Markets Live: Five years since GFC lows
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Markets Live: Five years since GFC lows

Shares post modest rises on the back of gains on Wall Street, but investors tiptoe cautiously amid the backdrop of tensions in Ukraine and ahead of a crucial US jobs report.

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That’s it for Markets Live today.

You can read a wrap-up of the action on the markets here.

Thanks for reading and your comments.

Have a great weekend and see you all again Monday morning from 9.

A slew of better than expected local economic news, that came hot on the heels of the best company reporting season in three years, saw local shares move higher over the past week.

The stockmarket shrugged off Monday’s falls as fears abated that Russia’s push in to Ukraine’s Crimean peninsula could escalate into to a military crisis with the potential to disrupt global oil supply and financial markets.

The ASX 200 index lifted 57.5 points, or 1.1 per cent, over the five sessions to 5462.3, while the broader All Ordinaries Index lifted to 5477.

On Friday the benchmark index added 0.3 per cent.

In China on Friday it was confirmed that Chaori Solar Energy has defaulted on its debt. It is the first time China’s government has allowed a national company to default.

“Given a five-year bull run it is impossible to argue stocks look cheap, but the market is not necessarily too high,” MLC Investment Management senior investment consultant Brian Parker said.

“With interest rates still ridiculously low there is an overwhelming incentive for investors to poor more money into stocks and chase equity markets higher.”

Gains in the local sharemarket over the past week were led by the big four banks, while the biggest miners were lower as iron ore and coal prices fell and amid growing fears of a slow down in Chinese demand growth.

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The number of Chinese companies with debt double equity has surged since the GFC, suggesting the first onshore bond default won’t be the last. (See posts below from 3:30 onwards.)

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 per cent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates.

The yield on five-year AA- notes leapt 13 basis points in two days to 7.82 percent on March 6, the most in almost four months, after Shanghai Chaori said it won’t be able to fully pay an 89.8 million yuan ($16.2 million) coupon due today on its March 2017 bonds.

Some “zombie” companies in China that have cash shortages will fail as authorities end an overly loose monetary policy, Xia Bin, an adviser to the State Council and former central bank board member, said on Feb. 10.

“After the first one, there may be more defaults,” said Zhang Yingjie, Beijing-based deputy general manager in the research department of China Chengxin International Credit Rating, Moody’s joint venture in China.

“The domestic economy is slowing, liquidity is tightening globally and more bonds are maturing this year with greater refinancing pressure, so there may be more defaults.”

And here are the best and worst for the day.

Leighton is up 7.7 per cent today. Nobody - not even the company's management - knows why, apparently. Let's call it short covering - why not?

Carsales is feeling the love from its recently announced acquisitions as it expands its presence in Asia. (Investors may have funded their Carsales shares by selling REA Group, which was down 1.9 per cent.)

Good day for the retailers - Harvey Norman, Myer, Kathmandu, and JB Hi-Fi all feature in the top 10.

Best and worst performing stocks in the ASX 200 today.

Best and worst performing stocks in the ASX 200 today.

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One of the odder S&P index decisions was to include IT distributor Dicker Data in the All Ordinaries index.

It has a free float of only around 15 per cent as its founder, and the chairman and chief executive, David Dicker, has about half the company and a fellow director (and former partner) around 35 per cent.

But that hasn't stopped Dicker from arguing earlier this morning his company's shares are worth more than $2 a pop, well up from their present level of around $1.10, on the back of the planned $65.5 million purchase of a competitor, Express Data, which is a big buy given Dicker Data itself is only worth around $130 million.

"We believe that the company's performance and historic multiples will support this strategy and price," he told shareholders today.

Shares to be issued later in the year to part fund the acquisition will take the free float to around 25 per cent, he said.

Shares closed 3.5 per cent higher at $1.20.

The market has closed at its high for the day, as investor optimism trumped any lingering fears of further conflagaration in Ukraine - at least for now.

The ASX 200 gained 16 points, or 0.3 per cent, to 5462.3, while the All Ords added 17 points to 5477.

Shares managed to gain despite Westpac declining 1.2 per cent and NAB 0.3 per cent. CBA was up 0.6 per cent, though, and ANZ was flat.

The big miners, BHP and Rio, advanced slightly.

Energy was the best performing corner of the market, led higher by Woodside (+1.1 per cent) and Santos (+2.1 per cent).

IT was up 1.2 per cent, driven by a 7.8 per cent acceleration in Carsales' share price.

Health care and consumer staples gained 0.9 and 0.8 per cent.

Syrah Resources has ended the week on a nice note, with its shares rising by 15 per cent on the back of a preliminary deal to supply graphite to China.

Melbourne-based Syrah is developing a graphite deposit in Mozambique, and has this afternoon announced an agreement to supply up to 100,000 tonnes of graphite to Chinese company Chalieco. Chalieco is a subsidiary of aluminium giant Chinalco.

The deal is not binding, but requires the two parties to negotiate a binding deal within three months.

Syrah shares rose by 13.8 per cent to $3.30.

"The Chaori default goes to show the government will begin to let the market decide the fate of weak borrowers," said Christopher Lee, managing director of corporate ratings for Greater China at Standard & Poor's in Hong Kong.

“This test case indicates the government is addressing the moral hazard issue.”

"Incidence of defaults will likely be incremental but controlled," he said, nominating metals and mining, shipbuilding and materials as the key sectors with high default risks.

Markets were stoic ahead of the expected default. The benchmark seven-day bond repurchase rate was little changed at 2.45 percent at mid-morning, its lowest since 2012. That weighted-average rate had briefly spiked on Wednesday after Chaori announced it would default, but has since plunged.

The Shanghai Composite Index was down less than 1 per cent since Tuesday's close.

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China's insatiable appetite for iron ore has led to billions of dollars of investment in the Pilbarra region of Western Australia's leaving the manufacturing states like Victoria to eat the dust of the big dig.

But now one ambitious Victorian miner is set to become the state's first iron ore producer in more than a century – sharing in some of the spoils of the tapering mining boom.

"It's not a story that's well known," Eastern Iron's managing director Greg De Ross told Fairfax Media. "I think most people we talk to are taken by surprise at how advanced it is, and that's there's iron ore mine situated three hours from Melbourne."

The Five Mile Nowa Nowa iron ore deposit in East Gippsland was drilled by the Victorian government in the 1950s. But it has been left dormant for decades as the enormous ore bodies in the Pilbara have fed the world's demand for iron ore.

Eastern Iron, an ASX-listed company with a sharemarket value of $5 million, has the permit to mine the more than 10 million tonne deposit.

The project is expected to create around 120 jobs in the region with workers living in the towns surrounding the site.

Shares have jumped 17.1 per cent to 4.8 cents (on admittedly minimal volumes) since the article was published. And no, we don't own shares in Eastern Iron.

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