Banks And Insurers Lead Advance

The Age

Thursday October 12, 2006

STEPHEN McMAHON

SPECULATION that insurance giant Suncorp-Metway is planning a takeover bid for Promina Group, Australia's second-largest car and home insurer, helped lift the market 0.7 per cent.

Investors surged into the financial sector, with the major banks and insurance companies propelling the S&P/ASX 200 Index 34.2 points to a close at 5282.8 - as the market inched ever closer to its 12-month record of 5364.5 set in May.

AMP Capital Investors chief economist Shane Oliver said he believed the market would keep moving higher, and that despite the potential for a few dips he expected the S&P/ASX 200 to hit 5500 by the end of the year.

"The reality is that the market is still quite good value," he said. "The worries that have dominated since May, particularly worries about global inflation, interest rates and economic growth are now starting to recede."

The initial speculation that Suncorp were planning to launch a $7.50-a-share bid sent Promina to a 12-month high of $6.82. It finished 38?, or almost 9 per cent, higher at $6.48.

Last month, Suncorp chief John Mulcahy said the insurance market was likely to undergo a period of consolidation. Suncorp shares lost 5? to $22.30.

Rival insurers lifted, with QBE up 50? to $24.90, AMP rising 16? to $9.32 and IAG soaring 14? to $5.60.

The big banks were higher. ANZ jumped 43? to $27.78, Commonwealth was up 50? at $47.13, NAB rose 20? to $37.70 and Westpac edged 6? higher to $23.05.

Growing confidence in the US economy and signs that its interest rates would stay on hold sent the dollar down. The Aussie closed at US74.32?, from US74.53? on Tuesday.

Building companies James Hardie and Rinker, which generate close to 80 per cent of their respective earnings in the US, aided the market climb.

Rinker, the biggest supplier of cement blocks in the US, jumped 24? to $14.72. The stock has gained $2, or more than 15 per cent, in the past month. James Hardie shares put on 30? to $7.83.

BHP Billiton finished 23? higher at $26.10 while rival Rio Tinto rose 35? to $71.40 on stronger indications of long-term growth in the Chinese economy and its appetite for commodities.

Since hitting share price lows in late September, BHP has risen 8.5 per cent and Rio has recovered 9 per cent.

Retail stocks bounced after the Westpac-Melbourne Institute's Index of Consumer Sentiment rose by 3.9 per cent after two consecutive months of falls. Coles Myer rose 10? to $14.28, Woolworths was up 13? at $20.60, David Jones rose 14? to $3.67 - a 12-month closing high - and Just Group lifted 10? to $4.03.

Telstra continued to slide in the aftermath of its T3 float launch, losing 4? to $3.67 - its lowest close in two weeks.

Santos lost 10? to $10.65 on a fall in oil prices overnight.

© 2006 The Age

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