Bloomberg News

Australian Stocks Rebound as Intervention Spark Recovery Hopes

August 09, 2011

Aug. 9 (Bloomberg) -- Australian stocks rose, reversing an earlier slide of as much as 5.5 percent, as governments in Taiwan and South Korea acted to stem stock declines, and amid speculation that the U.S. Federal Reserve will announce measures to support markets.

Billabong International Ltd., the world’s biggest surfwear maker that gets almost half its sales from the Americas, gained 1.2 percent, reversing a plunge of as much as 7.5 percent. BHP Billiton Ltd. rose 1.2 percent as the world’s No. 1 mining company erased a loss of as much 4.9 percent the followed a decline in commodity prices. National Australia Bank Ltd., the country’s biggest business lender, gained 2.9 percent after saying third-quarter profit rose 27 percent.

Australia’s S&P/ASX 200 Index, which last week had its steepest weekly retreat since 2008, rose 1.2 percent to 4,034.80 at the 4:10 p.m. close of trading in Sydney. It earlier dropped as much as 5.5 percent to 3,765.90.

“You’ve needed a circuit breaker after the freefall we’ve experienced over the last few days, and it’s likely to come in the form of government intervention,” said Jason Teh, who helps manage about $3 billion at Investors Mutual Ltd. in Sydney. “At the end of the day, stocks are companies, and companies are worth something, and it gets to a level where governments intervene and stocks begin to rally.”

Standard & Poor’s Ratings Services yesterday lowered credit ratings on debt issued by U.S.-backed mortgage lenders including Fannie Mae and Freddie Mac, citing its own Aug. 5 downgrade of the federal government’s AAA status.

Bear Market

The S&P/ASX 200 dropped 2.9 percent to 3,986.10 yesterday, completing a 20 percent retreat from an 18-month high in April 2010 to enter a bear market. The measure has wiped out more than half the gains from the beginning of the rally in March 2009 after the country’s currency soared to an all-time high against the dollar, threatening to cut exporter profits.

“The risk of a global recession makes the earnings of Australian companies vulnerable,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “If the global risks intensify, it doesn’t matter whether the market looks cheap.”

Stocks around the world have plunged in the past two weeks on concern the U.S., the world’s largest economy, may enter a recession and as Europe’s debt crisis intensified.

--Editor: John McCluskey.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net. Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net;

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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