Aussie stocks slip on banks and infrastructure

June 19, 2008

By Sonali Paul, Reuters

MELBOURNE - Australian shares fell 1.4 percent on Thursday, led down by banks on concerns about the continuing credit crunch and infrastructure firms sliding on worries they might cut distributions.

Selling was compounded by the end of the Australian tax year coming up on June 30, with investors crystallizing losses that can be offset against capital gains on their tax returns.

"The two big themes are tax-loss selling and financials under pressure," said Craig Young, a portfolio manager with Tyndall Asset Management.

The benchmark S&P/ASX 200 index lost 76.6 points to close at 5,366.6.

After trading around 1 percent lower for most of the day, the market dipped at the end of the session after debt-ladened Centro Properties Group and Babcock & Brown Power said they would not pay distributions for the six months to June.

Property trusts and infrastructure groups which borrowed heavily to expand in times of cheap debt now face the prospect of having to cut distributions to shore up their balance sheets, taking the shine off what used to be seen as safe investments.

"The market hasn't got an appetite for that kind of structure anymore," said Perennial Growth Management partner Adrian Mulcahy.

New Zealand's NZX 50 index <.NZ50> fell 1.5 percent or 51.5 to 3,340.1, hurt by a 4.4 percent fall in top building materials group Fletcher Building to NZ$6.54.

Banks led the Australian market down on nerves about rising funding costs. Westpac Banking Corp fell 4.2 percent to A$21.08, while Australia and New Zealand Banking Group sank 4.3 percent to A$18.68.

Westpac is in the midst of raising A$600 million with the launch of a hybrid security which will pay between 230 and 280 points above the bank-bill swap rate. A dealer said that compared with previous funds raised at about 40 points above the bank bill rate.

Centro Properties Group, battling to repay about A$2.8 billion ($2.6 billion) in debt, fell 3.6 percent to A$0.27.

But affiliate Centro Retail Trust surprised investors, saying it would pay out about 1.4 cents a share. Analysts had expected no distribution. Centro Retail shares soared as much as 20 percent and closed up 14 percent at A$0.395.

Infrastructure stocks tumbled after Transurban Group, on a trading halt for a capital raising of up to A$1 billion, said it was going to cut its distribution next year.

That knocked other road, rail and airport stocks on concerns they would have to cut payouts from next year, said two analysts who declined to be named as they were not lead analysts on the stocks.

Macquarie Infrastructure Group fell 8.2 percent. The stock is vulnerable to falling traffic on its highway 407 in Toronto as petrol prices curb driving. Rail and ports group Asciano Group fell 9.5 percent.

Babcock & Brown Power which is trying to sell off some power stations to help pay down debt, slumped 20 percent after saying it would cut its distributions in 2009 to between 13 and 18 cents. Analysts had been forecasting a payout of around 20.8 cents next year. [ID:nSYU004570]

Top phone company Telstra Corp Ltd shares fell 2.9 percent to A$4.42 in tax-loss selling.

A.B.C. Learning Centres Ltd shares fell 9.5 percent to a seven-year low close of A$0.715 after the Australian Competition and Consumer Commission sued the company for failing to sell two child-care centres it had committed to divest when it took over Peppercorn child-care group. [ID:nSYU004568]

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($1=A$1.06) (Reporting by Sonali Paul, editing by Mark Bendeich)