Australian market at year’s lowest level

Press, 27 July 1981, Page 22

Australian market at year’s lowest level

Indications last week that inflation in Australia is getting under control failed to offset disappointment with BHP’s result for the year, and the Australian sharemarket . fell to its lowest point of the year. The decline in the consumer price index, normally a signal for a surge of confidence in the sharemarket, went almost unnoticed, as sellers continued their plunder of the mining and industrial boards. The Statistics bureau reported that the CPI rose 2.2 per cent in the three months to June, compared with 2.4 per cent in the March period, bringing the rate for fiscal 1980/81 to 8.8 per cent compared with 10.7 per cent last year. But any hope that the CPI figures would act as a rallying point for the market disappeared on Friday when the market heavyweight, BHP, turned in what the market considered a disappointing profit. BHP announced a 20.8 per cent increase in net profit to $266.8M using the group’s inflation accounting procedure. The result is equal to

about S49IM on convential accounting methods. Some brokers had been predicting a conventional profit of up to SSSOM.

The BHP directors said that strikes and a deterioration in the steel division result helped offset improved production of crude oil. BHP shares finished the week 90c weaker at $13.50 despite the start-up of the group’s new Bass Strait drilling programme. The ail-ordinaries index went in the same direction, falling 28 points to a 1981 low of 640.2. The heavy fall brought the market indicator’s loss to 60 points, or 8.5 per cent, since the start of the financial year on July 1. The market’s capitalisation loss since the start of the month is now almost 54400 M. Brokers said that high interest rates continued to be the market’s ruling factor, debenture rates offered by several financial groups moved to a record 16 per cent during the week. BHP, in contrast, is currently offering investors a dividend yield of about 3 per cent (2.4 per cent in New Zealand).

■ Besides the competition offered by fixed interest securities, brokers believe the higher rates will cut heavily into profits. There is also thfe prospect that companies will turn increasingly to the equity market to fund expansion, and this could put further pressure on prices. Like the CPI figures, good news from the exploration field was also given short shrift.

Hartogen energy finished 60c down at 720 c despite announcing that the Surat Basin gas well, Royston No 1, had been declared a commercial operation after flowing at a daily rate of 239,600 cubic metres.

In other trading, WMC fell 15c to 485 c, MIM was 20c down at 375 c, CRA lost 20c to 395 c, Bougainville shed 8c to 148 c, Pancontinental dropped 56c to 570 c, Peko was 80c weaker at 670 c, Woodside retreated 14c to 166 c, CSR slid 28c to 560 c, TNT was 8c off at 250 c, the Bank of NSW slipped 2c to 303 c, and the A.N.Z. Bank was 6c down at. 530 c.