Australia Stocks Surge on U.S. Bailout, Rio Takeover Approval

By Shani Raja

Oct. 1 (Bloomberg) -- Australia's stocks surged, led by financial companies, on expectations U.S. lawmakers will salvage a $700 billion rescue package for banks. Rio Tinto Group rose after BHP Billiton Ltd.'s takeover bid won regulatory approval.

Rio shares had their biggest gain in almost a year after the Australian Competition and Consumer Commission gave the green light to BHP's $101 billion buyout offer. Westpac Banking Corp., taking over rival St. George Bank Ltd., surged the most in two decades as U.S. Senate leaders vowed to resume work on the bailout plan designed to unfreeze credit markets.

``The very expectation U.S. politicians might do something is proving positive for markets,'' said Troy Angus, who helps manage $3.1 billion at Paradice Investment Management in Sydney. ``If they actually did something it would help even more, although whether it's sufficient to underpin confidence in markets is yet to be determined.''

The S&P/ASX 200 Index rose 4.2 percent to 4,794.60 at the close in Sydney, the most in more than a week. A measure of materials and financial stocks on the index rallied 5.5 percent and 4.5 percent, respectively.

The Standard & Poor's 500 Index in the U.S. surged 58.35 points, or 5.3 percent, to 1,164.74, its biggest rally since July 2002, and JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. climbed more than 13 percent.

Westpac rose A$1.77, or 8.2 percent, to A$23.25, the most since May 31, 1988. Babcock & Brown Ltd., a manager of infrastructure assets, soared 31 cents, or 16 percent, to A$2.26. BHP Billiton Ltd. rose A$1.75, or 5.7 percent, to A$32.75, after its biggest slump in 21 years yesterday.

Rio jumped A$10.50, or 12 percent, to A$95, the most since Nov. 9, 2007.

``While significant concerns were raised by interested parties in Australia and overseas, the ACCC found that the proposed acquisition would not be likely to substantially lessen competition in any relevant market,'' Australia's regulator said today in a statement.

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

AWB Ltd. (AWB AU), Australia's largest wheat exporter, climbed 22 cents, or 7.9 percent, to A$3, the most since March 31. AWB said a class-action lawsuit against it in a U.S. court had been dismissed.

FKP Property Group (FKP AU), a retirement village operator, plunged 25 cents, or 6.5 percent, to A$3.60, the benchmark's second-worst performer. The company tumbled 20 percent yesterday after saying a hoped-for 10 percent growth in operating profit this fiscal year is unrealistic in the face of ``unprecedented turmoil'' in credit markets.

Harvey Norman Holdings Ltd. (HVN AU), Australia's biggest furniture and electronics retailer, slumped 6 cents, or 1.9 percent, to A$3.03, the lowest since July 16, after Morgan Stanley cut the company's price target to A$4.25 from A$4.75. Harvey Norman yesterday said profit for the two months ended Aug. 31 fell 18 percent on slowing sales growth.

Henderson Group Plc. (HGI AU), a U.K. money manager spun off from AMP Ltd., surged 26 cents, or 11 percent, to A$2.58, the most since February. The company said a majority of shareholders passed resolutions calling for changes to the corporate structure designed to improve its financial management and tax position.

Iron Road Ltd. (IRD AU), an iron-ore explorer, leapt 7.5 cents, or a record 50 percent, to 22.5 cents, after saying it's ``encouraged'' by the early results of drilling at the Warramboo site, and that the company expects iron-ore prices to rise in the coming calendar year.

Mincor Resources NL (MCR AU), Australia's fourth-largest nickel producer, dropped 6 cents, or 4.8 percent, to A$1.19, the fifth-biggest loser on the benchmark. Nickel slumped 3.4 percent on the London Metals Exchange.

Nexus Energy Ltd. (NXS AU), owner of 19.2 percent of Anzon Australia Ltd., rallied 11 cents, or 9.9 percent, to A$1.23, the index's seventh-biggest gainer. Nexus said it intends to accept a takeover offer for the shares from Roc Oil Co. (ROC AU), potentially clearing the way for it to gain full control of the oil and gas company. Roc Oil lost 5 cents, or 4.8 percent, to A$1.

Sino Gold Mining Ltd. (SGX AU), an Australian gold mining company, slumped for the second day after Merrill Lynch & Co. cut the company's rating to ``neutral'' from ``buy.'' Sino shares today fell 21 cents, or 5 percent, to A$3.97, the lowest since Sept. 17. Separately, gold fell 1.5 percent in New York as U.S. equities rebounded.

Stuart Petroleum Ltd. (STU AU), operator of the Bazzard-1 exploration well off Australia's southeast coast, tumbled 28 cents, or 21 percent, to A$1.06, the most in almost six years, after saying the first area targeted by the well contains water instead of oil.

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