Australian Stocks Surge on U.S. Recovery Plan; Macquarie Gains

By Shani Raja

Sept. 19 (Bloomberg) -- Australia's benchmark stock index rose the most in eight months, led by Macquarie Group Ltd., as the U.S. moved toward a ``permanent'' plan to shore up markets, calming investor concerns about the global financial system.

Macquarie, Australia's largest investment bank, soared by a record 38 percent at the close of trading in Sydney, eclipsing yesterday's 23 percent slump. National Australia Bank Ltd., the country's biggest lender by assets, rose by the most in more than 30 years. U.S. stocks rallied the most in six years as the plan for an agency to buy bad debt, alongside steps by regulators to curb bets against banks and brokerages, eased concern the credit crisis will deepen.

``This would go a long way towards solving the problem if done in a timely fashion,'' Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney, said. ``It would cut out the cancer of bad debt, and therefore has the potential to draw a line under the recent turmoil.''

Australia's benchmark S&P/ASX 200 Index advanced 196.80 points, or 4.3 percent, to 4,804.10, the most since Jan. 25. The gain pared the index's decline this year to 24 percent.

The credit market crisis, sparked by a U.S. housing recession, has already seen Lehman Brothers Holdings Inc. file for bankruptcy, and government takeovers of American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac.

Short Selling

Financial regulators in the U.S. and the U.K., attorneys general in New York, Texas and Connecticut, and the three largest U.S. pension funds are cracking down on short sellers in the wake of the Lehman and AIG collapses. Separately, the U.S. Securities and Exchange Commission will meet to consider more rules to guarantee market liquidity, Chairman Christopher Cox said.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke have proposed moving troubled assets from the balance sheets of American financial companies into a new institution.

Macquarie leapt A$9.85, or 38 percent, to A$35.90 following its record loss. National Australia Bank climbed A$3.40, or 17 percent, to A$23, the benchmark's eighth-best performer. Australia & New Zealand Banking Group Ltd. surged A$2.26, or 15 percent, to A$17.71, the most since 1988. Babcock & Brown Ltd., an infrastructure manager, jumped 4 cents, or 4.6 percent, to 80 cents, the most in almost two weeks.

Resources stocks gained on speculation global economic conditions will start to improve. BHP Billiton Ltd. the world's biggest mining company, rose 40 cents, or 1.1 percent, to A$35.40. Rio Tinto Group climbed A$3.10, or 3.2 percent, to A$101.50.

Kagara Ltd., an Australian mining company that supplies to Korea Zinc Co., surged 55 cents, or 25 percent, to A$2.75, the index's third-best performer, after saying a new nickel intersection ``expands potential'' at the Lounge Lizard prospect.

Centro Properties Group, the shopping center owner facing a $3.4 billion debt extension deadline this month, dropped 22 percent to a record low 6 cents after selling malls and other assets in Australia and New Zealand for A$157.5 million ($126 million).

Straits Resources Ltd., an Australian copper and gold mining company, slumped 30 cents, or 8.3 percent, to A$3.30, the lowest since Feb. 2007, after saying it would not proceed with a proposed restructure given present market ``volatility.''

Fortescue Metals Group Ltd. (FMG AU), seeking to become Australia's third-largest iron ore producer, rose 50 cents, or 9.6 percent, to A$5.70, the most since Sept. 8. The company said it will use cash flow to fund a planned expansion estimated to cost less than A$2 billion ($1.6 billion), and won't need to tap debt markets.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net