Australian budget leaks seem positive, but some pundits are sceptical: Afternoon market insights

The Australian market finished up slightly after investors paused to take a breath after the big losses of yesterday. Investors must wait for Greek party leaders to pare together a result from Sunday’s election before they can understand the risk implications. The Australian budget leaks seem to be all positive spending measures ahead of tonight’s release at 7.30pm AEST, but the Government has said it will be in surplus, meaning big cuts need to have been made somewhere.

“Share investors generally are braced for fiscal tightening and the possibility that the corporate tax rate will not be cut for larger companies,” Ric Spooner chief market analyst at CMC Markets wrote in a note.

Australia’s trade deficit widened more than estimated in March to $1.587 billion, the biggest since May 2008. Australian health care, telecommunication services, consumer discretionary, industrials sectors all rose over 0.5%.

The S&P/ASX200 was up 0.29% to 4313.60. The All Ordinaries Index was also up 0.31% to 4375.60.

The Australian dollar is weakening before the trifecta of a trade deficit, financial risk coming out of Europe and lower interest rates.

The day’s winners

Bathurst Resources (ASX: BTU) was up 5.93% to $0.625 at 2.30pm. Bathurst is developing a hard coking coal project in the Buller coalfield in the South Island of New Zealand – a region known globally for its low ash and high fluidity coking coal. The company recently won an environmental case in New Zealand’s environmental courts. Bathurst was down 9.38% yesterday.

Macmahon (ASX: MAH) rose 5.30% to $0.695 at 2.30pm. Macmahon is a construction and contract mining company with major projects throughout Australia, New Zealand, Asia, Mongolia and Africa. On May 2 the company provided an update on progress with the Tavan Tolgoi coal contract for Erdenes in Mongolia, saying Macmahon commenced site operations on January 2. Coal mining and overburden stripping is now well underway, temporary workshop facilities have been constructed and an experienced management team has been put in place.

The day’s losers

Iluka Resources (ASX: ILU) had fallen 10.53% to $14.27 by 2.40pm. Iluka is the major producer of zircon globally and largest producer of the high-grade titanium dioxide products of rutile and synthetic rutile, with operations in Australia and Virginia, USA. The company is involved in mineral sands exploration, project development, operations and marketing. The company cut its output forecast for Zircon, the mineral used to produce ceramics. The company now forecasts Zircon sales to be 400,000 tons in 2012, compared with its previous estimate of 450,000.

Intrepid Mines (ASX: IAU) was down 4.49% to $0.745 at 2.30pm. Intrepid Mines is a Canadian and Australian listed gold and silver mining and exploration company. The company has producing mines in Australia and Argentina. Intrepid has exploration properties are located in Argentina, El Salvador, Australia and Canada.

Sector movers

The strongest sector was the S&P/ASX 200 telecommunication services (Sector) which was up 1.07% to 1235.80 at 2.50pm.

The weakest sector was the All Ordinaries Gold (Sub-Industry) index which was down 0.70% to 5368.40.

Currency

One Australian dollar was buying $US1.0181 at 3pm, the lowest level in four months.

“The factors that supported the Australian dollar are peeling away,” Yoshisada Ishide, a fund manager at Daiwa SB Investments in Tokyo told Bloomberg. “Markets understand that Australia’s government can’t take stimulus measures and that it has to rely on monetary policy” to support growth.

Asia

Asian financial markets were mixed with Japan rebounding after heavy losses and property shares pulling China lower on weakening expectations of policy loosening. China’s Shanghai SE Composite fell 0.6%, weighed down for a second day of declines by property companies. South Korea’s Kospi share market Index was up 0.5%, and the Singapore Straits Times Index advanced 0.4%. The Sensex Index in India was 0.2% lower.

The South Korean won strengthened 0.2% to 1,136.40 per US dollar after German Chancellor Angela Merkel said yesterday she will receive the new socialist French President-elect Francois Hollande with “open arms” as they work together to tackle the debt crisis. The MSCI Asia Pacific Index (MXAP) added 0.2% as of 1:27pm in Tokyo. The cost of insuring Asia-Pacific bonds from default declined, according to traders of credit-default swaps.

Japan’s NIKKEI 225 was slightly up 0.66%, or 60.54 points, to 9179.68 at 3pm AEST.

Hong Kong’s Hang Seng was flat, down only 0.05% or 10.70 points to 20525.90.

The recovery in some markets may suggest global investors have priced in Europe’s debt problems after weekend elections in France and Greece or they may be waiting the result of the political parties trying to form a coalition in Athens.

Hong Kong developers are heading deep into mainland China, investing at least $1.3 billion to build malls in Chengdu, the city competing with Chongqing as the economic hub of the country’s west.

Swire Properties (1972) will open a 6.4 billion yuan ($AUS980 million) retail and office project in Chengdu in early 2014. Sun Hung Kai Properties (16), the world’s second-biggest property company, Henderson Land Development and Wharf Holdings also plan malls.

“It’s still very hard to find good shopping malls in Chengdu,” Eddie Ng, managing director for the city at property broker Jones Lang LaSalle told Bloomberg. “Luxury brands couldn’t find proper space here. The projects coming on-board in the next few years will change the retail landscape.”

Chengdu’s economy grew 15.2% in 2011 in the city of 11 million people.

But in news to sober those looking at operating in the booming one party state, Al-Jazeera said it would close its English-language office in Beijing after Chinese authorities expelled its correspondent, as the Chinese Government displays increasing sensitivity over media coverage. Chinese officials had expressed unhappiness over a documentary that aired by the broadcaster in November.

“Al Jazeera English has expressed its disappointment in the situation,” the television station said in a statement.

“The channel has even been requesting additional visas for correspondents for quite some time through the normal procedures but these have not been issued.”

The S&P/ASX200 was up 0.22% to 4310.80. The All Ordinaries Index was also up 0.24% to 4372.20.

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