Australian Shares Recover as Chinese Helps Ease Growth Worries

   By Robb M. Stewart 
 

MELBOURNE, Australia--Australian shares rebounded strongly Tuesday after better-than-anticipated Chinese manufacturing data helped ease some concerns about sluggish growth in the world's second-biggest economy and Australia's largest trading partner.

The HSBC flash manufacturing purchasing managers index for China came in at 50.5 for September, a modest rise from 50.2 the month before but ahead of some forecasts including from ANZ Bank which had expected the gauge of nationwide manufacturing activity to slip back into contraction territory--below 50--for the first time since May.

"The Chinese release appeared to flip broader sentiment to the upside. Some of the big yield stocks, including the banks and telcos, rallied with gusto," said William Leys, a sales trader at CMC Markets in Sydney.

The S&P/ASX 200 ended the day up 52.7 points, or 1%, at 5415.7. That marked a strong rebound for the index, after falling as much as 25 points early in the day to build on Monday's 1.3% fall and briefly erasing all gains made so far in 2014.

Most sectors of the market managed to finish higher for the day, led by the banks and helped by miners that had been under pressure earlier after the spot market price of iron ore, Australia's biggest export to China, fell to a fresh five-year low of US$79.80 a metric ton.

"Today's gains are primarily in the banks, which had started to appear oversold on most metrics," Stan Shamu, a market strategist at IG in Melbourne, said. "However, given the yield trade seems to have run its course, it will be interesting to see if this recovery has legs."

Commonwealth Bank of Australia and Westpac Banking both advanced 1.1%, while National Australia Bank rose 1.2% and Australia & New Zealand Banking climbed 1.4%.

The major iron-ore producers also gained, with BHP Billiton and Rio Tinto up 0.3% and Fortescue Metals Group 2.2% stronger. Still, smaller producers including BC Iron and Atlas Iron continued to slide, ending down 1.1% and 4.7%.

Nufarm rallied more than 12% after the fertilizer company forecast a rise in underlying earnings this fiscal year following a 53% drop in net profit in the year through July thanks to restructuring charges for closing factories.

Write to Robb M. Stewart at [e-mail]