Australia Stocks Rise Most in 11 Years After Bank Guarantees

By Shani Raja

Oct. 13 (Bloomberg) -- Australian stocks rallied from the biggest weekly decline in 21 years after Prime Minister Kevin Rudd guaranteed bank deposits and European leaders agreed to shore up lenders, easing funding costs.

National Australia Bank Ltd., the nation's largest lender by assets, surged 7.7 percent and BHP Billiton Ltd., the world's largest mining company, gained 8.2 percent. The U.S. Federal Reserve also pledged to ``consider every option'' to restore investor confidence.

``The measures are improving sentiment,'' said Hugh Dive, who helps manage about $3 billion at Sydney-based Investors Mutual Ltd. ``It may prevent a depression, but a lot of companies are facing tough times, so you're unlikely to see them reporting stronger outlooks and earnings.''

Australia's S&P/ASX 200 Index jumped 220 points, or 5.6 percent, to 4,180.70 at the close in Sydney, its biggest gain since October 1997, after plunging 16 percent last week. The All Ordinaries Index surged 5.1 percent, rebounding from its biggest weekly decline since October 1987.


The Australian government said yesterday that it will guarantee all deposits with institutions for the next three years and all ``term wholesale funding'' by Australian banks operating in international credit markets.

European leaders agreed at the weekend to guarantee new bank refinancing, and to use taxpayer money to keep distressed lenders afloat.

Repurchase Agreement

The Reserve Bank of Australia said today that it added A$2.85 billion ($1.9 billion) to the financial system.

Funding costs eased. The premium charged to exchange floating- for fixed-rate interest payments in Australia for a period of one year had its biggest decline since 2002.

National Australia rose 7.7 percent to A$22.40, the most since Sept. 19. BHP gained 8.2 percent to A$30. Babcock & Brown Ltd., a manager of infrastructure assets, soared 27 percent to A$1.28.

Fortescue Metals Group Ltd., seeking to become Australia's third-largest iron ore producer, rallied 5.2 percent to A$2.82 after a 46 percent plunge last week. The drop in the Australian dollar in recent months has ``added significantly to the company's bottom line,'' the Perth-based company said today in a statement.

The following companies rose or fell in trading today on the Australian stock exchange.

Alumina Ltd. (AWC AU), a partner in the world's biggest producer of the material used to make aluminum, slumped 18 cents, or 7.3 percent, to A$2.30, the lowest in almost 10 years. Aluminum prices have plunged 29 percent since July and demand for the material used in beverage cans and airplanes has softened, venture partner Alcoa Inc.'s Chief Executive Officer Klaus Kleinfeld said last week.

Nexus Energy Ltd. (NXS AU), developer of the proposed $1.2 billion Crux gas liquids project in Australia, plunged 7.5 cents, or 15 percent, to 41.5 cents, the lowest in more than three years and the index's biggest loser. The company said its managing director was last week forced to sell 1.5 million Nexus shares to meet the requirements of a margin lending facility.

Origin Energy Ltd. (ORG AU) rallied 70 cents, or 5.1 percent, to A$14.50, the most since Sept. 8. Origin said it has entered a currency-hedging agreement with ConocoPhillips to minimize the risks of a $5 billion investment in a natural gas venture in Australia.

PanAust Ltd. (PNA AU), a gold and copper explorer, leapt 7.5 cents, or 25 percent, to 37.5 cents, the most since 2003. The company said Friday that a pre-feasibility study highlighted the potential to develop a low-cost gold and silver deposit in Laos.

Sundance Resources Ltd. (SDL AU), seeking to build a $3.3 billion iron ore project in Cameroon, soared 2.6 cents, or 29 percent, to 11.5 cents, the benchmark index's biggest gainer. The company said Friday that it reached a deal to boost its investment in Congo Iron, which holds two exploration permits near Sundance's Mbalam iron-ore project.

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