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Australian Stocks Gain on Recovery Hopes, Takeover Speculation

Macarthur Coal Ltd.'s Coppabella Mine
A dragline bucket is operated at Macarthur Coal Ltd.'s Coppabella Mine, south west of Mackay in Queensland, released to the media on July 26, 2007. Source: Macarthur Coal Ltd. via Bloomberg News

Australian stocks rose for a second day amid signs economies around the world are improving and on speculation mergers and acquisitions will accelerate.

Macarthur Coal Ltd., the world’s biggest exporter of pulverized coal used by steelmakers, climbed 5.6 percent after Macquarie Group Ltd. said Hong Kong’s Noble Group Ltd. may be planning a bid. Gloucester Coal Ltd. jumped 28 percent after a takeover offer from Macarthur. Westfield Group, the world’s biggest shopping mall owner by market value, advanced 2 percent. Telstra Corp. gained as much as 1.5 percent after a newspaper said it appointed banks to sell shares in a Chinese subsidiary.

The S&P/ASX 200 Index rose 0.8 percent to 4,739.30 at the close of trading in Sydney, as U.S. existing home purchases increased and the U.K. economy shrank less than initially reported. About twice as many stocks advanced as declined. New Zealand’s NZX 50 Index closed 1 percent higher at 3,209.56 in Wellington.

“Recent data indicate the global economy is recovering faster than originally expected,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “It’s too early to say whether the recovery is self-sustaining, but we should know by the first quarter 2010. Merger activity has picked up and will probably remain strong next year.”

The gauge has rallied 51 percent from a five-year low on March 6 as government stimulus measures, including cash handouts and infrastructure spending, helped Australia skirt a recession. Stocks on the index trade at an estimated 16.8 times earnings compared with 9.7 times at the start of this year. The MSCI World Index of 1,656 stocks has gained 66 percent since March 6 and its shares trade at an average 17.7 times earnings.

Coal Producers

Macarthur Coal climbed 5.6 percent to A$10.25. The company bid A$656 million ($577 million) in cash for Gloucester Coal, adding two mines in Australia amid surging demand in Asia. Gloucester holders will be offered A$8 a share, Brisbane-based Macarthur said yesterday in a statement.

Noble Group, the commodity supplier backed by China’s $300 billion sovereign wealth fund, may bid for Macarthur after agreeing to a deal that will make it the largest shareholder, Macquarie Group said. Noble agreed to acquire a 23 percent stake in Macarthur, the world’s biggest exporter of pulverized coal, through the takeover of its 88 percent-owned Gloucester Coal.

Gloucester shares rose 28 percent to A$8.37. Centennial Coal Co. surged 3.5 percent to A$3.87. Separately, pulverized and thermal coal price forecasts were raised by analysts at Goldman Sachs JBWere Pty.

Pulverized coal may rise to $140 per ton in the year ending March 2011 from a previous estimate of $115 per ton, the analysts said in a note to clients. Thermal coal may rise to $85 per ton compared with earlier expectations of $80 a ton.

Home Purchases

Westfield, which gets more than a third of its revenue from the U.S., advanced 2 percent to A$12.25. James Hardie Industries NV, the top seller of home siding in the U.S., added 1 percent to A$8.30.

U.S. existing home purchases increased 7.4 percent to a 6.54 million annual rate from a revised 6.09 million pace the prior month, the National Association of Realtors said yesterday in Washington. It was the highest level since February 2007. The U.K. economy shrank 0.2 percent, less than the 0.3 percent contraction initially reported by the government.

“We’re seeing a fairly broad-based improvement in most economic measures,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “Heading into next year, most people are fairly optimistic we’ll see a continued recovery across the global economy.”

Telstra Gains

Telstra gained 0.6 percent to A$3.33 after rising by as much as 1.5 percent. The company has appointed UBS AG, JPMorgan Chase & Co., Goldman Sachs Group Inc., Merrill Lynch & Co. and Deutsche Bank AG to handle the $1 billion public listing of its Chinese real estate Web site Soufun, the Australian newspaper reported, without citing anyone. Telstra is expected to sell off its 51 percent stake in Soufun in the listing, the newspaper said.

Graincorp Ltd. jumped 7.6 percent to A$5.79. Eastern Australia’s largest grain handler named Reserve Bank of Australia board member Donald McGauchie to its board effective today.

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