Kreston market update week ending Friday 09th July 2010

Kreston ANZ

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Kreston Dormers

Kreston Dormers Financial Services Pty Ltd

The ASX 200 rebounded strongly this week up 1.9% for the week; this was led by the Financials and Energy sectors up 2.5% and 4.1% respectively. All other sectors were positive with Property and Materials both gaining 0.8%, while Utilities put on 1.8% for the week.

	Index	Change	%
All Ordinaries	4,372	81	1.9
S&P / ASX 200	4,352	85	2.0
Property Index	858	7	0.8
Utilities Index	4,232	75	1.8
Financials Index	4,128	104	-2.5
Materials Index	11,478	86	0.8
Energy Index	14,494	573	4.1

With regard to Bank Term Deposit rates remained unchanged.

Term	Rate %	Change in rate
3 months	5.60	0.10
6 months	6.00	0.00
12 months	6.11	-0.20
3 Years	6.80	-0.20
5 years	6.95	-0.05

The US S&P bounced strongly late in the week nearly putting back all the ground lost last week up 4.2%. This prompted the FTSE to have their biggest weekly gain in over 6 months, gaining 6.2%.

The Nikkei was up 3.7% and not surprisingly the Hang Seng bucked the foreign markets trend shedding -0.4% for the week.

Australian News

RBA- No rate change- still 4.5%

The RBA still views the global economy as likely to rise around a "trend" pace of growth this year, as announced this week by the Governor of the Reserve Bank of Australia, Glen Stevens. Contrary to the tales of woe about Europe, the RBA note "output in some key countries has been improving lately." The real concern comes next year "given the budgetary constraints governments face and pressure on the euro area banks." The biggest disappointment has been the US economy, "where the pace of labour market improvement is slow."

Trade Surplus Increases

In May this year, Australia posted its biggest monthly trade surplus since March 2009, confirming a significant turnaround in the trade account on the back of surging coal and iron ore prices. The seasonally adjusted balance on trade in goods and services widened to a surplus of $1.65bn in May from a surplus of $1.12bn in April, as announced by the Australian Bureau of Statistics (ABS). Imports rose 4% in May with exports surging 6%. The ABS also revised its April trade surplus to increase to $1.12b, up by almost $1bn from its original estimate.

Another 45,900 jobs were created last month, resulting in 11.1 million Australians in work. The unemployment rate is now 5.1 per cent seasonally adjusted. There's already a shortage of skills in key areas and a looming shortage of labor in general that will have the Reserve Bank's monetary policy finger itching before the year is out.

Corporate Activity

Hasting Diversified Utilities Fund (HDUF) – APA owns 16.8% of HDUF. The Foreign Investment Review Board (FIRB) has approved APA to go to 19.9% of HDUF. Given APA's position on the HDUF register, and their interest in the Epic assets inside HDUF, the question is when will APA make some type of offer for HDUF?

ING Industrial Fund (IIF) – Bids have been attracted from several interested parties for their Canadian portfolio of 450 properties ($1.1 billion). The trust is currently trading at a discount to NTA of 40%. If a sale is concluded depending upon price, we would expect gearing to be reduced and the stock to trade closer to its NTA of 60 cents. The company is reviewing its options and has appointed CB Richard Ellis as an agent in Canada.

Bilfinger Berger – The potential float has been deferred until 2011. It was deferred due to low pricing, deciding it would rather hold on to the business than sell it for a price below their expectations.

CSR – Has agreed to sell its CSR's sugar division, Sucrogen to Wilmar International Ltd for $1.75billion subject to obtaining the FIRB approval. The sale is expected to be completed by the end of 2010.

BORAL – Announced a $490m capital raising and flagged $290m in write downs as it seeks to streamline operations following a strategic review. Nearly 99 per cent of proxy votes have been cast in favour of the demerger of the Dulux paint, adhesives and garden projects group from Orica.Orica shareholders have voted to demerge Dulux. The Dulux Group is expected to begin trading on the ASX on a deferred settlement basis next Monday, pending court approval.

Overseas News

In Overseas economic news, the US service sector grew more slowly in June as business leaders fretted about the labour market's perilous state. The ISM's overall index of non-manufacturing activity eased to 53.8, falling short of the 54.9 reading economists were expecting.

Spain successfully sold 10-year government bonds to raise EUR6bn. The issue attracted bids worth EUR13bn.

The Baltic dry Index has slumped down 47% to 2216 points over the last 2 months, which reflects a decline in global trade.

Europe's banking supervisor will name the 91 banks that it will test for resilience to further market volatility and credit risks. They will also detail the key features included in the tests as banks are being individually tested but follow a common set of criteria. The results will be made public July 23. Investors found it encouraging to learn more of the details about the test, as uncertainty about it had been weighing on financial stocks in Europe as well as in the US.

US retailers' sales are growing at the fastest pace in four years; a sign consumers may be overcoming concern about unemployment and depressed home values. In the first five months of the retail fiscal year that began Jan. 31, sales expanded at an average monthly rate of 4 per cent, the biggest gain since 2006, as reported by the International Council of Shopping Centers trade group in advance of its June report.

The Agricultural Bank of China's $US22 billion ($A25.81 billion) initial public offering (IPO) is making headlines as potentially the world's biggest IPO. It also underlines the cash squeeze Chinese banks are facing after the massive lending binge in 2009 of $1.64 trillion.

In its World Economic Outlook Update released in Hong Kong on the 8/7/2010, the IMF upgraded its world growth forecast for 2010 because of ''stronger activity during the first half of the year''.''(But) downside risks have risen sharply amid renewed financial turbulence,'' it said. ''The new forecasts hinge on implementation of polices to rebuild confidence and stability, particularly in the euro area.''

Feature Section : Markets Performance over the Past Year

This week we review the Australian share market performance since the end of June 2009 and also look at each sector. The index readings and % rises are set out below.