DJ Australia Shares End Up 0.2%; Major Banks Rise On Benign Reforms

13-Dec-2010
SYDNEY (Dow Jones)--Australia's share market reacted positively to Friday's strength on Wall Street, hitting a fresh four-week high before profit taking trimmed gains Monday.
Banks generated most of the strength as investors were relieved by the benign nature of regulatory reforms announced by the Australian government over the weekend.
The benchmark S&P/ASX 200 closed up 11.2 points, or 0.2%, at 4757.1 after hitting 4775.7.
Last week's break above 4740.0 left minimal resistance until the Nov. 5 peak at 4815.0, a break of which could clear the way for a run toward the inverse head and shoulders target at 5025.0, according to Dow Jones Newswires technical analysis.
Share trading volumes were light as the market started to thin before year end.
However, the mood among traders remained bullish after recent gains on Wall Street.
"I think this will be a pivotal week and we could see some good upside," said IG Markets Institutional Dealer Chris Weston. "If fund managers are going to chase alpha, it's going to be this week because liquidity will dry up altogether next week."
According to Goldman Sachs, the Australian share market has risen 25 of the past 30 years in the period from mid-December to Jan. 10, with an average gain of 3.1% in that period.
Wall Street's S&P 500 rose 0.6% on Friday on the back of strong economic data.
"The Australian share market continues to track U.S. gains on improving economic data," said UBS head of sales George Kanaan. "I think markets will creep higher in the next two weeks."
Among financials, major banks rose 1.0%-1.6% after Australia's Labor government moved to empower a key regulator to prosecute collusion on price signalling on home lending rates but stopped short of offering any punitive measures that might directly harm big banks.
"There's definitely been some buying interest in major banks post the reforms, which were always likely to be more of a slap on the wrist," said RBS head of sales Justin Gallagher. "There's a level of comfort because even though this was reasonably well flagged, we've now got some comfort that the government isn't going to do anything silly."
Gallagher said major banks could rise a further 5%-10% in coming weeks.
The rise in the major banks came at the expense of the regional banks, with Bank of Queensland falling 3.5% to A$10.97 and Bendigo Bank falling 3.3% to A$9.91.
Elsewhere, resources set fresh multiweek highs despite concern about a 5.1% rise in China's consumer price index in November from a year earlier, the fastest rise in two years.
China lifted its banks' reserve requirement but left its key interest rates unchanged.
"The strength in miners is a bit surprising," said MF Global senior institutional trader Anthony Anderson. "You would think there's a rate rise to come in China."
BHP Billiton retested its Nov. 8 peak of A$45.74 before closing flat at A$45.44.
Westfield Retail Trust fell 3.3% to A$2.66 after its debut Monday following its split from Westfield Group, which fell 2.0% to A$9.60.
"Funds prefer Westfield Group without the trust," said Anderson. "They see more growth potential in Westfield Group."
-By David Rogers, Dow Jones Newswires: 61-2-8272-4693: david.rogers1@dowjones.com
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