Resources In Late Rally

The Age

Tuesday January 12, 1999

ELI GREENBLAT

Resource and mining stocks finally made it to the winner's circle yesterday, after a weekend jump in commodity prices buoyed hopes of better times for the struggling sector.

The All Ordinaries Index fell 6.9points, despite a 1per cent rise on Wall Street on Friday, with gains across the mining sector stopping the broader market falling below 2800 points.

A late rally among some resource stocks enabled the All Ords to finish at 2849.4points, off its low for the day of 2834.2points.

Brokers said that profit-taking had pushed the market lower, with many traders happy to sell down their holdings in some of last week's top performers.

``There was some overseas profit-taking around as well, and this was a main factor in the decline," said a D&D-Tolhurst director, Mr Trevor Edwards.

He said that even though Wall Street had climbed more than 100points on Friday, the All Ords was no longer closely following movements in the US market.

``The nexus between the Dow Jones and our market has been broken for a while, with the All Ords only minutely following Wall Street and more affected by other factors."

The local market fell in line with Japanese shares yesterday, with the Nikkei Index easing 23.33 points, or 0.17 per cent, to 13,368.48 points.

Most of the good news in the market was confined to resources after gains in the values of silver, zinc, copper and platinum.

Gold was unable to join the party, with the price falling 18US cents to $US291.38 an ounce.

Nickel was the best performer, with its value jumping $US13.49 to $US197.70 a pound. The price has surged 14per cent since Wednesday, with much of the gain due to a fall in supply.

A report from the broking firm ABN-Amro said: ``Once again, the point to highlight is just how quickly metal prices can move on the back of cutback announcements in the current environment."

Nickel prices are now at levels not seen since the end of last July.

Within the sector, BHP rose 55cents to $12.15, Rio Tinto improved 35.8 cents to $19.07, WMC put on 29 cents to $4.96, North rose 15 cents to $2.52, Pasminco six cents to $1.24 and Anaconda Nickel was up five cents at $2.45.

Despite a fall among the banks and telecommunications stocks yesterday, many brokers and fund managers still rate the sector as containing the best investment opportunities for investors.

Mr Michael Wilson, the chief investment officer with the fund manager Ausbil Partners, said he saw continued volatility in the stockmarket, with only select stocks to offer strong returns.

``We favor more defensive stocks at the moment, as opposed to the cyclical sectors," he said.

``This means defensive stocks that offer growth like the banks and telcos - similar to what we saw late last year."

Mr Wilson said while some of the large retail stocks had done well over the past few months, they were not as attractive as banks and telcos.

Among the defensive stocks, Brambles dropped 40.4cents to $42.19, National Australia Bank fell 38 cents to $25.92, Foster's Brewing slipped 23.5 cents to $4.66, ANZ eased 10 cents to $10.75, and Telstra fell three cents to $7.70, but Cable & Wireless Optus gained 15 cents to $3.88.

* The All Ordinaries Index fell 6.9points, or 0.24per cent, yesterday to close at 2849.4. While profit-taking dominated activity in the industrial sector, there was a slight rally in resource stocks after a weekend lift in some commodity prices. The Diversified Resources Index performed the best of the indices, gaining 3.87per cent to 2087.3 points.