Miners Lead The Way

The Age

Wednesday May 5, 1999

ELI GREENBLAT

Growing optimism about a rebound in commodity prices, and early signs of an economic recovery in Asia, continued to lift resource stocks yesterday, taking the sharemarket higher.

The All Ordinaries Index ended the day 9.4 points higher, but the real action was in mining stocks as the 100 Resources Index and Diversified Resources Index rose 2.96 per cent and 2.81 per cent respectively.

The market heavyweight WMC was the star performer, putting on 5.38 per cent. WMC and the other mining leaders accounted for most of the All Ords' rise.

BHP returned to the winner's circle, rising 67.5 cents or 4 per cent. It finished at $17.55 after reaching a 52-week high of $17.68. The stock is up more than 59 per cent from its lows of $11 in December.

Brokers said most of yesterday's gains in resource stocks were driven by offshore demand, especially from funds that had been underweight in the sector.

Share prices were also supported by an overnight rise in the oil price, up 19 US cents or 1 per cent to $US18.85 a barrel.

WMC rose 35.8 cents to $7.01, Rio Tinto improved 26.1 cents to $25.95, North rose five cents to $3.32 and Pasminco firmed three cents to $1.78.

Ms Liz Addis, a resource economist at N.M. Rothschild & Sons, said the recent rally in some base-metal commodities might have run ahead of fundamentals.

``It's not all blue sky from here," Ms Addis said, ``and we now need to see the demand side stronger for commodities, because funds can only drive prices so far."

Ms Addis said base metals were oversold in 1998, and much of the gains this year had been powered by speculative investors who were short in the sector.

``With economic data in the United States not showing any signs of a slowdown, and Asia starting to look not as bad as first thought, going short in base metals is not seen as such a confident position - and many funds are now looking to go long in metals," she said.

Ms Addis said zinc and nickel prices were recording strong rebounds from their lows, but copper and aluminium would continue to suffer in the absence of production cuts, and a forecast oversupply in both metals this year.

Analysts said trading was brisk yesterday as 488.1 million shares worth $1.34 billion changed hands. Thirty-one stocks touched 52-week highs and nine stocks fell to 52-week lows.

The All Ords is now 1.9 per cent weaker than when it hit a record closing high of 3145.2 points on 27April.

Investors were unconcerned about yesterday's monthly meeting of the Reserve Bank, stockbrokers said, as the market assumed monetary policy would be left unchanged.

A senior treasury economist at ANZ, Mr David de Garis, said: ``With retail sales recording strong growth in the March quarter, housing demand holding up and business surveys revealing a more optimistic attitude, the case for an easing is thin."

The biotechnology concern Biota fell 20 cents, or 3.64 per cent, to $5.30 despite the Pharmacy Guild of Australia giving a strong endorsement to the company's anti-viral product Relenza Rotadisks.

``The launch of Relenza in Australia is a major breakthrough for the pharmaceutical industry in this country," said the national president of the guild, Mr John Bronger, ``(and) I encourage all members to support the sale of Relenza during the winter months."

The All Ordinaries Index rose yesterday for the first time in five days, firming 9.4 points - or 0.31 per cent - to close at 3083.9. Gains in the mineral and resourced sector dominated activity, as stronger commodity prices overnight triggered demand for base-metal stocks. The All Mining Index was the biggest gainer, up 3.1 per cent at 678.4.