ASX CLOSE: Market falls on Friday profit taking

Friday 9th October 2009

Across Asia, markets were all higher this Friday, boosted by a drop in US jobless claims, rising memory-chip prices and strong commodity prices. After a week-long holiday, the Shanghai Composite is the best performer, currently up 3.8% as it plays catch-up to global markets. Elsewhere, the Kospi was 1.8% stronger while the Nikkei 225 rose 1.5% and the Hang Seng is currently up 0.2%.

In Australia, the ASX 200 was down 0.3% at 4752.9 as it succumbed to a classic bout of Friday afternoon profit taking. The energy and material sectors did most of the damage.

With 3.6% in gains up its sleeve already this week, the market tried to push higher this morning, briefly trading above the 4800 mark before retreating back to its opening levels.

The fact that the market was unable to sustain this morning's lofty heights suggests that short-term momentum maybe tiring and that the market has rallied too far, too fast. It wasn't entirely unexpected to see profit takers locking in gains this afternoon, especially given it's a Friday.

Also contributing to today's retreat was a bit of US dollar strength during the Asian session which took some of the earlier heat out of gold, oil and base metals. This, in turn saw some of our major cyclical names turn lower, giving up their earlier gains.

The healthcare sector was the worst performer today, down 2.2% with the likes of Ansell (-4.5%), CSL (-2.7%), Cochlear (-1.8%) & Sigma Pharmaceuticals (-1.9%) all detracting. Citigroup cut its target for CSL to $35.80 from $36.10 after revised FX assumptions cut FY10 and FY11 net profit forecasts by 1%. It said "CSL has lowered its U.S. donor fees and we understand that, across the industry, collection centre shifts are also being cut to address the oversupply. However, many companies have long-term source plasma contracts in place, which cannot easily be adjusted".

The energy sector was another major detractor, finishing -0.5% lower with WorleyParsons (-2.1%), Origin Energy (-2.1%), Santos (-0.7%) and Woodside Petroleum (-0.3%) leading the selloff. This was despite strong overnight leads which saw Crude Oil finish above $71 per barrel or 3% higher amid broad based commodity gains and further US dollar weakness. On the upside, Oil Search was the standout performer, rising 2.6% for the session.

Having performed strongly earlier in the day, the materials sector drifted in afternoon trade eventually finishing lower by 0.4%, taking 4 points out of the benchmark index.

BHP was down 0.8% while Rio Tinto managed to finish in positive territory by 0.3%. Alumina, Amcor and Lihir Gold were the biggest drags, all finishing lower by between 1.2% and 2.9% with Alumina fairing the worst.

The financials sector finished the day 0.1% weaker after uninspiring leads from the US where the S&P Financials sector was 0.1% higher while the KBW Banking index lost 0.3%. QBE Insurance Group and Bendigo Bank were the worst performers, falling 2.5% and 2% respectively. The big four banks were mixed with National Australia Bank and Commonwealth Bank of Australia posting gains of 0.8% and 0.4% while Westpac Banking Corporation and ANZ were down 0.7% and 0.5%.

Finishing the week strongly were Axa Asia Pacific (4.9%) and AMP (5%) after Morgan Stanley upgraded Axa to ‘overweight'. It said "Axa has been overlooked in the rally and the market may be focussing excessively on near-term earnings pressures and overlooking an attractive longer-term outlook". It also raised its price target by 22% to $5.38 from $4.40.

On the upside, the industrials sector helped pare further falls, rising 0.9% for the session. Standout performers included Asciano (3%), Qantas (2.4%), Leighton Holdings (2%) and CSR (1%).

Elsewhere in the market, in a note to clients Royal Bank of Scotland said it believes an investment and M&A cycle is likely to emerge as the market continues to recover from the financial crisis. It said "balance sheets are lowly geared, asset values are off their peaks and management will be starting to think of expansion rather than survival. The next 6-18 months offer a unique opportunity to reposition a business for future growth". It nominated a number of company's as potential targets including Tabcorp, Suncorp, Consolidated Media, Worley Parsons, Ansell, AWB, Challenger Financial and Austar as top takeover candidates.

Prices are in AUD unless otherwise stated.
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