, down two points. "In the morning, the SPI went to about a 20-point discount and that triggered negative arbitrage trading which knocked a lot of stocks down," one trader said.