ASX CLOSE: Market pushed higher by strong resources sector

Wednesday 23rd September 2009

Markets were mixed across Asia today, retreating from earlier gains spurred by strong overnight leads from Wall St. With Japan still on holiday, the Shanghai Composite is currently 1.6% lower while the Hang Seng is down 0.4%.The Kospi finished 0.4% weaker.

Further South in Australia, the ASX 200 has managed to buck the regional trend, up 1.5% at 4734.1 thanks largely to strong bidding across the resources sector.

The bulk of points came from those stocks leveraged to the global economic recovery and also Asia. Asian Development Bank's growth upgrades to India and China overnight and a raft of upgrades across the coal sector from various brokers have renewed buying interest.

Most brokers are positioned somewhere between bullish to outrageously bullish for end of year targets (4800 - 5300). This translates into advice for their clients to buy with those targets in mind, hence creating a lot of upside momentum.

Australia is lucky to be weighted so heavily towards financials and materials. With financials significantly outperforming of late and its materials sector benefitting from a seemingly endless plunge in the US dollar, it's no wonder Australia's share market and economy is so resurgent.

Overnight action in the US was just what the market was looking for - someone to take the first step and push prices higher again. A slew of broker and earnings upgrades provided the impetus and now there's plenty of cash to follow the advice.

It's still very much a ‘weight of money' game. The demand from cash on the sidelines will make dips shallow and short lived, as we continue to see. The recent pickup in industrial stocks shows that support is greater for cyclical natured equities compared to defensive ones.

The institutional based money with longer term time horizons seems willing to support and bid the market higher at current levels, despite short-term valuation concerns.

Looking across the market, the energy (2.4%), financials (1.7%) and materials (1.4%) sectors added the majority of today's gains.

In the energy space, the likes of Woodside Petroleum (5.1%), Oil Search (3.2%) and Origin Energy (2.6%) were all boosted by a strong move higher in oil. Crude Oil futures rose 2% to $71.63 per barrel overnight, rebounding after four straight falls as pressure on the US dollar resumed and expectations of another drop in US oil inventories boosted sentiment.

In the financials space, Macquarie Group and Bendigo bank were the standout performers, rising 5.2% and 4.5%. Elsewhere, Axa Asia Pacific was up 3.9% while the big four banks were all up between 1.1% and 2.7%, with National Australia Bank the top performer.

Once again, strong leads were the main driver with the S&P Financials sector and the KBW Bank Index both significantly higher overnight, rising by 2.2% and 2.3%, respectively. Citigroup and JPMorgan were the standout performers, up 5% and 4.3% while elsewhere, Bank of America rose 2.1% and Goldman Sachs added 1.7%.

In the materials sector, Alumina (5.2%), Lihir Gold (2.7%), Orica (2.4%) and Rio Tinto (2.3%) were the biggest risers. They all benefitted from stronger overnight base metal prices.

Prices are in AUD unless otherwise stated.
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