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ASX rallies to its best week since March

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Australian shares rallied to their best week since March, in a broad-based advance led by consumer discretionary and utility companies.

The benchmark S&P/ASX 200 index climbed 19 points, or 0.3 per cent, to end the day at 5814. The All Ordinaries 20 points, or 0.4 per cent, higher at 5884.

For the week, the S&P/ASX 200 rose 1.8 per cent, its best week in percentage terms since the last week of March. For the week, the S&P/ASX 200 rose 1.8 per cent, its best week in percentage terms since the last week of March.  

For the week, the S&P/ASX 200 rose 1.8 per cent, its best week in percentage terms since the last week of March. The Australian dollar traded at $78.38¢.

“Australian shares had a good rebound from the bottom of the range they have been in for the last few months,” said AMP Capital’s head of investment strategy Shane Oliver on the week’s movements.

“Data was a bit more upbeat over the last week with continuing strength in business conditions, a slight rise in business confidence and an improvement in consumer confidence albeit only back to long term average levels.

“Beyond short term uncertainties we remain in a sweet spot in the investment cycle – with OK valuations particularly outside of the US, solid global growth and improving profits but still benign monetary conditions.” 

More records were broken in global equity markets this week, with Germany and the US hitting fresh highs. Oil and copper staged a bit of a recovery as well ahead of China’s Communist Party congress next week.

Iron ore prices continued to fall over the week, however, and Capital Economics said investors have belatedly woken up to the fact that the Chinese government’s directive to close large swathes of steel capacity during the winter months will depress iron ore demand.

“This is at a time of high iron ore stocks in China and rising supply from Australia and Brazil,” Economist Caroline Bain said.

The mining sector was the worst performer in percentage terms over the week, eking out a 0.1 per cent advance. That compared to a 4.4 per cent advance for the consumer discretionary sector and a 3.5 per cent rise for the utility sector.

Standouts on a company level over the week included Mantra, which jumped 20.1 per cent in the week after it accepted a $1.2 billion buyout offer from French hotels group Accor.

Nine shares rallied 14.9 per cent over the week. It intends to launch a new ad platform 9Galaxy, which the free-to-air broadcaster says can predict audiences and dynamically change campaigns based on more than 10 years worth of data.

Platinum Asset Management soared 10.1 per cent for the week. The global equities manager earlier in the week showed funds under management swelled by around $1 billion to $24.8 billion at the end of September.

Stockwatch

Bellamy’s jumped 32.per cent over the week. The infant formula maker increased its revenue forecast for the current financial year amid indications its turnaround plan is bearing fruit. The stock had been battered over December and January, shedding two-thirds of its value, after new import rules in top market China threatened the company’s profits. While there are still “challenges to navigate” as Bellamy’s implements its turnaround plan, it now expects its core business to post a revenue growth of about 15 per cent to 20 per cent in the year to June 2018, versus a prior view for a 5-10 per cent rise. Last year, Bellamy’s swung to a loss after China imposed rules requiring foreign vendors to register by 2018. Some skipped registering and dumped their product, triggering a price drop and a profit warning from the Australian firm. It has since announced a plan to help its business turn a corner based on renegotiating its supply deals and buying a China-registered formula cannery in Melbourne.

Bank of Queensland

Bank of Queensland revealed a special dividend alongside forecast-beating full year cash earnings of $378 million on Thursday. However, both Citi and Morgan Stanley downgraded their ratings after the result. Citi’s Craig Williams cut his rating on Bank of Queensland to neutral from buy citing the 10 per cent increase in the shares over the past three months. “While BoQ is relatively well positioned against a challenging industry backdrop; it has outperformed for investors this year and no longer offers much upside,” Mr WIlliams said. Meanwhile, Morgan Stanley analyst Andrei Stadnik said “we think the share price implies margin expansion beyond the first half of 2018, lower-for-longer loan losses and buyback,” and downgraded the bank to underweight. Shares lost 0.3 per cent over the week.

China imports

Iron ore imports by China surged above 100 million metric tons to a record, smashing the previous high set in 2015, as the country’s concerted push to clean up the environment stoked demand for higher-grade material from overseas while hurting local mine supplies. Purchases of iron ore expanded to 102.8 million tons in September from 93 million tons a year ago, surpassing the previous record of 96.3 million tons in December 2015, according to customs data out Friday. Over the first nine months, imports climbed 7.1 percent to 817 million tons, putting full-year purchases on course to top 1 billion tons by a comfortable margin.China has been pulling in ever-greater volumes from miners in Australia and Brazil to meet resilient demand from steelmakers, who’ve benefited from rising profit margins. As Asia’s top economy presses home a drive to clean up the air, mills are seeking out higher-grade material. At the same time, local mines have been restricted,with Macquarie Group saying Chinese iron ore output has collapsed.

Kobe Steel

Kobe Steel sank more than 40 per cent this week as its fake data scandal expanded into its core business after the company said there had been “inappropriate actions” related to its steel wire produced overseas. Kobe Steel falsified quality certification data for steel wire used to support engine drives in automobiles and to strengthen tires, the Nikkei newspaper reported Friday. The scandal is reverberating around the world as Kobe Steel customers from Toyota Motor to General Motors scramble to determine if they used the suspect materials and whether safety was compromised in their cars, trains and planes. Ford said it used aluminum from the company in its Mondeo car hoods in China though it hasn’t confirmed whether the parts were compromised. The affair has wiped $1.8 billion off the company’s market value and led to speculation it may be broken up.

Apple crown

China has become the world’s largest apple producer, state-run Xinhua news agency reported, citing information from the 10th International Apple Expo in Luochuan, Sha’anxi. China has been developing the agriculture industry in recent years, said Bi Meijia, head of the Ministry of Agriculture’s Department of Personnel and Labor. The apple industry has enjoyed steady growth with constantly improving quality, product mix and competitiveness, Bi said. Chinese apple production accounts for about 50 percent of the global market in terms of planting area and yield, and the country is moving from a major apple producer to an apple industry powerhouse, with ever-increasing demand for both direct consumption and processing, he said. China is a leading apple exporter, said Bi.

– With wires

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