singapore hotel: Markets Live: Banks lead ASX higher

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March 25, 2013 – 10:51AM

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Australian shares rise as Cyprus and the European Union agree to a plan to resolve the island’s financial crisis.

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2:35pm: Blue chips are performing well today, led by the the financial sector:

BHP: +0.4%

Rio: +0.9%

ANZ: +1.2%

CBA: +1.1%

NAB: +1.1%

Westpac: +1.4%

Fortescue: +2.4%

Woolworths: -0.2%

Wesfarmers: +0.2%

Telstra: -0.2%

2:20pm:China’s yuan hit a record high today after the central bank set a firmer midpoint in response to hopes that Cyprus will avoid a banking crisis, but traders remained cautious about betting on further appreciation.

Spot yuan touched 6.2095 per US dollar in early trade, its highest level ever, and was trading at 6.2103 by mid-morning, again of 0.03 per cent over Friday’s close.

2:10pm: Among today’s federal government cabinet reshuffle, Julia Gillard appointed Gary Gray, a former adviser to the country’s largest oil and gas firm Woodside Petroleum, as resources minister.

Gray, a senior Labor party figure in the resource-rich Western Australia state, should ensure an advocate for the resources industry remains in place at a time when investment in the sector is slowing amid signs the mining boom has peaked.

1:55pm: Here’s how the rest of the region is looking:

Nikkei(Japan): +1.5%

Shanghai: -0.1%

Taiwan: +0.8%

South Korea: +1.4%

Singapore: +0.5%

New Zealand: flat

1:31pm: With more than half the trading day over, the benchmark SP/ASX200 is up 26.6 points, or 0.5 per cent, to 4993.9, while the broader All Ords is up 24.4 points, or 0.5 per cent, to 5005.2.

1:01pm: Commercial property write Carolyn Cummins writes that listed group 360 Capital Industrial Fund is in the process of raising $63.7 million via a bookbuild with a price range of 45¢ to 46¢, through Moelis Co.

It is being partly done through an institutional placement of $12.3 million and a pro-rata non-renounceable entitlement offer on the basis of one new unit for every 1.6 existing units in to raise about $51.4 million. The distribution yield is said to be about 10 per cent.

1:00pm: There’s live video of the Eurogroup press conference on Cyprus available here:

12:21pm: The chairman of China’s Hanlong Mining, which is bidding for Australia’s Sundance Resources, is under police investigation for harbouring his brother before the latter’s arrest on suspicion of murder, local media reported on Saturday.

Liu Han was detained this week along with family members, according to local media reports. The official Xinhua news agency, quoting police sources, said on Saturday he was being investigated for possibly shielding evidence, among other “serious” criminal offences.

12:10pm:Hong Kong shares could start the week higher, with Chinese retailers in focus as sector bellwethers such as Belle, GOME and Li Ning post their 2012 results.

Li Ning is expected to report a net loss of close to 1.1 billion yuan, according to Thomson Reuters SmartEstimate, after spending as much as $288 million to buy back unwanted inventory from its distributors. Turnover is forecast to have dropped 16 percent last year to around 7.5 billion yuan.

Other notable corporate earnings expected on Monday include Agile Property, China Longyuan Power, Datang International Power, Henderson Land and PICC Group.

Combined profits of China’s state-owned firms rose 9.7 per cent in the first two months of 2013 from a year earlier, data showed on Friday, a sign of gradual economic recovery as profits had fallen 5.8 percent last year from 2011.

12:02pm: BREAKING: Eurozone finance minister have approved the EU-IMF plan to resolve Cypriot banks.

12:00pm: Here’s the latest from one of the Reuters’ reporters covering the Cyprus negotiations:

Capital controls remain an open question as far as I understand. May be needed during process of bank resolution. #Cyprus

— Luke Baker (@LukeReuters) March 25, 2013

11:53am: Paint maker DuluxGroup may save twice as much as originally expected from its takeover of building products and garage door supplier Alesco.

DuluxGroup acquired Alesco in December 2012.

DuluxGroup managing director Patrick Houlihan said that after three months of owning Alesco, DuluxGroup was well advanced in identifying cost savings and had undertaken strategic reviews of each of Alesco’s businesses.

‘‘To date, we’ve identified cost synergies of $9 million, ahead of the original estimate of $5 million,’’ Mr Houlihan said in a statement on Monday.

Dulux shares are down 0.7 per cent to $4.49.

11:42am: Here’s some more from the negotiations in Brussels:

The key issues in dispute were how Cyprus would raise 5.8 billion euros from its banking sector towards its own financial rescue, and how to restructure the outsized banks.

The speaker of the Cypriot parliament, Yiannakis Omirou, told reporters in Nicosia a bailout deal was “taking shape”.

The EU’s economic affairs chief Olli Rehn said earlier there were no good options but “only hard choices left” for the latest casualty of the eurozone crisis.

