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Australian Shares Climb on Earnings; Benchmark Tops 5,000 Level

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Feb. 13 (Bloomberg) -- Australian shares rose, with the benchmark equities gauge breaking through 5,000 to close at the highest level since September 2008, after earnings from Commonwealth Bank of Australia and Leighton Holdings Ltd. boosted investor optimism.

Commonwealth Bank of Australia, the nation’s largest lender, climbed 2.4 percent as retail banking and wealth management boosted first-half profit by 1 percent. Leighton soared 11 percent as the country’s largest construction company returned to full-year profit after completing two major projects and reducing debt levels.

The S&P/ASX 200 Index gained 0.9 percent to 5,003.70. Volume was about 35 percent above the 30-day average. The gauge last closed above 5,000 in April 2010. New Zealand’s NZX 50 Index added 0.1 percent to 4,221.40.

“There are a lot of reasons to see why markets will keep being supported,” Simon Burge, chief investment officer at Above The Index Asset Management Pty, said in a Bloomberg Television interview in Sydney. “What the CBA result shows us today is that the banks are able to maintain margins. Coming into this reporting season we had very low expectations.”

Of the 299 companies on the MSCI Asia Pacific Index, a benchmark for Asian equities, that reported earnings this quarter and for which Bloomberg has estimates, 53 percent have exceeded profit expectations. Some 53 percent have missed sales projections. That compares with 74 percent of Standard & Poor’s 500 Index companies that topped profit forecasts during the period, while 34 percent fell short of sales estimates, data compiled by Bloomberg show.

Interest Rates

Investors have been moving into equities as the Reserve Bank of Australia undertakes the most aggressive interest-rate cuts among advanced economies, sapping the allure of bonds as yields decline. The S&P/ASX 200 has gained 7.6 percent this year, compared with a 6.5 percent advance on the S&P 500.

Commonwealth Bank rose 2.4 percent to A$67.11, a record high, as net income climbed to A$3.66 billion ($3.77 billion) in the six months ended Dec. 31 from A$3.62 billion a year earlier. Chief Executive Officer Ian Narev boosted earnings from retail customers and improved margins from the prior half as the RBA cut interest rates to match a half-century low.

Leighton surged 11 percent to A$23.14, the biggest advance in almost four years. Chief Executive Officer Hamish Tyrwhitt has focused on expanding profit margins as he cut gearing, a measure of debt levels that incorporates the value of lease commitments, to 35 percent of Leighton’s capital from 46 percent at the end of June.

Goodman Fielder Ltd. sank 4.9 percent to 68.5 Australian cents, among the biggest decliners today on the S&P/ASX 200 Index, as first-half profit missed analyst estimates.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net

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