Australian Market Report of February 11: Disappointed by Plan for Bad Bank

Overnight Wall Street tumbled more than 4 percent as financial shares were sold off after the Treasury Department rolled out the rescue plan to buy toxic assets from banks. Investors were sharply disappointed by the lack of substantive details about how the government will deal with a mixture of public and private capital.

Yesterday the Australian market closed slightly lower. The benchmark S&P/ASX200 index was down 0.6%, or 19.9 points, at 3488.7, while the broader All Ordinaries index dropped 0.5%, or 17.2 points, to 3428.6.

Key Economic Facts and Figures

National Australia Bank's business confidence index of January slumped 12 points to a record low of negative 32 points. The result shows that the outlook for the labour market was continuing to worsen. NAB also forecasts the GDP to shrink by 0.25% with a number of negative quarters during the year.

On Wednesday the Westpac/Melbourne Institute releases Consumer Sentiment Index for February, and the housing finance data for December by Australian Bureau of Statistics is also due.

M&A News

Rio Tinto (ASX:RIO) is close to a $US20 billion deal with Chinalco of China in an effort to reduce debt. Rio and Chinalco are believed to be discussing an asset sale worth between $US11 billion and $US15 billion and raising an extra $US5 billion to $US9 billion in convertible notes to the Chinese aluminium giant.

Important Corporate News

Australian Wealth Management (ASX:AUW) has reported a first-half loss after writing down the value of some assets. The group's net loss for the six months ending December 31 was A$131.59 million, compared to a profit of A$34.88 million in the previous corresponding period.

Ansell's (ASX:ANN) first half net profit rose 27% to A$72.2 million, helped by strong sales of medical gloves, but cut its forecast for full-year earnings in the face of tough market conditions.

Commonwealth Bank of Australia (ASX:CBA) has reported a 9% rise in first half net profit to A$2.573 billion as the strong growth in its retail banking offset declines in business banking and wealth management. The Board maintained a fully franked interim dividend of A$1.13 per share.

Challenger Financial Services (ASX:CGF) is expected to report a loss exceeding A$100 million for the six months ending December 31, 2008, after confirming write-downs on its investments of about A$225 million after tax.

Beef producer Australian Agricultural Company (ASX:AAC) says drought and accounting adjustments have led to a net loss of A$38.7 million for the year ended December 31. But the company expects to return to profit in 2009 as the key earnings drivers look positive.

Compass Hotel Group (ASX:CXH) warned that it would book up to A$80 million in write-downs and impairment charges.

AWB (ASX:AWB) is expecting a good cropping season to boost earnings as the demand for agri-commodities tends to be stable in the global financial downturn.

Telstra (ASX:TLS) says in a statement that it has expanded its presence in China with the acquisition of controlling interests in two of the country's leading mobile content and online music business. Telstra has acquired a 67% interest in both China M and Sharp Point.


Related Companies

Telstra Corporation Limited.
        

Rio Tinto Limited
         

Compass Hotel Group
       

Commonwealth Bank of Australia
       

Challenger Limited
        

AWB Limited
       

Australian Wealth Management
       

Australian Agricultural Company Limited
      

Ansell Limited
        

Aluminum Corporation of China (CHINALCO)