Australian stocks ended Monday almost unchanged after the first hung parliament in 70 years left the market grappling for direction, although miners gained on bets a planned new mining tax may never surface. Foster's ralled to a 2-1/2 year high on take-over talk, ending up 7.6 percent at A$6.26 on reports SABMiller and Asahi Breweries were looking at Foster's beer operations, valued at more than $10 billion.
Investors likely face a week's wait before they know who will form a national government and how independents will sway key policies like a tax on iron ore and coal profits, and a planned broadband network. Negotiations with independents are likely as the major parties scramble to get the required 76 seats to take government.
"At this stage, the coalition may seem to be in a slightly better position as the independents mostly have ties with the coalition. One key coalition promise is that there will be no mining tax," said Stephen Roberts at Nomura Global Economics.
Miners rose, with BHP Billiton shares up 0.5 percent to A$38.11 and Rio Tinto up 0.9 percent at A$72.20. "The market determined that a resources rent tax was now less likely. This is by no means written in stone, but it is the prevailing view point," said David Taylor, market analyst at CMC Markets. "Investors want certainty and have started to price in the most likely outcome," he said.
Before the election, investors had been pricing in a Labour win. "It's interesting to see the big two resource stocks a bit firmer. Perhaps that's signalling more likelihood of a coalition, but none of us know. It's a roll of a dice," said Rob Patterson, managing director at Argo Investments. Australia's benchmark S&P/ASX 200 index fell 2 points to 4,429, according to the latest available data.
New Zealand's benchmark NZX 50 index rose 0.5 percent to 3016.8. Telstra Corp, which trades on Monday exclusive of its 14 cent dividend, touched a record low of A$2.76 and closed down 19 cents, or 6.4 percent, at A$2.77. Labor's $43 billion national broadband network hangs in the balance versus a smaller, privately funded broadband plan under the Coalition.
Patterson said Tony Abbott's coalition may have to commit more to broadband to secure government. Westpac Banking Corp fell 2.6 percent to A$22.07 after third-quarter cash profit jumped 27.3 percent but it joined rivals in sounding a cautious tone about prospects amid rising costs, global uncertainty and lukewarm lending growth.
Prime Infrastructure rallied 21 percent to A$4.35 after it agreed to merge with Brookfield Infrastructure Partners in a deal offering a 28 percent premium to Prime's Friday close of A$3.60. Canada's Brookfield, which already owns 40 percent of Prime, would make the Australian company a wholly owned unit. Challenger Financial Service rose as much as 12 percent to A$3.94, a three-month high, after it forecast an 11 percent rise in cash earnings to A$375 million in the 2011 financial year. Ansell rose 2.7 percent to A$13.10 after it said earnings for fiscal 2011 would be in a range of 86-91 US cents a share, up 8-14 per cent from US 79.7 cents in 2010.
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