Strong earnings from some of Australia’s largest and most widely owned companies have helped the Australian sharemarket post its best week since February.
The benchmark S&P/ASX200 surged 131.3 points, or 2.4 per cent to 5566.5 for the week, while the All Ordinaries gained 130 points, or 2.4 per cent to 5559.6.
On Friday, the ASX200 added 18 points, or 0.3 per cent, while the All Ordinaries rose 16.7 points, or 0.3 per cent.
Overall, results have been pretty good, thus far, abating some investors concerns that valuations are stretched.
“Despite some negative global economic news, with weak economic results in Europe and Japan, and to a lesser extent the US, the Australia market has put on a solid advance this week,” Perpetual head of equities Matt Sherwood said.
“That’s occurred in the wake of some of the more major companies delivering earnings results which have come in not only high, but also higher than market expectations.”
The Commonwealth Bank of Australia delivered yet another record profit of $8.68 billion, up 12 per cent, as well as increasing its dividend by 10 per cent.
Despite being sold off on the day the bank posted its earnings, CBA shares pushed 1.3 per cent higher for the week to $81.20.
Suncorp, which owns insurance brands GIO and AAMI, reported a $730 million full-year profit, beating analyst expectations. While it also delivered another special dividend, the bank warned of increased competition in the insurance space. Suncorp shares ended the week 7.3 per cent higher at $14.88.
ANZ delivered a quarterly update on Friday, reporting an 8 per cent rise in cash earnings to $5.2 billion in the first nine months of its financial year. The bank said it is on target to hit its full-year target of 4-5 per cent revenue growth. ANZ shares rose just 0.4 per cent to $32.39..
“Valuations had come up over the last couple of years and I think the key was it was time for corporate Australia to deliver on those expectations and I think overall they’ve done quite well. The results and have mostly in line or above expectations,” Mr Sherwood said.
Telstra was also among the companies giving back to shareholders. The telecommunications provider increased its dividend for the second time this year and will enact a $1 billion share buyback. Telstra shares hit a 12-year high following the result, finishing up 3.5 per cent for the week at $5.58.
Fairfax Media reported a turnaround in full-year profit to $224.4 million, following a loss in the previous year. Strong growth from the media company’s real estate website Domain helped earnings. Fairfax shares finished the week up 2.8 per cent at 90.5¢.
“I think it’s giving investors confidence that the underlying level of corporate profitability and corporate activity is there to justify at least where share prices are, whether it’s enough to catapult them further forward remains to be seen,” JBWere executive director Mike Kendall said.
However, Mr Kendall warned that investors still need to focus on individual company fundamentals as the story is different for everyone.
Early in the week, JB Hi-Fi reported a 10.3 per cent profit jump to $128.4 million, but investors were not impressed by the 5.5 per cent fall in organic sales. Shares in the electronics retailer finished the week down 8.8 per cent at $17.66.
Goodman Fielder reported a heavy loss of $405.1 million, however chief executive Chris Delaney said he was not concerned that the loss would derail a $1.34 billion takeover offer from an Asian consortium. Goodman Fielder shares ended the week 0.7 per cent higher at 63.5¢.
After being contacted by Fairfax Media on Friday, BHP Billiton released statement stating that it would prefer to push ahead with a demerger of its non-core assets, which could be unveiled as early as next week. The demerged entity could be worth close to $14 billion. For the week BHP shares shot up 3.5 per cent to $39.05, with the biggest part of the gains coming in Friday afternoon.
“They’ve probably spent the last year, year and a half, reducing costs, reducing capex, there’s talk about buybacks, demerger. It’s quite a shift that’s been occurring under new management away from grow at all costs and more about delivering shareholder value,” Dalton Nicol Reid portfolio manager Jamie Nicol.
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