Todays Australian stock Update
THE Australian share market closed firmly in the black following a strong lead from Europe, with Wall Street closed overnight for a public holiday.
The benchmark S&P/ASX200 index was up 60.7 points, or 1.09 per cent, to 5619.1 while the broader All Ordinaries index had risen 54.6 points, or 0.97 per cent, to 5688.6.
On the Sydney Futures Exchange at 4.18pm AEDT, the March share price index contract was 35 points higher at 5613 on a volume of 20,800 contracts.
CommSec market analyst Juliette Saly said the solid market performance had been driven by a recovery in the banking sector and the top two miners.
"Banks and miners were what helped the European markets,” Ms Saly said.
"Rio Tinto and BHP Billiton are benefiting from news of higher commodity prices but other stocks that performed well yesterday have fallen a bit, including Fortescue Metals Group (FMG), which had a big run up when it was announced that iron ore prices were likely to spike up.”
FMG’s shares finished down 7 cents, or 0.93 per cent, at $7.45 while BHP Billiton gained 74 cents, or 1.9 per cent, to $39.70 and Rio Tinto had added $2.50, or 1.87 per cent, to $136.50.
With more than half the population either directly owning shares or indirectly through super funds, Australia has the highest number of shareholders per capita of any nation. Indeed, one of the nation’s pillars to pay for retirement is maximising super returns.
But Ann Byrne, the new chief executive of the Australian Council of Superannuation Investors, sees no conflict between members expecting a good return on investments and demanding companies look after the environment, employees and society along the way.
A well-known advocate of super funds taking an active role in forcing companies to adhere to good governance from her time as head of UniSuper, Ms Byrne this week signalled that ACSI, which represents 41 super funds that collectively manage $250 billion, would pursue environmental, social and corporate governance issues (ESG) with companies in which funds invest.
The recent sharp sell off in global share markets will have a marked adverse effect on returns from Australian superannuation funds, a research report says.
SuperRatings says 2008 has started in a sea of red ink for funds, with the average balanced investment option estimated to have lost 6.0 per cent since the beginning of January.
In the 2007 calendar year the median return for Australia’s major superannuation funds was 8.0 per cent, its lowest since 2003.
"Right now things aren’t looking great for super fund members," SuperRatings managing director Jeff Bresnahan said.
"But negative returns are expected on a balanced portfolio on average once every six years."
Australian superannuation funds last returned a negative result six years ago, when the average balanced investment option lost 5.2 per cent.
Withdrawing YOUR SUPERANNUATION
DESPERATE families are dipping into superannuation funds to fend off mortgage foreclosure and pay medical bills, groceries and utilities.
Fund trustees report the number of people raiding their nest eggs to pay living expenses has skyrocketed in the past five years.
Cash-strapped families can withdraw up to $10,000 a year if they prove financial hardship. And they can access as much super as needed to avert foreclosure, pay medical bills for life-threatening illnesses, pay for a funeral and other situations based on compassionate grounds.
But taking too much superannuation before retirement can cause greater hardship later, SuperRatings managing director Jeff Bresnahan says.
"It’s an avenue for people who genuinely could lose their house," he said. "It should be used for genuine need only or you really are just hurting yourself."
PAYING THE MORTGAGE
To stop the bank or mortgage lender repossessing the family home, super fund members can apply to the Australian Prudential Regulation Authority with a letter from their lender confirming that, if a payment is not made, the house will be repossessed.
Super can be used to treat a life-threatening illness or injury, acute or chronic pain or mental disturbance.
Any hefty medical transport costs incurred in treating these conditions can also be funded by super holdings.
The treatment must not be available through the public health system and, again, super members must apply to APRA.
MODIFYING THE HOME OR A CAR TO ACCOMMODATE A DISABILITY
Making changes to a car or home to cater for a disabled family member can be paid for with super.
A letter from a doctor must confirm the disability and the need for modifications. Invoices for the costs are needed to apply to APRA for access to super funds.
PAYING FOR PALLIATIVE CARE AND FUNERALS
APRA will approve of the release of super funds to pay the costs of palliative care, which is all care associated with the relief of pain for the super funds holder or a dying family member.
Costs related to the death, funeral, burial or cremation of a family member can be drawn from super.
Doctors’ certificates and bills are required.
GENERAL LIVING EXPENSES
Super holders struggling with living costs, including groceries, utility bills, school fees and other expenses can apply to their individual fund for up to $10,000 in a year.
They must prove severe financial hardship by showing they have received Commonwealth income support for the past 26 weeks, including drought relief and exceptional circumstances payments, but not Austudy.
Applicants must show they are unable to meet reasonable family living expenses and have only the family home as an asset that could be sold to cover costs.
One super fund manager warns: "A lot of super trustees won’t consider current bills — they need to be overdue."
Mr Bresnahan says members of a fund that won’t allow early release can roll over into a fund that does.
NEWCREST AT LOSS ( PROFITS DOWN )
Newcrest rose as much as A$1.01, or 3 percent, to A$35.23 and traded at A$34.40 at 1:17 p.m. Sydney time on the Australian Stock Exchange. The stock has gained 3.9 percent this year and has a market value of A$15.6 billion.
Profit, excluding the hedging losses, of A$207.9 million, beat some analyst estimates, including a A$191.3 million forecast from Goldman Sachs JBWere Pty and A$164.2 million from JPMorgan Chase & Co. It compared with Credit Suisse Group’s estimate of A$208 million.
“Their adjusted profit, excluding the hedge book adjustment, is in line with what we were looking for,” Hunter Hillcoat, an analyst at Austock Securities Ltd., said today by phone.
Newcrest reported a loss after tax of A$216 million on the hedge book, it said. Global gold mining companies such as Newmont Mining Corp. have been reducing gold sold in forward contracts to take advantage of prices that rose 31 percent last year.
Many producers increased forward sales, or the selling of output before its mined, when gold fell to a 20-year low in 1999, to protect against further declines in prices. Since then, the gold price has tripled, forcing mining companies to buy on the spot market to unwind, or close, the hedges.
Since September, Newcrest bought 3.4 million ounces of gold at an average A$845 an ounce to close contracts, it said today. At Feb. 15, a total of 622,302 ounces of gold forward sales contracts remain to be closed. They are expected to be shut by September, the company said today.
“It cost them a lot of money but if you consider that the gold price stays up where it is now, they should benefit from the gold price improving,” Leyland’s McCormick said.
Gold for immediate delivery rose 0.2 percent to $907.15 an ounce at 1:16 p.m. Sydney time. It has climbed 8.8 percent this year and reached a record $936.92 on Feb. 1.
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