With banks closed for the last week, the Central Bank of Cyprus imposed a 100-euros per day limit on withdrawals from cash machines at the two biggest banks to avert a run.

French Finance Minister Pierre Moscovici rejected charges that the EU had brought Cypriots to their knees, saying it was the island’s offshore business model that had failed.

“To all those who say that we are strangling an entire people … Cyprus is a casino economy that was on the brink of bankruptcy,” he told Canal Plus television.

11:36am: About 1000 domestic pilots at Virgin Australia will receive pay rises of up to 28 per cent over the next three years after they voted in support of a new enterprise bargaining agreement, writes BusinessDay‘s Matt O’Sullivan.

The preliminary results of a ballot over the last week show that an overwhelming number of the pilots who are represented by two rival unions – VIPA and the Australian Federation of Air Pilots – have voted in favour of the new industrial agreement.

The agreement will result in pay rises of between 14 per cent and 28 per cent for the Virgin pilots over the next three years. The deal also includes clauses relating to job security and career progression.

It brings an end to almost 18 months of protracted negotiations between the pilots and Virgin, as well as a power struggle between the two unions who are competing for members.

The agreement will now be submitted to the industrial umpire, Fair Work Australia.

The pay rises are due to come into effect this week.

11:17am: With a positive outcome in Cyprus looking more likely, Aussie stocks are now pushing up towards a gain of 1 per cent. The All Ords is now 0.8 per cent higher and the benchmark ASX200 is 0.9 per cent higher. Both have pushed back over the 5000 point mark.

11:11am: Here’s another answer to the question put by ‘ASX not making sense’ asked this question: Why is the ASX in a corrective downturn when no other market in the world is?

Reader ‘Life is Good, The Real World‘ has offered a view:

ASX is up 16% over 1 yr; DAX up 13%, Dow up 11%, FTSE up 9% and Hang Seng up 7%. We are due a “breather”, plus Fwd PE based on many assumptions of lower rates and improved non-mining conditions.

I don’t agree we will retrace 38-62% but more likely range trade 4850 -5150 until next rptg season, unless major Eco change (ie rates drop 0.5%). I thing a big LNP win will also help the markets (sadly!).

And so has elliottfy:

Because the current uptrend is heavily biased towards financials and not heavily based on fundamental increases in wider company earnings.

P/E ratios are seeing widespread increase and this is not backed up by company fundamentals. Forward P/E is well above the long term average.

Such a massive increase in share price on the ASX over the past 6 months is simply unsustainable over the long term and a correction is required.

11:05am:BREAKING A bailout deal between Cyprus and its international lenders is “taking shape” and will be put to the finance ministers of the 17-nation euro zone for approval, the speaker of the Cypriot parliament said.

More as it comes to hand.

10:57am: CBA looks like it might snap a 5 day run of losses today. Its shares are 0.93 per cent higher in opening trade after failing to post a gain throughout last week. Admittedly, some of those losses were very small (0.03%), but still, investors are probably please to see the banking giant back in positive territory.

10:56am: As Bloomberg writes, the Aussie dollar is maintaining three weeks of gains, as investors speculate the nation’s banks will be untouched by concerns in Europe that bank deposits are under threat.

The Cypriot parliament rejected a tax on all bank accounts on the island last week, forcing the nation to hunt for other sources to contribute to the rescue package.

“You saw a bit of safe-haven buying last week and, given that our bank ratings are still among the highest in the world, investors are looking favorably on Australia and New Zealand,” said Tim Kelleher, ASB Institutional, a unit of Commonwealth Bank of Australia in Auckland.

“The likes of Canada and Australia, and as a result New Zealand, would probably see an influx of deposits if things worsen in Europe and that would be supportive for the currencies.”

The dollar bought $US1.0450 in early trade, from $US1.0444 last week, when it gained 0.3 per cent. It rose as high as $US1.0460 on March 22, the strongest since January 30.

10:44am: Following the comment we published earlier from Ric Spooner about the outlook for the local market today, reader ‘ASX not making sense’ asked this question:

Dear Mr Spooner Why is the ASX in a corrective downturn when no other market in the world is?

We tweeted Mr Spooner (@RicCharts) with the question. He replied:

@thomasahunter Relative valuations are a factor. Our Fwd PE got well above long term average. Also big exposure to resources + China concern

— Ric Spooner (@RicCharts) March 24, 2013

10:31am: Among the big banks:

CBA is 0.89% higher to $69.24

ANZ is 0.72% higher to $28.75

NAB is 0.75% higher to $30.86

Westpac is 1.05% higher to $30.82

10:26am: And here are the worst:

Karoon Gas -4.22%

Oceanagold -2.91%

Medusa Mining -2.02%

Mount Gibson Iron -1.9%

Beadell Resources -1.65%

10:24am: Here are the best performing companies on the ASX 200 this morning, with Leighton Holdings leading the charge:

Leighton Holdings +4.7%

Sandfire Resources +3.79%

Dulux Group +2.88%

Westfield +2.51%

TPG Telecom +2.24%

10:23am: Shares in Fortescue Metals Group and Atlas Iron have opened higher this morning, despite the iron ore majors (Rio Tinto and BHP Billiton) opening lower.

