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09/11/2010 5:46PM
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Date Posted: 9/11/10 13:53:02
Australia Shares End Down 0.8% On Woodside SellDown
09/11/2010 5:46PM
SYDNEY (Dow Jones)--The Australian share market hit a three-day low Tuesday amid a steep decline in Woodside Petroleum and selling of other major companies by investors buying into Royal Dutch Shell's share sale in Woodside.
The benchmark S&P/ASX 200 closed down 37.7 points, or 0.8%, at 4740.7 after hitting 4731.0. The index hit a six-month high of 4815.0 last Friday.
Volume was inflated by Shell's partial selldown of its Woodside stake. Shell sold 29.18% of its stake--10% of Woodside's issued capital--at A$42.23 a share, a discount to the share's closing price of $45.86 on Monday.
Traders said other major companies came under pressure as institutional investors raised funds to buy into the A$3.31 billion Woodside deal, which was conducted by UBS.
"The fact the market's had to come up with A$3.3 billion for Woodside, is a good enough reason for the market to be limping today," said RBS Head of Sydney sales trading, Justin Gallagher. "I think probably locals in general probably would have been a little bit underweight Woodside and used it as an opportunity to buy the stock at a discount."
In a positive sign for Woodside, traders said Shell's selldown was heavily oversubscribed.
Woodside shares closed down 6.3% at A$42.99.
Elsewhere in the sector, Oil Search fell 4.3% to A$6.64 and Santos fell 2.0% to A$13.04.
Karoon Gas fell 5.3% to A$9.14 before the final pricing of its Brazilian initial public offering Wednesday.
Other major drags included BHP Billiton, down 1.3% at A$44.57, amid speculation it could shift its attention to Woodside after Canada recently blocked its bid for Potash Corp.
Also, in materials, Equinox Minerals was down 4.9% at A$6.04 after First Quantum indicated it will sell its 16% holding in the Canadian listing of Equinox.
"This would be an ideal foothold in the company; you'd just need to buy up to 19% and then launch your takeover but if no one's buying I suspect it's because the stock is too expensive," said BBY Analyst Gavin van der Wath.
Adelaide Brighton fell 11% to A$3.26 after flagging the loss of 50% of a major supply contract with Cement Australia in Western Australia state.
Deutsche Bank downgraded Adelaide Brighton to Hold from Buy, citing contract uncertainty.
Among financials, major banks fell 0.6%-1.3% and Macquarie fell 2.2% to A$36.20.
Offshore markets continued to provide a slightly negative backdrop, with U.S. stock index futures down 0.3% and the euro down 0.5% after overnight falls on European debt jitters
European sovereign debt problems are back in focus after Irish bond yields hit record levels versus German bunds and Irish credit default swaps hit record highs.
RBS's Gallagher said European sovereign debt concerns were "almost irrelevant" to Tuesday's fall in the Australian share market. Still, he said it wouldn't take much for the S&P/ASX 200 to dip below 4700 in the short-term.
Other traders weren't expecting European debt problems to have much impact on Australia.
"I think while QE (quantitative easing) is in place and China remains strong, our market will be OK," said BBY Senior Institutional Trader Peter Copeland. "Obviously there are some capital raisings and strategic sell downs, which are adding liquidity to the market. But I don't think that's going to snowball. It doesn't seem like the level of fear of European sovereign debt issues is up to the same level of a few months ago."
Copeland said he expects the S&P/ASX 200 to trade within the 4700-5000 range before the end of the year.
Citi strategists forecast a rise in the S&P/ASX 200 to 5600 at the end of 2011, with mergers and acquisitions expected to intensify, given low corporate valuations and debt gearing ratios.
The broker said its forecast was consistent with consensus expectations for fiscal 2011 earnings per share growth of 20% and a forward price-earnings ratio of 14 times versus current levels below 13 times.
Australia's share market faces another hurdle late next week, when the QR National institutional bookbuild is expected to raise several billion dollars from investors.
-By David Rogers, Dow Jones Newswires: 61-2-8272-4693: david.rogers1@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=K%2FJnW5XN%2B29i5oXvn3Dnmg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
November 09, 2010 01:46 ET (06:46 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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