ASX closes at all-time high

By Al Robinson

  • Share market closes at all-time high
  • RBA admits mortgages are stretching households
  • Commodity exports to rise by 4%
  • Gindalbie and Sundance merge
  • AGL to decide on AU$1.06bn Alinta purchase

The share market closed higher than ever before yesterday. The ASX 200 index closed at 6451.5. The US rate cut has pushed funds into Australian equities. Miners Rio Tinto and BHP were the big movers. The RBA has identified some Sydney suburbs as under financial stress. Higher interest rates are forcing families to allocate up to 40% of their income to mortgage payments. The Australian Bureau of Agricultural and Resource Economics yesterday forecast a 4% rise in commodity export earnings for 2007-08. Resource exports are likely to contribute significantly to this growth. Iron ore companies Gindalbie and Sundance will merge, as anticipated by the market. The deal values Sundance at around AU$1.5 billion, and the companies together at AU$2.3 billion. Meanwhile, AGL Energy must decide in the next three months whether to purchase the remaining 67% of Alinta. If it doesn’t, AGL is obligated to sell its current 33% stake to Babcock and Brown Power.

All the details below…

How’s this for volatility: All Ords hits new high
The stock market closed at a record high yesterday. The benchmark ASX 200 index finished at 6451.5 points. Analysts pointed to the US interest rate cut as the motivation for investors to buy back into shares.

Credit squeeze strikes suburbs
In a financial review, the Reserve Bank of Australia has warned that market volatility may not be over. It also identified that some households are under financial stress, due to high interest rates. Mortgages in some Sydney suburbs take up 40% of household income.

Mining and farm exports forecast to hit $145bn
The Australian Bureau of Agricultural and Resource Economics (ABARE) expects commodity export earnings to rise by 4% this financial year. ABARE also predicted 77% of the total earnings figure will come from mineral exports. The largest export growth is likely to come from iron ore and coal sales.

Iron ore developers look solid after merger
Iron ore developers Gindalbie (ASX: GBG) and Sundance (ASX: SDL) have merged, creating a AU$2.3 billion company. Sundance shareholders will receive two Gindalbie shares for each Sundance share they hold. The offer gives Gindalbie shareholders a premium of 1.5% on the current market price.

AGL outlines retailer’s sale price
Babcock and Brown Power (ASX: BBP) yesterday set an exercise price of AU$1.06 billion for the call options AGL Energy (ASX: AGK) holds over Alinta. AGL has three months to purchase 67% Alinta at this price. If the company chooses not to buy, it is obliged to sell its current 33% stake in Alinta to Babcock and Brown.

All the best,

Al Robinson


Money Morning Australia