Index Surges On Media Shuffle

The Age

Saturday October 21, 2006

STEPHEN McMAHON

THE sharemarket rose about 1 per cent as rumours of further media consolidation sent investors into a buying frenzy and helped the market to its fourth week of consecutive growth.

The S&P/ASX 200 Index jumped 50.1 points to 5314.9, putting it within touching distance of the record high set in May. Sentiment was aided by US markets hitting record closing highs overnight on strong company profits.

BHP Billiton led the charge, rising 57? to $27.75 in response to Saudi Arabia's support for the OPEC production cut.

AMP Capital Investors chief economist Shane Oliver said the boom in takeover activity would result in reasonable gains over the next six to 12 months.

"The May record high is likely to be taken out fairly soon, after which the market is likely to pause for breath before pushing on towards 5500 by year end," Mr Oliver said in his weekly report.

"Shares remain good value, the global economy is on track for a soft landing which should ensure profit growth remains positive; inflation and interest rate fears are receding and the world is awash in excess savings looking for a home, with some of it likely to fuel further takeover activity."

Shares in John Fairfax Holdings, owner of The Age, rocketed 8 per cent to $5.11 in early trading, after News Corp acquired a 7.5 per cent stake. Fairfax closed at $5.05, still up 31?.

Hedge funds are reported to have been picking up stakes in Fairfax, but News Corp's off-market acquisition made up three-quarters of yesterday's 98.1 million Fairfax share volume, worth $503 million.

Takeover rumours helped Ten Network gain 16? to $3.50 or 4.8 per cent.

A jump in metal prices - including gold, which hit a two-week high of $US602.40 as the US dollar weakened - took Rio Tinto $2.22 higher to $77.27.

Optimism about Australia's medium-term economic outlook, despite next month's expected 25-basis-point interest rate rise, lifted Commonwealth Bank 46? to $46.45, ANZ 13? to $28.23, National Australia Bank 18? to $37.60 and Westpac 19? to $23.53.

The bond market is already betting rates will fall back again in the first quarter of 2007.

Coles Myer recovered 35? to $13.55 as investors backed the board's decision to reject Kohlberg Kravis Roberts' $18.2 billion bid for the retail giant.

The main drag on the market was building company Rinker, which generates close to 80 per cent of its earnings in the US. Fears of a US economic slowdown sent the stock down 38? to $14.10.

Woodside Petroleum slipped a further 55? to $38.50 on its profit downgrade.

The dollar closed at a six-week high of US76.02?, up from last week's close of US75.14?.

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© 2006 The Age

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