The local stockmarket is nudging a six-year high after shares climbed each day of the past week, as half-year company reporting season delivered some better than expected results and delighted investors with a raft of interim dividend increases.
The benchmark S&P/ASX 200 Index rose 82.4 points over the past week, or 1.5 per cent, to 5438.7, while the broader All Ordinaries Index also rose 1.5 per cent to 5449.4. Stocks added 0.5 per cent on Friday.
The ASX 200 has rallied 4.8 per cent this month and is now ahead 1.6 per cent year-to- date, after losing 3.3 per cent in January.
Growing confidence that an extended period of record-low interest rates, a depreciation in the currency, and corporate cost discipline are delivering a more robust outlook for company earnings prompted a number of investment banks to lift their market forecasts.
Citi, one of the more bullish brokers, is now predicting the market will hit 5800 points by June 30.
National Australia Bank finished the week 1.3 per cent higher despite shedding 1.8 per cent on Friday after showing quarterly net profit rose 7 per cent from the previous corresponding quarter, but analysts were disappointed by lower margins.
Westpac Banking Corporation rose 1.7 per cent to $33.31, and ANZ Banking Group added 2.1 per cent to $31.82. But the biggest bank, Commonwealth Bank of Australia, eased 1 per cent to $75.18.
Overall, company reporting season delivered enough good news to offset the hit delivered to confidence on Wednesday by data that showed real wages, accounting for inflation, went backwards last year.
Australian Bureau of Statistics data for December showed annual wage growth in 2013 was 2.6 per cent, the weakest annual reading since records began in 1997.
Citi analysts Paul Brennan and Josh Williamson noted that the wage growth data looked even worse when public sector pay rises were excluded. “We expect sub trend nominal wage growth to persist given the environment of business cost reductions and a falling terms of trade,” the Citi analysts said.
Resources giant BHP Billiton rose 3.8 per cent over the week to $39.17, after results release on Tuesday beat expectations with a 69.4 per cent rise in interim net profit compared to the first half of last financial year. The company also continued to reduce costs and improve cash flow. Main rival Rio Tinto added 3.4 per cent to $70.23. The spot price for iron ore, landed in China, dipped to $US122.90 a tonne.
A theme of reporting season that has given some fund managers pause for thought is that very few companies that have demonstrated increased profit growth have achieved those results through top-line revenue growth. Instead corporate cost cutting, which almost always includes job losses, has continued to be a main driver of profit growth.
But Morgan Stanley Wealth Management head of strategy Malcolm Wood said the mostly positive tone of a slew of half-year company results released over the week was cause for investors to be more optimistic about the market’s outlook for 2014.
“So far, reporting season has shown impressive trends in earnings, reflecting the benefits of a lower Australian dollar, low interest rates, improved cost control, rising volumes in the resources sector and some improvement in the non-resources sectors,” Mr Wood said.
Mr Wood said the spate of companies raising interim dividends was an encouraging trend. “Rising dividends, including special dividends, indicates strong balance sheets and improving business confidence - albeit from below average levels,” he said.
Fairfax Media, publisher of the Australian Financial Review and BusinessDay, was the best-performing stock in the ASX 200, climbing 25 per cent to 90¢, after surprising with a bigger than expected half-year profit.
Online jobs advertiser Seek Ltd spiked 22.4 per cent to $16.14 on hopes the group is poised to expand in Asia after announcing a deal to acquire Singapore-based rival JobStreet. The news came as Seek posted a record half-year net profit of $87.4 million and lifted its interim dividend by 40 per cent to 14¢.
Breville Group climbed 20.1 per cent to $9.73 after showing on Thursday that strong sales of Breville and Kambrook appliances had offset the loss of a valuable distribution license with coffee machine maker Keurig. The household appliances manufacturer and distributor posted a 1.6 per cent fall in interim net profit, beating analyst expectations.
AMP Ltd added 10.6 per cent to a seven-month high of $5 after beating analysts interim profit expectations.
Energy was the worst-performing sector, up just 0.1 per cent, after Santos and Origin Energy fell after posting half-year results that missed analyst expectations. However Australia’s biggest oil producer Woodside Petroleum lifted to $39.17 after raising its interim dividend.
Buru Energy was the worst-performing stock, dumping 21.3 per cent at $1.55, after drilling results from its Ungani oil field in Western Australia released on Monday cast doubt over the project’s production targets and the potential of other prospects in the Canning Basin.
Wesfarmers, owner of Coles and Bunnings, advanced to $43.80 after showing half-year net profit rose 11.2 per cent and lifting its interim dividend.
Telstra Corporation advanced to $5.25.