Atlas jumped 2 cents higher immediately to $1.19 while Fortescue jumped 3 cents higher to $3.84.

Our Saturday newspaper speculated that the pair might be firming up a deal to cooperate on railway lines in the Pilbara.

Rio were 34 cents lower at $57.58 in early trading, while BHP were down 7 cents to $33.35.

10:21am: Leighton shares are higher in early trade after falling by almost 7 per cent on Friday. Its shares have risen 4.4 per cent, or 89 cents, to $21.09 in early trade.

You can read more on the background to Friday’s slide and this morning’s gains here.

10:15am: And now a look at the markets in early trade. The All Ordinaries index is 14.4 points higher, or 0.3 per cent, to 4995.2, while the benchmark SP/ASX200 is 15.5 points higher, or 0.3 per cent, to 4982.8.

10:09am:So, where are we headed today?

Ric Spooner at CMC says Cyprus will likely to be the ‘‘defining event for today’s trading.’’

Markets have positioned for the likelihood that agreement will be reached on a bank restructuring package.

From a technical perspective, the SP/ASX 200 index has now clearly ended the uptrend that began last November. The index is now in a corrective downtrend. So far the index has retraced 28% of the rally from the low in mid-November to the peak in early March. Corrections like this are more likely to end up retracing 38-62% of the rally. That implies potential for the index to decline to somewhere between 4850 and 4650 before the major uptrend resumes.

And here’s Evan Lucas from IG Markets on a couple of companies to watch for early:

It will also be an interesting week for Leighton and Billabong. Leighton is going to have to show that it does have an independent board to stop a further run-on in its share price after the shock announcements from its former Chairman on Friday. While BBG is entering its own eleventh-hour situation with formal offers due by Thursday – is the offer price going to be lowered? Or will it be pulled all together? We will see.

9:50am: Also in local news, Westfield Group, the world’s biggest shopping centre operator by assets, said it sold half shares in six malls in Florida to O’Connor Capital Partners for about $US700 million ($670 million).

Westfield agreed to sell a 49.9 per cent interest in the shopping centres at book value, valuing the joint venture with the New York based real estate investment and development company at about $US1.3 billion, the Sydney-based company said in a statement to the Australian stock exchange.

Westfield will continue to manage, develop and lease the properties, it said.

9:49am: Leighton shares will be in the spotlight again today after losing 6.9 per cent.

At a hastily convened board meeting on Sunday night, Leighton installed long-serving independent director Bob Humphris as chairman, who will oversee a testy transition of the board following the shock departures of chairman Stephen Johns and directors Ian Macfarlane and Wayne Osborn on Friday.

Mr Johns cited an irreparable “breakdown in relations” and interference from an ACS-controlled Hochtief as his reasons for quitting.

You can read more on this story here.

9:42am: Turning to local news, toy distributor Funtastic has shrugged off a tight retail market to deliver a 68 per cent jump in first half profit.

The $9.3 million net profit for the six months to January 31 included a $3.3 million payout to the company as part of its distribution of Lego toys.

Funtastic announced a fully franked dividend of 0.5 cents per share, the company’s first dividend since 2006. Chief executive Stewart Downs said the first half results demonstrated that Funtastic could deliver strong profits in a challenging retail environment.

‘‘These results also highlight the fact that our Funtastic Brands business has become the growth engine of the group,’’ Mr Downs said in a statement.

9:35am: The Cyprus talks came as the central bank imposed a 100-euros per day withdrawal limit at cash machines for the island’s two biggest banks to avert a run on the lenders.

A spokesman for second largest lender Cyprus Popular Bank, which had previously limited withdrawals to 260 euros, said the new measure would remain in place until the bank reopens, scheduled for Tuesday, or until confirmation of continued emergency funding from the European Central Bank.

A government official, who declined to be named, said the restriction also applied to Bank of Cyprus. The official had earlier said the measure applied to all local banks on the island. Other banks have not imposed limits.

9:35am: As we enter the new week, the Cyprus situation remains a case of watch this space. Talks with Eurogroup partners on conditions for resurrecting a Cyprus bailout to avert a looming banking system meltdown finally got under way after a delay of four hours on Sunday, two European Union sources said.

The gathering of finance ministers from the states that share the euro currency with Cyprus came after eight hours of meetings for Cyprus President Nicos Anastasiades with bosses from the ECB, the IMF, the EU and the eurozone.

However, further eurozone governmental sources said the decision to bring in the waiting finance ministers was to bring them up to date with the state of the talks among the heads.

Asked if the development could be taken as a positive sign that a deadlock could be broken, or if leaders were passing down the more difficult details, one of these sources said to “take the second scenario.”