Bargain hunting gives way to slump

BARGAIN hunters were out in force early today, boosted by a last-minute rally on Wall Street overnight but that gave way to an afternoon slump following weaker leads from Asian markets.

Rebecca Lawson

Following on from yesterday’s crash – reported as the worst in six years – resource stocks headed to the positive side of the bourse after stocks on Wall Street finished strongly in a wildly volatile session.

However a slump in Asian markets – Tokyo fell more than 1% - saw the S&P-ASX 200 slump to 5903.2 points, its lowest since March before rallying to end at 6011.8, a gain of 1.2%.

The All Ordinaries finished up 1% at 6050.3 points, a 6.3% dip from a 12-month rolling high of closing points of 6456.67.

Both BHP Billiton and Rio Tinto climbed 2.5% and 1.2% respectively to their intraday highs, before the latter ended the day below the $90 mark at $88.72 (loss of $2.48 or 2.7%) while BHP cooled to close at $36.25 – a lift of 29c or 0.8%.

While resource stocks ended the day a little weaker and mixed, there were some mid-cap plays that shone on the bourse.

Exploration success at its Golden Grove project in Western Australia and Prominent Hill in South Australia has boosted Oxiana’s confidence that both assets have considerable potential to be expanded in annual production and mine life.

The news saw Oxiana’s shares add 16c (4.7%) to $3.60, while Fortescue Metals made some of the gains from yesterday’s slump of 9.1% to firm up $1.46 (4.9%) to $31.50.

Iluka Resources made up for its loss in yesterday’s session, climbing 30c (5.2%) to $6.02 while Sally Malay Mining was a standout player today, adding 31c (9%) to $3.75, prompting Macquarie Research to upgrade its recommendation to Outperform.

Investec is warning zinc prices are set to tumble further with the metal heading for years of excess supply, and according to the banking group the view is held by many market analysts.

“Rising mine production will lead to years of substantial surpluses taking prices down to around $US1300 by mid-2009, or one-third of current levels,” Investec told Dow Jones Newswires.

World zinc output is expected to jump by nearly 1 million tonnes next year from an already forecast 11.2Mt for this year, with mine restarts and commissioning of smaller or mid-sized mines the main reason for the boost.

The news had minimal impact on zinc prices, which dipped 0.8% to $US3558.50 per tonne for spot price while three-month delivery fell 0.7% to $3520/t.

The foreboding news appeared to have little impact on Australian zinc stocks, which rallied late in the day with most ending in positive territory.

TNG topped the list, firming A8c (13.3%) to 68c, Zinc Co added 2.5c (6.5%) to 41c and Jabiru climbed 5c (4%) to $1.31.