Reuters: Hot Stocks: Australia shares firm as rate cuts eyed on slowing growth

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Australia shares firm as rate cuts eyed on slowing growth Dec 5th 2012, 06:08 MELBOURNE | Wed Dec 5, 2012 1:08am EST MELBOURNE Dec 5 (Reuters) - Australian shares rose 0.4 percent on Wednesday, winning back a good chunk of losses in the previous session, on expectations of more rate cuts after data showed the economy slowed in the third quarter. The Australian Bureau of Statistics reported gross domestic product (GDP) rose 0.5 percent in the third quarter, the slowest pace since early 2011.. The benchmark S&P/ASX 200 index rose 16.8 points to at 4,520.4, according to the latest data, after falling 0.6 percent on Tuesday. "It was a solid, if not spectacular performance, with shares grinding higher despite another indifferent showing on Wall Street and the underwhelming local GDP print," said Tim Waterer, strategist at CMC Markets. New Zealand's benchmark NZX 50 index slipped 0.2 percent to 4,007.25 points. The Reserve Bank of Australia (RBA) cut interest rates to a record-matching low of 3 percent on Tuesday and investors suspect further easing will be needed to offset a profusion of headwinds, from a falling terms of trade to a high local dollar. "A lower rate environment will ultimately help drive more allocation away from cash to equities in 2013," said UBS strategist George Boubouras. "Lower cash rates drive investors towards higher-risk assets to search for a higher return. In all cycles, lower rates drive more risk-seeking behaviour. That is what lower funding costs aim to do - drive equity and property prices higher," he wrote in a report. Top banks gained after the rate cut, with Commonwealth Bank advancing 1 percent. Ten Network Holdings Ltd requested a trading halt ahead of an announcement in relation to a proposed capital raising. "The raising will be a bitter pill for shareholders to swallow," said Cameron eacock, strategist at IG Markets. "Ten is a company bleeding cash, both from its operations and its shareholders. Due to poor programming, Ten has lost significant TV market share and as a result has seen TV ad revenues slump," he said. Iron ore miner Sundance Resources plunged 12 percent to A$0.345 after it said its takeover by Hanlong Group would be delayed to the end of January because the Chinese company has not yet obtained the necessary funding. The deal had been due to close on Jan. 8. Discovery Metals jumped 2.6 percent to A$1.61 as investors bet its Chinese suitor was likely to be successful with its A$1.70 a share, or A$824 million ($864 million), hostile offer, after the copper miner announced it had run into problems at its Boseto mine in Botswana. "I expect that there would be a few others who'd be quite happy to sell at this price, particularly when you factor in what they (Discovery) just said -- that we have to stop mining at the Boseto open cut," said Pieter Bruinstroop, an analyst at broker Octa Phillip. Coal of Africa's fell 8 percent to A$0.175 after workers at its Mooiplaats colliery in South Africa embarked on an illegal strike following the suspension of four workers. (Reporting by Miranda Maxwell; Editing by Sanjeev Miglani) Link this Share this Digg this Email Reprints

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