Banks Best As Market Soars
Sydney Morning Herald
Friday September 25, 1998
Banks powered an across-the-board rise for the sharemarket yesterday as international confidence saw turnover hit the best level in three weeks.
The All Ordinaries index rose 41.3 to 2614.9, its third consecutive rise, as strong offshore buying pushed up all but two of the markets indexes, Chemicals and Insurance.
The All Ords rose as much as 60 points, following the lead of international markets, before a falling futures market dragged it downward.
After rising as much as 61 points early, the Share Price Index closed up 45 at 2631.
Buyers flocked to defensive, or growth, shares, while shedding companies involved in takeover action.
"Fund managers have been bailing out of growth stocks over the past couple of week, but [Dr Alan] Greenspan [US Fed chief] has convinced them it is time to buy again," BNP Investment Management's head of equities, Mr Brian Ingham, said. "I don't think the pattern will change too much. However, below 2500 the All Ordinaries is cheap, at 2750 or higher, it is expensive."
The Banks index led the market, accounting for 31 per cent of the move in the All Ords.
Macquarie Equities' associate director, Ms Lucinda Chan, said bank stocks had been buoyed by the talk of interest rate cuts, which provided them with better lending margins and increasing borrower demand. "Interest rate cuts mean, globally, that businesses borrow more money," Ms Chan said. "The banks have had an unbelievable bounceback, NAB was trading at $20 at the start of the week, and now it's over $21.50."
NAB's 67c rise to $21.55 led the sharemarket, while Westpac added 33c to $9.78, ANZ 16c to $9.04 and CBA 19c to $20.18.
News Corporation also boomed, adding 38c to $11.28, continuing its resurgence from the lows touched during its converting preference share pricing period. News Corp's preferred stock rose 31c to $9.78, continuing its recent trend of rising at a slower rate than the ordinary stock.
Telstra pushed closer to its all time high of $4.70, rising 6c to $4.61. Brokers said much of the buying was done by shareholders who had sold out, and who wanted to return before the second tranche of instalment receipts was issued.
AAPT also leapt 16c to $2.92, in the market excitement.
Stocks involved in takeovers, particularly insurance, received harsh treatment as buyers looked for more certain returns.
HIH's 1-for-3 scrip bid for FAI prompted a negative reaction from the market, with HIH shedding 17c to $2.12.
Colonial, which recently purchased local operations of Legal & General and Prudential, dropped 4c to $4.85, while GIO, the subject of a hostile takeover bid by AMP, lost 6c to $5.06.
Wesfarmers, currently bidding for SGIO, shed 45c to $12.05, after it began trading without its 45c dividend, while SGIO also fell 1c to $1.68.
QBE was bid up in early in the day, as speculation mounted that it too would become embroiled in a takeover, but the speculation melted in the afternoon, and the insurer closed down 7c on $6.11.
Reinsurance, up 4c to $3.94, and MMI, 4c to $1.40, were also mooted as takeover targets.
AMP continued to attract buyers ahead of its increase in weighting on the All Ords on October 1, rising 13c to $21.95.
© 1998 Sydney Morning Herald
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