ASX struggles higher after Chinese shares rout ends

The ASX dove at the open after Wall Street’s wild finish but has since steadied. Photo: Brendon ThorneAustralian shares endured another volatile day of trading but ultimately ended the day higher, amid continued worries about the state of China’s economy and despite a poor Wall Street lead.

The Dow Jones fell another 1.3 per cent on Tuesday night, despite climbing 2.8 per cent higher in intraday trading. The index has fallen 10.5 per cent over the past five sessions, marking its biggest five-day fall since August 2011.

That late sell-off in US equities spilled over on to the ASX at the start of Wednesday trade, and the benchmark S&P/ASX 200 index dived 1.6 per cent in the half-hour after opening, led by the big banks, only to rebound just as strongly as bargain hunters moved in.

Investors were also buoyed by an end to the rout in Chinese shares. Although the Hangzhou Composite index was down 1.6 per cent by early afternoon trade, it was up 1.8 per cent by the time the Australian market closed, helping to finally drive the ASX into positive territory.

The ASX 200 finished 36 points, or 0.7 per cent, higher at 5172.8, while the All Ordinaries added 35 points to 5178.9.

Shares rallied “because people realise the market’s been trashed down”, Equity Trustees head of asset management Paul Kasian said. “If you compare dividend yields to the cash yield it’s bloody cheap. It’s never been as cheap as this. You have to go back to the worst days of the GFC.

“Even on a price-to-earnings basis, the market doesn’t look expensive.” Real buying interest

Wall Street’s finish overnight was “disturbing”, CMC chief markets analyst Ric Spooner said, “but we appear to have withstood the unsettlingly weak close from US markets last night. And I think that shows there’s some real buying interest in our market at the moment despite the ongoing volatility.

“People are sensing value and don’t want to miss this opportunity, even at the risk of getting in too early,” Mr Spooner said.

The reasons for the sharp bounce shortly after opening were unclear, he said.

“I’m not aware of any news event that’s triggered that, it’s just the way market tactics work. People like to see the open, they like to see how low it’s getting, get a sense of whether that selling will really continue and then you might find the bigger orders start coming into the market.”

Auscap Asset Management portfolio manager Tim Carleton described the market as “amazingly volatile” and “pretty oversold”.

“We’ve added to some positions selectively over the course of the move down in the market, but we’re not going crazy buying things,” he said.

All banks stocks were up: ANZ by 0.3 per cent to $28.07, Commonwealth Bank by 1.4 per cent to $76.13, National Australia Bank by 1 per cent to $31.39, and Westpac by 1.2 per cent to $31.28. Generous dividend 

BHP’s earnings report, released late on Tuesday, and the generous dividend in particular pushed the big miner’s shares up 2.6 per cent to $23.94, while Rio Tinto increased 0.9 per cent to $48.89. Telstra was 0.5 per cent higher to $5.86.

Sydney-based vitamins maker Blackmores became the second stock in recent times to break the century barrier, soaring 10.6 per cent to $100, after revealing on Tuesday that net profit after tax for 2014-15 had jumped 83 per cent to $46.6 million.

Among Wednesday’s earnings results, plastic packaging manufacturer Pact Group enjoyed a 17 per cent leap in net profit to $67 million, with total revenue for the 12 months to June 30 jumping 9.3 per cent to $1.25 billion. But However, shares were down 3.2 per cent to $4.25.

WorleyParsons was up 6.3 per cent to $8.13 despite warning its markets had “deteriorated” since May. The engineering group halved its final dividend and reported an annual net loss of $54.9 million because of project writedowns and dispute settlements.

Kerry Stokes-controlled Seven Group Holdings has swung to a full-year net loss of $359.1 million, after its earnings fell $621.6 million, from its $262.5 million profit a year earlier. Shares lifted 0.2 per cent to $4.67.

Listed vet and pet group Greencross was the day’s worst performer, after news it had appointed its finance chief Martin Nicholas as its new chief executive after the resignation of boss Jeffrey David. Investors were caught off guard by the announcement, with Greencross’s shares slashed 13.5 per cent to $6.08.